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Illustration: Sarah Grillo/Axios

Large and respected institutions, including a $1 trillion company run by the richest person on earth are starting to worry about the world's institutions, most notably the stock market and fiat currencies, and they are taking steps to hedge the risks.

Why it matters: Tesla's announcement that it will invest its reserves in bitcoin and gold as well as dollars makes the company part of a growing movement away from the greenback — which has long been the world's primary and most trusted store of value — and the largest and most high-profile company to do so.

  • The $1.5 billion bitcoin investment accounts for nearly 8% of Tesla's cash assets.

What we're hearing: As central banks continue to push trillions of dollars a month into markets more firms are starting to see holding dollars as a risk, Axel Merk, president and portfolio manager at Merk Hard Currency Fund, tells Axios.

  • "The world doesn’t move on facts, it moves on perception," Merk says.
  • "Do you think there’s a risk that the dollar is going to decline, going to debase? If you think it’s a risk that’s noteworthy, what are you going to do about it? These things become more of a self-fulfilling prophecy if more and more people endorse their view."

The big picture: Tesla is the latest and largest to announce an investment in bitcoin, but not the first.

  • Insurance giant MassMutual, in business since 1851, purchased $100 million of bitcoin for its general investment fund and acquired a $5 million minority equity stake in institutional crypto manager NYDIG.
  • Square, PayPal and Visa all announced investments and ventures allowing bitcoin payments on their platforms.
  • Business intelligence firm MicroStrategy said in December it had purchased a sum total of 40,824 bitcoins, current value $1.7 billion, and had sold bonds to raise the capital to do so.

Between the lines: While developed market central banks have been printing money, central banks in emerging markets have been gradually adding to their holdings of gold rather than dollars, especially countries like China, Turkey and India.

  • Russia has increased its gold holdings so much that its central bank now holds more gold than dollars.

Yes, but: The overwhelming majority of companies' and countries' reserves remain in dollars.

Be smart: It's not just the dollar companies and individuals are losing faith in, Douglas Borthwick, chief marketing officer and head of business development at crypto trading platform INX, tells Axios. It's fiat currencies overall.

  • "Why save your wealth in a currency at a bank with a negative interest rate when your government is printing and distributing even more of that same currency out of thin air?" says Borthwick, who was previously managing director at Chapdelaine FX Trading.
  • "Your own wealth and currency becomes worth less. Fiat currencies are not going away. Neither is money printing."
Charted: Gold underperforms
Expand chart
Data: FactSet; Chart: Axios Visuals

By engaging in quantitative easing and convincing market participants that they stand ready to print a literally endless amount of money in an effort to buoy their respective economies, the world's central banks have eroded the perceived value of their currencies, experts say.

  • Using that money to buy bonds drove down the value of fixed-income instruments and made their interest payments negligible and often negative ($18 trillion of the world's bonds currently hold negative yields).
  • Central banks' implicit promise to step in if asset prices fell significantly has pumped stock indexes to extreme valuations and eroded trust in the equity market.
  • The expected increase of trillions of dollars of government spending is further fueling fears of assets losing their value.

What's happening: As bitcoin's price has driven higher, more firms and individuals are embracing it over traditional inflation and currency debasement plays like gold.

  • Its status as an asset outside the control of typical "elites" or institutions is adding to its popularity, but its primary draw is likely the mesmerizing price appreciation.

Go deeper

Tesla buys $1.5 billion in bitcoin, will start accepting the cryptocurrency as payment

Tesla CEO Elon Musk. Photo: Justin Sullivan/Getty Images

Tesla has bought $1.5 billion worth of bitcoin and will begin accepting the cryptocurrency as payment for its products, the company announced in an SEC filing Monday.

Why it matters: Tesla would be the first automaker to accept bitcoin for payments, with the $1.5 billion purchase giving the company liquidity in the cryptocurrency once it starts allowing people to use it to buy products, per CNBC.

Dion Rabouin, author of Markets
Feb 8, 2021 - Economy & Business

Trump’s World Bank head speaks out on climate change, inequality

Against the backdrop of the coronavirus pandemic, World Bank president David Malpass has been a surprisingly outspoken advocate for policies to reduce global warming, rein in economic inequality and use multilateral institutions to fight the worst of the pandemic's impacts.

Why it matters: As a nominee of former President Donald Trump and a longtime skeptic of multilateral institutions, many feared that Malpass would weaken the World Bank's work on climate change or make it more "America First" in its orientation. But that hasn't been the case, as he explained on "Axios on HBO."

5 hours ago - Health

FDA advisory panel recommends Pfizer boosters for those 65 and older

A healthcare worker prepares a dose of the Pfizer-BioNTech Covid-19 vaccine at the Key Biscayne Community Center on Aug. 24, 2021. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

A key Food and Drug Administration advisory panel on Friday overwhelmingly voted against recommending Pfizer vaccine booster shots for younger Americans, but unanimously recommended approving the third shots for individuals 65 and older, as well as those at high-risk of severe COVID-19.

Why it matters: While the votes are non-binding, and the FDA must still make a final decision, Friday's move pours cold water on the Biden administration's plan to begin administering boosters to most individuals who received the Pfizer vaccine later this month.