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RBC Analyst Thinks Apple Should Launch Own Crypto Exchange

Analysts at the largest Canadian bank have some suggestions for Apple, such as creating an open system that would use a bitcoin wallet. Apple is the biggest publicly traded company in the world, having a market capitalization of $2.3 trillion.

So, after Tesla announced on Monday that it purchased bitcoin worth $1.5 billion, some analysts from Wall Street think that Apple could make the transition to the world of cryptocurrency fray.

Apple’s Possible Impact

A recently released report by the brokerage firm RBC Capital Markets believes that Apple could effortlessly generate over $40 billion from the crypto business. The company is already providing payment wallets, which are really popular now that cashless payments have gone viral as a result of the COVID-19 pandemic.

If Apple makes this move, it would also help make the U.S. a technological leader in the crypto world for the next two decades.

Mitch Steves, an RBC analyst, mentions that the payments firm Square (SQ) manages to generate around $1.6 billion per quarter in bitcoin-related revenue on an active install base, which is estimated to be somewhere close to 30 million.

“Apple’s install base is 1.5 billion, and even if we assume only 200 million users would transact, this is 6.66x larger than Square. Therefore, the potential revenue opportunity would be in excess of $40 billion a year (15% incremental top-line opportunity),” mentions the report.

The report believes that the whole research and development cost “would be de minimis in our view as Square’s entire R&D budget is under $1 billion.”

The analysts also mentioned that the competition in the crypto exchange space “is light.” Regulations have made it hard for some Americans to purchase crypto, and many exchanges disappear during times of high volume.

Apple would be able to solve the regulatory and KYC challenges of crypto if it produced a closed system in which only transfers between customers would be allowed, the analysts opinioned. Furthermore, it could also create an open system that uses a bitcoin wallet and banking service like Strike or Lighting Network (Bitcoin’s blockchain) in order to reduce the cost of converting fiat to crypto.

But most importantly, Apple getting involved in the crypto market means that bans of crypto in the U.S. would become highly unlikely.

“If Apple went down this path the U.S.A. would likely acquire the most crypto assets from a global perspective. If the U.S.A. owns the most crypto assets (be it bitcoin or other assets), it would not make logical sense in our view to ban it. In addition, with Apple’s secure and world-class software, the U.S.A. would be able to have confidence in user information and balances if needed in the future.”

Apple’s Balance Sheet Could Have Bitcoin

The analysts even thought of a trick for Apple to finance the development of the project, which is betting money on bitcoin.

“For example, if the firm purchased $5 billion of bitcoin (20-25 days of cash flow), the price of the underlying asset would need to rise by 10% for the firm to fully fund the entire project in the first place,” the analysts mentioned. “This is a solid value proposition in our view as the business would be funded without diluting any other projects at the firm.”

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