Despite frequent references to the “growing trend of corporate treasuries making allocations to Bitcoin”, very few have actually done so. But this could change.
Bitcoin held by corporate treasuries
Source: Bitcoin.Treasuries.net
The start of a trend
A trend started in 2020 for corporate treasuries to allocate some of their assets to Bitcoin. Some of these were major corporations, such as Tesla, SpaceX, Block, and Norwegian oil company Aker.
However, corporate Bitcoin investments dropped off substantially during the bear market in 2022, in particular as Tesla sold most of their Bitcoin and SpaceX sold all of their holdings.
Since then, only small companies have been adding Bitcoin to their balance sheet, other than SpaceX and Block starting to buy again, and Reddit making a small allocation, which they later redeemed.
Crypto businesses
There are, of course, numerous crypto businesses, such as Bitcoin miners, that hold Bitcoin on their balance sheet. However, as they are already exposed to Bitcoin by the nature of their business, these holdings do not indicate that non-crypto companies would consider Bitcoin a legitimate treasury asset. Nor is it likely that businesses that have no connection to the crypto industry would follow the example of Bitcoin miners or other crypto specialist companies making treasury allocations to Bitcoin.
When analysing the trend of corporations making treasury allocations to Bitcoin, we exclude all crypto companies.
MicroStrategy’s dominance
Since 2021, most of the Bitcoin purchases by corporate treasuries were done by just one company, MicroStrategy.
The pace of their acquisitions has accelerated further this year, and again after the US elections, and they account for 92 percent of all Bitcoin currently held by corporate treasuries.
If we add to this the holdings of the original Elon Musk and Jack Dorsey companies that bought Bitcoin in 2020/21, the remaining 25 corporations hold only 2.5 percent of the total Bitcoin treasury assets of non-crypto businesses.
Although the number of companies allocating to Bitcoin nearly doubled this year, these have so far been all microcaps and small caps.
No trend for major corporations
Other than the small number of companies that started the Bitcoin allocation trend back in 2020/21, no medium or large-sized corporation have come on board since.
The reasons are, in part, due to regulatory uncertainty in the US, concerns around the accounting treatment of Bitcoin holdings, and Bitcoin’s high historical volatility. Major corporations have also found the size and liquidity of the market in Bitcoin a constraint.
Additionally, as MicroStrategy has accounted for most of the “trend” and has been the company primarily associated with Bitcoin treasury allocations, their example seems to have acted as more of a deterrent to treasurers than a lead to follow – despite the appreciation in MicroStrategy’s share price. Making large leveraged bets that vastly overwhelm the company’s actual business is not in line with corporate treasurers’ remit.
The rationale is there
Nonetheless, the rationale is solid for corporate treasuries to make Bitcoin allocations.
While neither Bitcoin nor gold provide an effective hedge against short-term changes in inflation trends, both assets maintain their purchasing power over the long term. In fact, Bitcoin’s purchasing power has increased dramatically over time, while the purchasing power of fiat currencies has steadily declined.
Bill Miller described Bitcoin as an “insurance policy against financial catastrophe”, and in the current environment of escalating fiscal deficits and ever-increasing government debt reaching levels far exceeding the economic output of the country, an “insurance policy” against potential catastrophic scenarios is well advised.
Future drivers
The barriers to corporate treasury Bitcoin allocations are coming down rapidly as regulatory risk declines, clarity increases, and the size and liquidity of the market grow.
An additional major driver is the growing trend of central banks and local governments considering Bitcoin strategic reserves. As the new US administration claims that they are intent on creating a Bitcoin reserve, various states (e.g. Pennsylvania and Texas) and other countries (e.g. Brazil and Russia) have already followed suit by filing similar bills, and many more are considering it. Recently, even Jerome Powell called Bitcoin an alternative to gold.
If central bank Bitcoin reserves proceed, this would put Bitcoin entirely on par with gold, and it is likely that corporate treasuries, including those of major companies, would follow suit.
Additionally, there is a growing trend of shareholder activism advocating for Bitcoin treasury reserves. Although the shareholder vote at Microsoft failed, similar shareholder proposals are being advanced at other corporations, such as Amazon. Such activism, coupled with Bitcoin’s growing status as a safe-haven asset, may finally kick-start a genuine trend of treasuries making Bitcoin allocations.
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