Keeping Bitcoin (BTC) in treasury will soon become the corporate standard. signature Wall Street’s MicroStrategy recently hit the headlines when it decided to allocate a large portion of its treasury to Bitcoin and buy over 21,000 BTC in August and nearly 17,000 more in September. What made your CEO do it? Michael Saylor, it seems prospective enough. MicroStrategy stocks rose 50%, as did BTC. According to Saylor, Bitcoin was the best inflation protection and store of value, and in his words “cash is junk”. Your bet has been very rewarding so far.
Technically speakingBitcoin is indeed a global store of value. BTC is not just an American or Asian phenomenon: it is held and traded worldwide through a variety of local exchanges, making the available liquidity pool both global and capillary.
There are many technical reasons for calling Bitcoin an inflation hedge. BTC is a numerus clausus asset class, which means that just like gold, high-end real estate, and fine arts, there are a limited number in circulation (a maximum of 21 million coins). In addition, after the BTC has been halved, there is a new and shrinking supply of Bitcoin and a culture of long-term holding among most participants in the crypto space. All of this means a small reservation. Historical, BTC appears to be replaying its last bull runs after being halved. This is the third halving and it doesn’t disappoint. On the demand side, the picture widens.
The world’s economies are in a strong, expansive money phase. widespread quantitative easing so to speak, in response to that Covid19 pandemic. So far, Bitcoin has outperformed all asset classes during the crisis, sparking new demand and gaining its wings as a global store of value. The fact that it is ethereal and not tied to actual economic cash flows, as opposed to stocks or real estate, for example, works to your advantage when the global economy falters.
Bitcoin offers an alternative and digital safe haven. The demand thus materializes in purely monetary considerations, and Bitcoin is technically a hedge against natural inflation in this sense. It will soon become a corporate standard, as will government bond ownership.
Cryptocurrencies as treasury stocks
There is also a slight ideological bias towards current corporate movements. For savvy CFOs, a Treasury Department’s share of the digital currency provides a measure of regulatory coverage and arbitrage. Nobody controls the Bitcoin blockchain and no government can hack into it and confiscate resources. This additional safety valve, a feature of most blockchains (censorship resistance), is in fact one of the main reasons for BTC. This feature can be an obstacle for most central banks as they want to run their own currencies and blockchains, not Bitcoin’s, and they certainly want to control the issuance as opposed to the programmatic and non-discretionary issuance of bitcoin. And, in fact, it’s why Bitcoin will resonate with many CFOs, ironically both conservative and avant-garde.
What is surprising with Saylor and MicroStrategy is the size of the bet. With a market cap of around $ 2 billion, a $ 425 million bet seems very important to the company. So far it has paid off spectacularly. While betting may all seem reckless, betting nothing is worse.
What seems reckless or extreme will seem silly. With a rough estimate of $ 10 trillion in corporate treasury worldwide, an allocation of 3% instead of cash equates to $ 300 billion, which is roughly the value of Bitcoin in cash. These orders of magnitude say that the new wave of BTC has arrived. The demand is growing and the supply is getting smaller. Soon, all CFOs will be calmly wondering whether the company shouldn’t expose itself to the class of digital assets, but how to do it right and who to trust to manage its digital assets.
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Marc Fleury is the CEO and co-founder of Two Prime, a fintech company focused on the financial application of cryptocurrencies in the real economy. Based on his financial experience, ranging from his role as a consultant for private equity firms to his academic work in modern banking and monetary theories, he sets the strategic direction for the core investment strategy vision and partnerships for the company.