Apple's Bitcoin Investment: When And Why?

Following Tesla's $1.5 billion investment in Bitcoin, all eyes are on Apple to see if it will follow suit. RBC Capital Markets speculates that Apple could be the next big company to buy Bitcoin, suggesting that the tech giant could immediately gain market share and disrupt the industry. With a potential revenue opportunity of over $40 billion per year, Apple's entry into the cryptocurrency exchange market could be a game-changer. However, Apple has been cautious with its cash hoard under CEO Tim Cook, and the company has not indicated any plans to buy into crypto.

Apple's potential revenue from investing in Bitcoin

Steves proposes that Apple implement crypto exchange functionality within the Apple Pay Wallet app, allowing users to buy, sell, send, and receive Bitcoin and other cryptocurrencies. With an install base of 1.5 billion, even assuming only 200 million users would transact, this would be a significantly larger user base than that of competitors such as Square. The potential revenue opportunity is thus estimated to exceed $40 billion per year, a 15% incremental top-line opportunity.

Furthermore, Apple's potential revenue from investing in Bitcoin is tied to the broader strategy of turbocharging its payments business. By adding a crypto exchange to Apple Wallet, which comes preloaded on iPhones, Apple could easily dwarf rival offerings. The scale and reach of Apple's platform would make competition from other players in the market muted.

While there is inherent risk in investing in Bitcoin, Apple has the ability to tolerate such risks. Even a small percentage of Apple's cash on hand invested in Bitcoin could result in significant returns, especially considering the potential for increased demand and value in the limited supply of Bitcoin.

Apple Pay and the future of cryptocurrency

Apple's Next Move?

Apple has been cautious with its approach to cryptocurrency, but with its history of disrupting industries, it is well-positioned to make a significant impact in this space. Apple Pay, its mobile payment and digital wallet service, was introduced in 2014, and in 2019, the company announced the Apple Card, a digital credit card co-developed with Mastercard and Goldman Sachs.

The Crypto Opportunity

Following Tesla's $1.5 billion investment in Bitcoin, RBC Capital Markets released a report suggesting that Apple could "immediately gain market share" by launching a mechanism for buying and selling cryptocurrencies. The report proposed that Apple create a crypto-exchange within Apple Wallet, unlocking a potential multi-billion-dollar opportunity.

Apple's Conservative Approach

Apple has historically been financially conservative, and while it has shown enthusiasm for fintech, it has approached the cryptocurrency industry with caution. In 2014, the company removed a string of bitcoin wallet apps from its App Store, only to reverse its stance later that year. More recently, in 2018, Apple banned apps found to be mining cryptocurrency on its devices.

The Future of Apple and Crypto

Despite Apple's cautious approach, there is growing speculation about the company's potential involvement in cryptocurrency. Apple Pay vice president Jennifer Bailey stated in 2019 that "we're watching cryptocurrency" and that "we think it has interesting long-term potential."

The Bottom Line

Apple has the resources and expertise to make a significant impact in the cryptocurrency space. While the company has been conservative with its financial strategy, the potential for disruption and innovation in this industry may be too great for Apple to ignore.

The future of Apple Pay and cryptocurrency is uncertain, but with the increasing mainstream adoption of Bitcoin and other cryptocurrencies, Apple may be poised to make a move that could shape the future of finance.

The influence of Tesla's investment on Apple

In February 2021, Tesla revealed a $1.5 billion investment in Bitcoin, stating that it would soon start accepting the cryptocurrency as payment for its electric vehicles. This move was seen as a tipping point for Bitcoin's journey into the mainstream, with other companies like AT&T and Microsoft already accepting Bitcoin payments.

Following Tesla's investment, RBC Capital Markets released a report suggesting that Apple could benefit from investing in Bitcoin and creating a crypto-exchange within Apple Wallet. The report estimated that this move could generate more than $40 billion in annual revenue for Apple and unlock a multi-billion-dollar opportunity.

• Investing cash on hand: Apple has the financial capacity to invest in Bitcoin, and even a small percentage of its cash on hand could result in a substantial investment. Apple's history of financial conservatism suggests it may start with a lower percentage and gradually increase its investment.
• Apple cryptocurrency exchange: RBC Capital Markets believes that if Apple enters the cryptocurrency exchange market, it could potentially dominate the industry. This move would position Apple as a leader in the crypto industry and further mainstream Bitcoin.
• IPhone as a crypto wallet: Apple's hardware expertise and security features could allow it to create one of the world's first secure cryptocurrency wallets integrated into a smartphone. This would make crypto more accessible to a wider range of users and increase worldwide adoption.
• Accepting Bitcoin as payment: If Apple allows customers to purchase its products with Bitcoin, it could be a significant step towards mainstream adoption. Apple's move in this direction could influence other companies to follow suit.

While Apple has historically taken a cautious approach to new ventures, Tesla's investment and the subsequent rise in Bitcoin's value may encourage Apple to explore these opportunities. Apple's potential involvement in the crypto space could have a significant impact on the industry and further solidify its position as a leader in innovation.

The risks and benefits of Apple investing in Bitcoin

Apple investing in Bitcoin has been a topic of discussion since Tesla invested $1.5 billion in Bitcoin in 2021. While there are potential benefits to Apple investing in Bitcoin, there are also risks to consider.

Benefits

Apple investing in Bitcoin could bring several advantages, including:

• Market share gains: RBC Capital Markets reported that Apple could immediately gain market share by launching a mechanism for buying and selling cryptocurrencies, such as a crypto-exchange within Apple Wallet.
• Revenue boost: The same report suggested that Apple could generate more than $40 billion in annual revenue from such a move, diversifying and maximising returns on its cash holdings.
• Shareholder wealth preservation: Investing in Bitcoin could be a way for Apple to preserve and grow its cash holdings, especially as the US dollar loses value over time. This, in turn, could preserve shareholder wealth.
• Disrupting the industry: Entering the cryptocurrency exchange market could potentially allow Apple to disrupt and own the market, solidifying its position as a leader in the fintech space.

Risks

However, there are also risks associated with Apple investing in Bitcoin:

• Volatility: The price of Bitcoin is known for its extreme volatility, with frequent and rapid fluctuations. This could introduce uncertainty and risk for investors.
• Regulatory uncertainties: Cryptocurrency regulations are constantly evolving and differ across geographies. These regulations could impact how Apple uses or accesses its crypto holdings, causing volatility and uncertainty.
• Scams and security: Not all cryptocurrencies or trading platforms are equally secure, and scams are a risk. Additionally, the responsibility for keeping crypto holdings safe falls on the user, and there is no protection or insurance for lost or stolen cryptocurrencies.
• Reputation and brand loyalty: Apple's reputation and brand loyalty could be at risk if it invests in Bitcoin and the cryptocurrency market experiences a significant downturn.

In conclusion, while Apple investing in Bitcoin could bring potential benefits, such as market share gains and revenue boosts, there are also significant risks to consider, including volatility, regulatory uncertainties, and security concerns. As such, a careful and thorough evaluation of the risks and benefits is essential before making any investment decisions.

Apple's previous approach to cryptocurrency

Apple has had a cautious approach to cryptocurrency in the past. In 2014, the company removed a string of bitcoin wallet apps from its App Store but reversed its stance later that year. In 2018, Apple banned apps found to be mining cryptocurrency on its devices.

However, Apple has also made moves that indicate a growing interest in the fintech space. In 2014, Apple Pay, its mobile payment and digital wallet service, was introduced. In 2019, CEO Tim Cook announced the Apple Card, a digital credit card co-developed with Mastercard and Goldman Sachs.

Apple has also made public statements about its interest in cryptocurrency. In 2019, Apple Pay vice president Jennifer Bailey said, "we're watching cryptocurrency, and we think it has interesting long-term potential." In 2020, Apple hired Jeff Bronikowski, Warner Music's former head of technology innovation, who had been working on a number of blockchain efforts to create digital assets.

In a 2021 interview with the New York Times, Tim Cook said that crypto was "something that we're looking at," and in the same year, he told a New York Times DealBook conference that he had been keeping an eye on cryptocurrencies "for a while". However, Cook also stated that Apple had not been actively pursuing cryptocurrency as a form of payment for its products and services and that he would not invest Apple's money in crypto because he didn't think "people buy Apple stock to get exposure to crypto."

Despite these statements, rumours persist that Apple is putting the building blocks in place for its own cryptocurrency. In addition, some analysts have suggested that Apple could immediately gain market share by launching a mechanism for buying and selling cryptocurrencies, such as creating a crypto-exchange within Apple Wallet.

Frequently asked questions