Companies Store BTC. Some public and private companies have begun using Bitcoin as a reserve asset in the past few years. One firm that has recently become famous in the industry has amassed over one percent of the total Bitcoin supply, or $57,561. At the time of writing, MicroStrategy’s Bitcoin holdings were 226,331 BTC. While this company’s massive holdings of Bitcoin steal the show from other corporate holders, dozens of different companies now have much smaller amounts of Bitcoin in their treasuries.
Among these are Bitcoin miners Hut 8, CleanSpark, and Riot Platforms, as well as the Nasdaq-listed cryptocurrency exchange Coinbase. A number of non-crypto companies have Bitcoin on their books as well. These include Tesla, Mercado Livre, an electric car producer, Chinese software business Meitu, and Semler Scientific, a medical manufacturer. A publicly traded exchange-traded product (ETP) provider, DeFi Technologies, has lately bought 110 BTC to use as collateral for its treasury.
Data from Bitcoin Treasury shows that public and private companies collectively own 812,929 BTC, or around 3.87% of Bitcoin’s total supply. This shift began just before spot Bitcoin ETFs debuted in the US, and it has since given rise to a new category of Bitcoin holders. Because of this, it is much simpler for companies to become acquainted with the cryptocurrency. Companies’ use of Bitcoin has had a largely positive effect thus far, and the reasons for this are apparent: Bitcoin’s long-term potential stands in stark contrast to the gradual depreciation of the US dollar.
Adopting Bitcoin as a Treasury Asset
U.S. Federal Reserve officials have set a 2% annual inflation target. Because “inflation that is too low can weaken the economy,” theorists believe that the dollar’s value should decline by 2% annually in a perfect world. Inflation peaked at 9.1% in 2022 before leveling down at about 3.5% following the Federal Reserve’s interest rate hikes, proving that this ideal scenario doesn’t always work. Because of this unpredictability, companies are looking for assets that can better withstand inflation.
Companies Store BTC: In contrast to Bitcoin’s predictable monetary policy and 21 million supply cap, several central banks throughout the world have implemented a policy that is comparable to this. Bitcoin’s characteristics and tumultuous past have given it a reputation as a possible inflation hedge and caused its performance to not correlate with other asset classes.
“Given Bitcoin’s low correlation to the performance of traditional asset classes, such as equities and bonds, Bitcoin may look attractive to institutional investors as an addition to their investment portfolio and hedge against traditional market volatility, thereby spreading risks while potentially enhancing portfolio performance,” commentated a Binance spokesperson on the increasing corporate adoption.
A representative from the company went on to say that they think the best way to ensure the industry’s long-term success is to create a trustworthy regulatory climate that safeguards investors, encourages innovation, and fosters trust. According to them, firms will feel more at ease investing in cryptocurrency once standardized regulatory frameworks become the norm.
People are buying Bitcoin because, according to BitPay’s chief revenue and marketing officer Bill Zielke, “the long-term vision of Bitcoin as an appreciating store of value and hedge against inflation.” “They may also believe that we are at the beginning stages of a blockchain-powered world in tech and finance,” Zielke continued.
Curtis Schlaufman, VP of marketing and communications at DeFi Technologies, spoke about the decision to adopt Bitcoin, explaining that it reflects confidence in its ability to protect against inflation and monetary debasement. “We have adopted Bitcoin as our primary treasury reserve asset. Companies Store BTC: “According to Schlaufman, Bitcoin has “significant short to long-term potential to expand the company’s treasury” because it has been the best-performing asset over the last decade. Even if Bitcoin’s potential is appealing, you should be aware that this new asset class is risky due to its notoriously high price swings.
Managing Bitcoin’s Volatility
Cryptocurrency markets often experience daily price changes in the double digits, which is more typical than in more conventional asset types such as stocks and bonds. In days of tremendous volatility, Bitcoin itself has witnessed these fluctuations several times.
While Bitcoin’s “erratic trading value” is “well-known to crypto enthusiasts, but could startle business investors who measure success a quarter at a time,” according to Arina Dudko, head of corporate payment solutions at cryptocurrency exchange Cex.io, who said that a simple glance at the price chart demonstrates this.
Any entity that has any exposure to Bitcoin needs to be able to weather the storm. According to BitPay’s Zielke, the adoption of Bitcoin as a reserve asset by any corporation carries with it the potential for short-term losses, increased accounting complexity, and the additional burden of educating stakeholders and staff.
Zielke elaborated by saying that Bitcoin has had its fair share of failures, citing the hacking of Mt. Gox and the bankruptcy of FTX, but that BTC has “rallied back every time” and that the “financial rewards are clear and obvious.” There are benefits beyond monetary gain. Using Bitcoin as a reserve asset for corporate treasury is like “positioning yourself as titans of the future,” according to Zielke.
Companies Store BTC: According to Dudko of Cex.io, businesses of all sizes should consider their risk tolerance and conduct thorough research before investing in Bitcoin: “Considering how they would fare if BTC gained or lost double-digit valuations, given its proven volatility, could be prudent for companies looking to avoid dire financial straits.”
According to Dudko, this will provide companies with more information about the crypto economy and how to protect themselves from unexpected risks. The CEO of DeFi Technologies, Schlaufman, explained that his firm diversifies its holdings among U.S. dollars, Bitcoin, and venture capital in order to mitigate the risks associated with holding a volatile asset like Bitcoin.
He promised that the business would “continue to purchase Bitcoin as we are able to,” expressing confidence in the cryptocurrency’s long-term upward trajectory. For instance, a cryptocurrency backed by gold might offer a versatile way to invest in the precious metal, which is now held by central banks globally as an asset for treasury purposes.
Should Companies Adopt Other Cryptocurrencies?
Unlike central banks that have embraced gold as a treasury asset, businesses that embrace Bitcoin have the opportunity to broaden their focus to tap into the expanding decentralized finance (DeFi) area, provided they know of it. When asked for his thoughts on the matter,
Schlaufman of DeFi Technologies said that it “just makes sense” to invest in Bitcoin instead of other assets. His company is focused on cryptocurrency, and BTC has been the world’s best-performing asset for the last decade. He verified that expanding into additional asset classes is not something the organization is thinking about at the moment.
While BitPay’s Zielke expressed doubts about the widespread adoption of “other cryptocurrencies will be adopted so bullishly as investments by large companies,” he did predict that more companies will start using cryptocurrencies, especially stablecoins, for international payments and employee remuneration services. With stablecoins, you can send and receive cryptocurrency payments quickly and cheaply without worrying about their value fluctuating.
According to James Toledano, COO of the self-custodial crypto wallet app Savl, Bitcoin is now the most popular option for government funds. However, Ethereum “seems to be the next natural choice” because of its unique value proposition and record of success with smart contracts.
Companies Store BTC: “The boundaries between TradFi and DeFi are eroding very quickly, and that crypto is going mainstream,” Toledano said of the current trend, adding that it could “accelerate the integration of digital assets into the broader financial ecosystem, influencing investment strategies, payment system, and financial regulations.” Despite diversifying the market with highly volatile tokens like memecoins, retail traders appear to be losing ground to corporate holdings. Retail investors have been less active this market cycle, reports Reuters.
According to Dudko, the cryptocurrency industry’s growth was driven by retail participants. However, he expressed concern that institutional and corporate adoption could lead to the exclusion of certain digital assets due to price or scarcity, as well as the erosion of the industry’s egalitarian spirit, which he believes inspired many people to start their crypto journey. According to her, this rebalancing might also mean “that the same forces have officially co-opted decentralized finance many sought to avoid by placing value on the chain.”
The crypto asset class may undergo significant changes as a result of increasing corporate use, which further legitimizes it. Companies who jump on the bandwagon now may be committing heavily to the future of finance, but it’s hard to say how the Bitcoin space’s culture will evolve if this trend keeps up.
Concerned about the future of inflation and monetary policy, corporations are diversifying their holdings by purchasing Bitcoin and other assets. The long-term potential of Bitcoin has convinced some corporations to plunge in despite its volatility, making its corporate adoption challenging. It is unclear what will motivate further corporations to make the change.
