At the time of this writing Around 3.6% of Bitcoin (BTC) are tied to long-term investments by institutional investors. According to data from 13 companies have accumulated almost 600,000 BTC, CA 2.85% of all bitcoins and for an approximate value of $ 6.9 billion.
The list contains MicroStrategy on top, with around 38,250 BTC (almost $ 450 million). Second on the list is Galaxy Digital Holdings at 16,651 BTC (around $ 198 million). Third, with 4,709 BTC it is the payment company Square Inc., founded by the CEO of Twitter, Jack Dorsey. Regardless, some companies are helping their customers invest in BTC. One such company is Grayscale investments through its GBTC trust with around 450,000 BTC.
That said, the amount of Bitcoin that public companies hold in reserve is a tiny fraction of corporate coffers worldwide. Actually, The actual amount of cash held in reserves is trillion US dollars. But consider the following: Nine SP 500 companies have nearly $ 600 billion in cash and short-term investments. If only 5% (or $ 30 billion) of that amount were converted into Bitcoin, the price could easily multiply by five.
Of course there is the question of Where can Bitcoin be added to corporate investment portfolios? The most likely category is “alternative investment”. The need to strike a balance between traditional and alternative investments could reduce the market’s appetite for cryptocurrency.
But still, The potential demand is still enormous. As mentioned in a current fidelity report, the alternative investment market grew to $ 13.4 billion at the end of 2018, and very little of it was in bitcoin. It might be necessary to convert just 5% of that to see the price of Bitcoin hit the moon.
Some investment firms have decided to create completely independent businesses to store their Bitcoin funds and other crypto assets. For example, Stone Ridge founded the New York Digital Investment Group, which today has more than $ 1 billion in cryptocurrencies.
What is driving this movement?
To better understand this phenomenon, I recently had one Chat illustrative with Michael Saylor, the founder of MicroStrategy. In particular, I found it very interesting Your choice of 100 years as the basis for measuring the success or failure of a reserve asset.
Naturally, Most businesses are started with the expectation that they will live long, preferably centuries. Even for humans, it still makes sense to study how investments can change over a hundred years as a person can accumulate wealth destined for heirs or even for heartbreaking causes like climate change. As Michael Saylor said:
“A good way to evaluate an investment is to take $ 100 million and go a hundred years forward and wonder what happens. If I had $ 100 million in one of the greatest cities in the world in 1900 and 100 years forward went and got the money in the best bank in town, I have two types of risk: counterparty risk and inflation risk. As for counterparty risk, all major banks in all major cities in the world have gone bankrupt in 100 years 90% chance you will lose it all . “
Naturally, The most obvious weakness that can be seen when looking at the performance of a reserve asset over 100 years is inflation. Of all asset types, the fiat currency has the highest inflation over time. For example, What could be bought for $ 5 in the 1920s is way more than what can be bought in 2020. According to a website that collects and processes government data for the benefit of the public, The US dollar loses around 2% of its purchasing power every year.
What about the other assets?
While real estate appears to be a great asset to hold as a long-term reserve, it can depreciate in value from taxes. But what is more important Real estate is exposed to risks associated with changes in regulation or public administration. Over a 100 year period, a government that respects private property will likely be replaced by a government that does not. This has been proven several times around the world in the last century.
Meanwhile, stocks are also at risk of mismanagement and changes in regulation. Michael Saylor gave the example of energy and water services, industries in which highly profitable companies were nationalized. We cannot say with conviction that Internet service providers, for example, will not become public services in the next 100 years.
Even Gold and other precious metals have problems when you look at them 100 years from now. As their value increases over time, the logistics of owning them can be stressful. You can use third party storage services like commercial banks, but history has taught us that Gold can also be lost there, especially in times of war or political upheavals such as revolutions. This also happened several times in the last century. Government and non-government agents stole large amounts of gold during World War II. Similarly, the incoming government confiscated a large amount of privately owned gold during the Soviet Revolution.
For now, Bitcoin has no counterparty risk. In other words, we don’t need to worry that the actions of a third party will result in a significant depreciation of the asset. You are also protected from risks that can arise from regulation or an extreme change in government policy. Bitcoin holders always have complete control over their holdings.
As a network between peers The Bitcoin platform offers asset owners a level of control that bypasses regulation or the use of state force. In the meantime, we are almost certain that their value will continue to increase over the years as supply is determined and the rate of new units being issued is halved every four years.
That is very likely Autonomy and the increasing scarcity of Bitcoin add value over time. and it would not be surprising in 100 years if the price were significantly higher than it is today.
This article does not contain any investment recommendations or recommendations. Every trading and investment step is associated with risks. Readers should do their own research in making their decision.
The views, thoughts, and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Constantin Kogan is Managing Director of Wave Financial Group and partner of BitBull Capital. He has been a cryptocurrency investor since 2012. He has over 10 years of corporate governance, technology and finance experience. It contributes to the digital asset space as well as economies of exchange and value.