Bitcoin (BTC) has reached all-time highs in early 2021, reaching $50,000 as of the 16th of February of 2021. Currently, Bitcoin is trading above the 50,000 dollar mark as of late February. This large increase has been reputed due to increasing corporate adoption, principally from the announcement that the electric car marker, Tesla, bought $1.5bn (£1.1bn) in bitcoin, additionally promising that Tesla will soon accept future payments in this cryptocurrency. Following this announcement, there has been greater corporate interest in adopting Bitcoin from companies and financial institutions. The world’s largest asset manager, BlackRock, has announced that they have begun to ‘dabble’ in Bitcoin. Thus, 2021 represents a watershed moment; whether the corporate world will accept and adopt Bitcoin as a mainstream currency.
First and foremost, it is clear that Bitcoin was originally envisaged and intended to start a new revolution in the form of an electronic currency. Satoshi’s infamous white paper in 2008 described it as ‘A Peer-to-Peer Electronic Cash System’. But it was not until 2010 that Bitcoin was used as an actual currency, paying some 10,000 Bitcoin for two pizzas, worth over $500 million now at current prices.
Bitcoin essentially is a decentralised form of digital cash that eliminates the need for traditional intermediaries, as needed for other paper currencies, like banks and governments, to make transactions. The digital currency uses what is termed “peer-to-peer technology”, where individuals and companies govern the Bitcoin network; Bitcoin miners are in charge of processing any transactions, which decentralises the currency.
However, in spite of Bitcoin being envisaged as a new form of revolutionary currency, Bitcoin in earlier years was generally regarded as a speculative instrument. Commentators back in the unprecedented Bitcoin boom of 2017, where price rose from $900 to $20,000, criticised Bitcoin as not being a viable currency due to its value being unstable and transaction processing being too slow. Originally, in the Bitcoin boom in 2017, many companies were keen to jump on the Blockchain bandwagon, like Microsoft and Expedia, who allowed all payments to be in Bitcoin. However, following the crash in 2018, where the cryptocurrency lost half its value, many companies were less keen to adopt Bitcoin. For most tech companies, however, whilst eager to be attributed to the blockchain revolution as per Big Tech’s innovative spirit, this volatility did not stop their plans to adopt Bitcoin for payments. Facebook even introduced plans to begin to launch its own cryptocurrency, Libra.
However, despite acceptance mainly from Big Tech in the early years following from 2017, most companies and financial institutions still refused to adopt Bitcoin, crushing any semblance of mainstream corporate adoption. It was not until years after the 2018 crash, as of March 2020, where the corporate world began paying greater deference to Bitcoin, as its price began to surge and recover amid a time of global panic in global markets. From the 12th of March, where Bitcoin was priced at a low of $3,850, prices increased to just under $24,000 in December 2020, an increase of 224% from the start of the year. This increase in fundamentals and in interest from institutional investors added validity to the idea of adopting Bitcoin, where major companies like PayPal finally announced in October of 2020 that it would allow users to buy and sell Bitcoin on its platform, after years of speculation.
It was not until 2021 that corporate adoption of Bitcoin has been the main focal point for the cryptocurrency. In years prior, Bitcoin and its significance were generally confined to a debate between retail and professional investors alike, whether Bitcoin itself had any validity as to the utility of being a currency or simply being a speculative asset. However, now as Bitcoin is seeing increased interest from institutional investors, like from the world’s largest asset manager BlackRock, corporate adoption seems more legitimate.
The real watershed moment was when electric car maker, Tesla, announced plans to buy $1.5 billion in bitcoin, promising to start accepting Bitcoin as a payment method for all its products. Following this announcement, Bitcoin has attained record prices breaching the 50,000 dollar mark and paving the way for a flurry of companies to follow suit, like Square, the Fintech giant, which recently announced plans to buy $150m worth of bitcoin. Even financial giants such as Mastercard have finally caved in to adopting Bitcoin, announcing its plans to support selected cryptocurrencies on its network.
Thus, the floodgates have opened. As more and more companies begin adopting Bitcoin, especially those of household names, like Tesla and Mastercard, Bitcoin seems a more legitimate currency for the corporate world. This, in turn, will lead more companies to adopt the cryptocurrency, potentially leading to widespread corporate adoption.
However, there is a lesser-known contemporary challenge that is now being advanced in relation to the environmental impact of Bitcoin, which could prevent mainstream adoption. This could preclude some of the more “socially conscious companies” with greater emphasis on environmental, social governance (ESG). Therefore, Big Tech and its supposed greater social awareness may potentially rescind its adoption of the cryptocurrency, in light of this new challenge and ESG corporate dynamic.
Bitcoin already has a carbon footprint comparable to that of New Zealand, producing 36.95 megatons of CO2 annually. This massive expense is largely due to the huge amount of energy required by the miners, who process the digital ledger by generating new units of the cryptocurrency by solving complex algorithms. Critics argue that this environmental impact misses the point of the cryptocurrency, where “energy usage itself is not a bad thing” and is overall a net benefit for society. Regardless, it is clear that this new advanced challenge could threaten mainstream corporate adoption of Bitcoin, especially in light of the changing corporate dynamic with greater emphasis on ESG.