Musk states that Tesla’s purchase of Bitcoin “does not directly reflect his opinion.” Excess US dollars lead banks like J.P. Morgan to reject fiat currency deposits.
The same as other big banks, J.P. Morgan is asking its customers to transfer their cash to other financial institutions. The BBC news channel describes this new situation as “reverse” liquidity crisis. According to Elon Musk, CEO of Tesla, Bitcoin (BTC) has become an alternative to cash for large companies.
Changpeng Zhao, the CEO of Binance, commented on the billionaire’s enthusiasm for Dogecoin (DOGE) and Tesla’s recent acquisition of Bitcoin. Zhao suggested that although Musk supports DOGE on social media, he decided to seriously bet on Bitcoin.
On Twitter, the Tesla CEO responded to Changpeng Zhao’s comments, clarifying that Tesla’s purchase did not directly reflect his opinion. Although the electric car manufacturer has invested USD 1.5 billion in Bitcoin, Elon describes it as “almost as bad as fiat money.” That “almost” indicates that he sees a difference that makes Bitcoin an alternative option to cash.
“When fiat currency has a negative real interest, only a fool would not look elsewhere,” Musk clarified. He considers that Bitcoin “is a less silly form of liquidity than cash.” For that reason, he finds it logical that one of the best-priced companies has placed its expectations on this digital asset.
Musk said that he is not an investor and that he does not own publicly-traded stocks, other than Tesla. However, he regards Tesla’s recent purchase of Bitcoin as an “adventurous” move amid economic uncertainty. While Musk considers that cash is depreciating, banks back this view by rejecting new deposits for excess cash.
If Banks Don Not Accept Cash, Use Bitcoin
J.P. Morgan, Bank of America, and City Group received more than USD 1 billion in deposits in 2020 alone. These financial institutions also reached an all-time low in the number of loans that they made.
Expert in the American financial system Nathan Stovall says that there is currently “reverse liquidity crisis”. In other words, banks have excess deposits and users are accumulating US dollars in their accounts. According to Stovall, this is happening because of the remnants of the 2008 economic crisis, the pandemic, and new money printing policies.
The researcher notes that banks normally receive income to later make loans and earn interest. However, the profit margin that banks can currently make has decreased. Stimulus from the US government has flooded financial institutions with money. Likewise, both companies and individuals have received bonds, and the amount of US dollars in circulation has increased.
Credit demand has also plummeted, so big banks are not accepting cash and are rejecting deposits. Banks find handling large amounts of money unprofitable and costly. For that reason, firms like J.P. Morgan are imposing a maximum deposit of USD 200 billion on their biggest customers.
Nathan Stovall believes that some institutions may still be willing to receive funds, but large firms are no longer very interested. Musk’s words acquire a new dimension as large companies consider that cash increasingly loses its value.
By Alexander Salazar