Earlier this week, bitcoin received a boost from an unexpected source —MicroStrategy
Per the CEO, Michael J. Saylor, “Our investment in Bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our shareholders.”
He further notes that “MicroStrategy has recognized Bitcoin as a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash…and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.”
Per Ryan Scott of Blookroots, “As we stated a few months back, when Paul Tudor Jones came out publicly stating his positioning on Bitcoin, it is only a matter of time until we see more of this from other major movers and shakers in the financial universe. When larger players come out publicly showing support, it gives others the validation to do so as well.”
Jeff Dorman, CIO of Arca, notes that MicroStrategy’s bitcoin investment has potentially “let the genie out of the bottle” on two issues, which could have lasting effects on Corporate America and Banking Industry.
1) “Every other Corporate Finance team at public companies saw the 10% move higher in Micro Strategy’s stock price. Back in 2017/2018, many public companies found a way to use the word ‘Blockchain’ on earnings calls, just because the market was rewarding stocks of companies who were forward thinking. The move in Micro Strategy’s stock upon announcement of a BTC ‘cash’ position will incentivize other CorpFin teams to consider this.”
2) “Lost in all of this is the utility of owning BTC (or another stable digital asset like ArCoin) instead of cash. Owning cash means you need to have multiple global checking accounts with different banking hours and expensive wire fees, plus you have to try to earn a yield on your float by parking the cash in various money market and other yield-bearing instruments. Plus, you can’t do anything with your cash on weekends. Whereas owning just BTC or ArCoin can reduce your reliance on 3rd parties, lower transaction costs, and increase payment flexibility.”
The aforementioned notion is extremely interesting because the heightened correlation between Gold and bitcoin in 2020 showcases how BTC is well on its way to becoming the preferred store of value asset globally. But, MicroStrategy’s decision also highlights it as an efficient and cheap global payment network.
Bitcoin’s network efficiency has numerous examples of large amounts of money being moved, almost instantaneously, and with minimal fees, which could be a game changer in terms of cost reduction for public companies.
On the surface, it seems MicroStrategy’s bitcoin allocation has the potential to be the first domino in fulfilling Satoshi’s vision of a global, decentralized financial system, thus further validating it as a store of value, reliable payment network, and medium of exchange.
The future is still far from written, but if more companies begin to follow MicroStrategy’s lead, Corporate America could be the next big demand boost for bitcoin.
Disclosure: The author owns bitcoin and ethereum.