Why some companies are switching their cash into bitcoin?
Over the past few months, we have witnessed an unprecedented pace of growth in the crypto industry. Apart from the gambling-spirited and often uninformed retail investor, we are now starting to see (public) companies allocating part of their cash reserves into Bitcoin.
The move was expected by most so-called Bitcoin Maximalists, as Bitcoin is gaining more and more authority. But what exactly is the reason behind all those companies choosing to buy Bitcoin? In this short article, we take you through all the reasons for which some of the most prominent entrepreneurs have adopted the alternative store of value. Let’s delve in.
Microstrategy started a tsunami of investments
It was September of 2020 when the crypto world came to know Michael Saylor, CEO, and founder of Microstrategy, as the first ever institutional investor who decided to bet it all on Bitcoin. Across a number of different purchases, Microstrategy now holds nearly 100.000 Bitcoins, an amount that reflects more than 90% of their treasuries. The bold move came after Saylor started digging into the fundamentals of the cryptocurrency during the early days of the pandemic.
Following the investment of Microstrategy, we saw a large number of (often public) institutions allocate their cash reserves to Bitcoin. Jack Dorsey’s Square was the second to invest, and the biggest one to this day is Tesla. The latest investment caused a mayhem of positive sentiment from the community and the Bitcoin price rose by more than $7000 in a single day.
You can see a complete list of popular companies that have invested in Bitcoin by following this link.
That said, the companies did not stop there. Many of them with Saylor in the front are borrowing money at low-interest rates to buy up even more Bitcoin. When focused on macro perspectives it is a relatively safe bet, and we can expect to see more companies do the same.
Apart from all that, Saylor also recently hosted a seminar for institutional investors, helping them understand the benefits of buying and holding onto Bitcoin when reflected in the current conditions of our economy. The latest is by far the biggest reason behind the switch to Bitcoin. Here’s what we mean by that.
Our economy is (very) unstable
The latest year has been nothing short of tragic for the global growth and prosperity of our economy. With Covid19 still presenting a legit threat to our world, governments decided to shut down retail on a global scale. Millions of people have lost their jobs, while small businesses are fighting to survive. In a single year, we saw thousands of mom & pop shops close down, and let us not even get started on the food and beverage industry.
This unfortunate turn of events has made many people dependent on the government, which is printing more money wrapped in quantitative easing packages in order to bail out companies and distribute stimulus checks to the public.
In other words, the currency is being inflated, and the next few years are expected to be the worst ones yet (in the US alone, 40% of the circulating supply was printed in the last year). Naturally, the inflation that so many fear is going to decrease the buying power of money. Some even think we can expect double-digit inflation rates within 2021.
Having said that, it is now easier to understand why companies invest in Bitcoin. The asset has been growing steadily when looked at from a macro perspective. Fiat currencies on the other side have been decreasing steadily when the same is done. And given that Bitcoin is a more advanced and improved form of gold, it would be riskier to not own some rather than to own.
If institutions want to move billion dollar blocks of money around the globe, gold is a million times more expensive than #bitcoin, and a thousand times slower. We can’t build a modern economy on antiquated technology.
— Michael Saylor (@michael_saylor) February 11, 2021
As a result, more and more companies are jumping on the bandwagon and some even believe that countries are secretly building a stash. We see the development of multiple Bitcoin-related funds, the latest of which comes from Norway’s second richest man (Seetee). It is therefore important to ponder; why do people with an abundance of resources still feel the importance of Bitcoin? For them, profit is not the primary incentive. Instead, it is the survival of our world in case of a global, hyperinflationary collapse.
|CryptoCurrency||USD||Change 1h||Change 24h||Change 7d|
|Bitcoin||0.37 %||1.05 %||11.54 %|
|Ethereum||0.41 %||6.11 %||21.96 %|
|Binance Coin||0.15 %||3.98 %||43.14 %|
|XRP||0.08 %||1.45 %||91.38 %|
|Tether||0.22 %||0.17 %||0.10 %|
|Cardano||0.47 %||1.33 %||20.95 %|
|Polkadot||0.86 %||1.20 %||7.40 %|
|Uniswap||1.31 %||0.23 %||26.83 %|
|Litecoin||0.33 %||0.11 %||23.87 %|
|Chainlink||0.11 %||11.49 %||29.27 %|
|Dogecoin||0.37 %||15.11 %||115.56 %|
|Bitcoin Cash||0.11 %||0.63 %||29.55 %|
|Stellar||0.07 %||5.05 %||29.87 %|
|Theta Network||0.74 %||2.58 %||0.95 %|
|VeChain||1.41 %||11.65 %||63.39 %|
|Filecoin||0.02 %||5.33 %||10.21 %|
|USD Coin||0.12 %||0.07 %||0.09 %|
|TRON||0.59 %||8.58 %||24.57 %|
|Wrapped Bitcoin||0.04 %||0.92 %||11.69 %|
|Klaytn||0.79 %||3.70 %||1.36 %|