In 2020, big businesses and institutions really started jumping into Bitcoin. Now Tesla has invested $1.5 billion into the cryptocurrency and is working on plans to let customers pay with it when buying its EVs. While Apple often stands back and watches before stepping into something new (iPod, iPhone, etc.), I think now is the time for Apple to make its move into Bitcoin/cryptocurrency – here are four ways the company could do it and potentially disrupt the industry.
Bitcoin background
In October 2020, Square Inc. (payment processing app, Cash app, etc.) invested $50 million into Bitcoin (BTC). That was about 1% of the company’s total assets at the end of Q2 2020 (for reference, that’s grown 4x since then to over $200 million at the time of writing). That move came after the Cash app has offered the ability to buy Bitcoin for several years.
Table of contents
Bitcoin background
Why Bitcoin?
Apple and Bitcoin: 4 ways it could move into cryptocurrency
Investing cash on hand
Apple cryptocurrency exchange
iPhone as a crypto wallet
Accepting Bitcoin as payment
Apple and Bitcoin wrap-up
Investing cash on hand
Apple cryptocurrency exchange
iPhone as a crypto wallet
Accepting Bitcoin as payment
An even bigger investment into BTC was made by Microstrategy over the last year with the company’s CEO Michael Saylor putting over $1 billion into the cryptocurrency. And notably, Saylor was likely a factor in Elon Musk and Tesla putting its $1.5 billion in – with what started as a Twitter conversation back in December.
2020 also saw more traditional veteran investors like Stanley Druckenmiller and Paul Tudor Jones become Bitcoin bulls.
The big picture here is that more and more companies and institutions are looking to Bitcoin for long-term investment and asset preservation, something Bitcoin bulls believe will lead to more stability and naturally, increased value.
Why Bitcoin?
There is certainly risk with investing in Bitcoin, but there’s also a very big potential upside. Apple of all companies has the ability to tolerate risk, and even putting just 1% of its cash on hand would amount to a $2 billion investment into Bitcoin. Notably, analysis from Ark Investments sees Bitcoin growing to $70,000 per coin if US companies put 1% into it, and $400,000 a coin if companies put 10% into the cryptocurrency.
The bull case here is that investing cash on hand into Bitcoin is a way to preserve/grow cash (BTC has over a 100% growth a year at this point) while the USD is losing value over time. In turn, that preserves shareholder wealth. That line of thinking is based on Bitcoin having a known, limited supply of 21 million coins and the basic principles of supply and demand (if people and companies keep investing in it).
Michael Saylor believes that Tesla, Apple, Google, etc. will need to shift their cash to Bitcoin. Notably, the video below is from December 23, before Tesla made the jump into BTC.
Apple and Bitcoin: 4 ways it could move into cryptocurrency
Apple has been publicly optimistic about cryptocurrency in the past. Back in 2019, Apple Pay vice president Jennifer Bailey said “we’re watching cryptocurrency” and that “We think it’s interesting. We think it has interesting long-term potential.”
Investing cash on hand
So Apple has been no doubt researching and planning on what do to with Bitcoin/crypto for some time. As far as Apple investing its own cash on hand, I think it’s a no-brainer. 1% of that would be $2 billion and would be an easy way to start. It probably wouldn’t alarm Wall Street/traditional investors being such a low percentage and with Tesla and Apple both investing in it, the moves would spur many more companies to do the same. The 1% mark would be in line with Apple’s financial M.O.
I don’t think Apple is likely to put a large portion of its cash into Bitcoin in one move – like Michael Saylor might advocate. But it could put itself in position for huge gains if it moved say even 5 or 10% of its $207 billion in cash to Bitcoin. But with a history of being financially conservative, Apple may make a bigger initial bet on this next aspect of crypto…
Apple cryptocurrency exchange
I think the other side of Apple embracing Bitcoin will be integration with iOS. Major players like Square and PayPal already offer the ability to buy Bitcoin easily in their apps and Apple has been ramping up its financial offerings over the last couple of years.
Of course there’s been some good progress with Apple Pay adoption, but things have become more focused in the fintech space for the company with Apple Cash and Apple Card.
Apple offering the ability to buy and sell or better yet, also send and receive Bitcoin P2P right within iOS could be a game-changer.
In fact, RBC Capital Markets (via CNBC) believes that if Apple jumps into the cryptocurrency exchange market, it could disrupt and potentially own the market.
RBC believes this could mean $40 billion/year in revenue for Apple – that would be a sizable boost to the company’s services portfolio. Further, RBC thinks that if Apple bought $1 billion of BTC, it could create a lot of momentum with an Apple Exchange.
“If the firm decides to enter into the crypto exchange business (multi-billion dollar industry) we think the firm could immediately gain market share and disrupt the industry (while simultaneously making the USA a leader in crypto for the next 10-20 years),” RBC Capital Markets analyst Mitch Steves said in a note to clients on Monday.
iPhone as a crypto wallet
So far, Bitcoin has been a bit messy when it comes to the public understanding how it works and buying it. For beginners or small amounts, there’s the ease of buying through Cash App, PayPal, Robinhood, etc. Those apps allow you to buy BTC with USD. However, these apps, don’t offer a full cryptocurrency exchange like Coinbase and others where you can send and receive as well as buy and sell.
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And for those serious about buying and holding crypto like Bitcoin, they do so with hardware called a cold wallet (offline wallet) for the most security. That’s usually a standalone thumb drive-sized device like Trezor or Ledger. But the issue here is that it’s mostly tech-savvy people that know or are ready to learn about how that all works.
But with Apple’s hardware expertise with iPhone and its Secure Enclave, the company could have a huge opportunity to build one of the world’s first secure cryptocurrency wallets integrated into a smartphone that’s easy for users to adopt (Samsung has done this with several of its S series Galaxy smartphones, but it hasn’t been widely adopted and integrates with the third-party Gemini exchange). Apple could have a big advantage by having its own exchange as well as offering iPhone as a cold storage wallet.
Apple recently shared its has over 1 billion active iPhones around the world. That could mean a massive increase in worldwide adoption if Apple is able to blend its security expertise with user-friendliness to allow almost anyone to feel comfortable and confident getting started with Bitcoin and other cryptocurrencies.
Accepting Bitcoin as payment
It will be interesting to see how Tesla does with its plans to allow customers to buy its electric vehicles and other products with Bitcoin. This is another major piece in more people adopting the cryptocurrency.
If Apple at some point lets its customers buy Apple products with Bitcoin, it could be a major factor in other companies following suit.
I think a move like this is more likely to come after bringing Bitcoin into iOS and Apple investing some of its cash into the crypto. It will involve a lot more leg work with the tax and legal details to figure out. Nonetheless, it would be a big boon for Bitcoin and crypto to see companies like Tesla and Apple accept the crypto as payment.
Apple and Bitcoin wrap-up
The future of Bitcoin and other cryptocurrencies are no doubt uncertain, but it’s clear that big businesses like Tesla and more are ready to test the waters to discover what the future of finance could and should look like.
I think all signs point to more companies jumping into Bitcoin following Tesla and Microstrategy’s moves and think Apple should be next as it has more upside potential than almost any other company in the world due to its ability to lean into this fintech revolution from multiple angles.
Apple could stand to see massive returns on investment by putting cash on hand into BTC but the bigger deal could be if it could become the leader of software/hardware that makes crypto simple, accessible, and secure for the masses.
For more in-depth coverage on Bitcoin and cryptocurrency, check out our sister-site, Blocktalk.
