Tesla bought Bitcoin. Will Apple be next?

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If Bitcoin can entice the world’s richest person—Tesla’s maverick chief executive Elon Musk—perhaps it can also attract the world’s most valuable company.

The possibility has more than the usual Bitcoin bulls roused. Analysts at RBC Capital Markets, a Canadian investment bank, see the potential for Apple to add Bitcoin to its balance sheet as part of a broader strategy they believe could turbocharge the iPhone maker’s already fast-growing payments business.

The key to the analysts’ proposal, which was featured in a Monday note from RBC, is for Apple to build a cryptocurrency exchange directly in Apple Wallet, the company’s mobile wallet app. They argue that Apple “could immediately gain market share and disrupt the [crypto exchange] industry,” bringing in tens of billions of dollars more revenue per quarter, by doing so. And as icing on the cake, Apple could fund the entire operation, quite simply, by buying Bitcoin.

(Apple did not respond to Fortune’s request for comment about whether it has considered or plans to consider the analysts’ recommendations.)

The Apple Wallet garden

Apple Wallet, for all its popularity as consumers shift to contactless payments amid the coronavirus pandemic, isn’t living up to its full potential.

If Apple added a crypto exchange to its home screen app, the service would easily dwarf rival offerings. Apple Wallet comes preloaded on iPhones—and there are more than 1.5 billion active iPhones worldwide. In the face of Apple’s gargantuan scale, competition from longtime players, like Coinbase (43 million users), and relative newcomers, like PayPal (360 million users), would be “muted,” the RBC analysts say.

The revenue opportunity is, potentially, ginormous. The analysts note that Square, another financial tech firm that offers Bitcoin-buying, brought in $1.6 billion in crypto exchange–related revenue in its most recently reported quarter, ended Sept. 30. If Square’s Cash App has about 30 million monthly active users, then imagine, the analysts say, how much more money Apple could be making, given the breadth of its customer base?

Even a conservative estimate is unignorably compelling. Forget the 1.5 billion active iPhones; stick just to the roughly 200 million iPhones Apple sold last year instead. That figure already exceeds Square’s active user base by about sevenfold.

In other words, if Square collects $1.6 billion in revenue per quarter on its crypto services, Apple could rake in $11 billion, so RBC’s thinking goes.

Ace up the sleeve

The most intriguing part of the RBC analysts’ gambit is their recommendation that Apple fund the crypto exchange operation by—what else?—buying Bitcoin.

If Apple were to plunk down a small fraction of its $190 billion “war chest” of cash and equivalents on Bitcoin, it would be relatively inconsequential for Apple and almost certainly a market-mover for Bitcoin. Say Apple bought $5 billion of Bitcoin—a sum that equals about 20 to 25 days of the company’s cash flow, RBC’s analysts note—Bitcoin’s price would need only “rise by 10% for the firm to fully fund the entire project in the first place!”

The RBC analysts’ math relies on accounting by rival Square to estimate the cost of Apple adding a crypto service to Apple Wallet. Square’s entire R&D budget for 2019 was $670 million. If Apple spent a comparable amount—say, a half-billion—to start bringing in an extra $44 billion in revenue annually, the analysts write, “we think this would represent an efficient use of capital.”

There’s obviously plenty of precedent for big corporate Bitcoin purchases to move the market. Consider Tesla. When Tesla said on Monday it had converted $1.5 billion—about 8% of its $19.4 billion in cash as of Dec. 31—investors immediately bid up the price of Bitcoin 16% to an all-time high above $44,000. Similar, if less enthusiastic, price jumps accompanied Bitcoin-purchasing news from the likes of Square, PayPal, and IT-software maker Microstrategy.

Assuming history repeats itself—which is, of course, a big assumption, given the wild, rollicking price swings characteristic of crypto-land—Apple putting up the buy-in amount for a seat at the crypto casino’s poker table would effectively be free over the short term, by RBC’s wager.

Then again—and this is an outcome the RBC analysts don’t discuss—Apple buying Bitcoin could also, if fate conspired against it, be viewed as the ultimate “top.” Like the star-crossed Time Warner–AOL tie-up for $165 billion at the height of the dotcom bubble, it may end up being remembered, in retrospect, as the irrationally exuberant crest before the crash.

“To be clear, we do not believe Apple needs to hold Bitcoin as a balance sheet asset,” the RBC analysts say, before adding, “although it would likely help.”