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– TIMESTAMPS –
1:58 Microstrategy Purchase
6:36 Square Follows
9:40 Starting a Trend
11:49 BTC Investment Case
14:50 How Much Could Invest?
17:07 Impact on Price
19:18 Final Thoughts
⛓️ 🔗 Helpful Links & Sources 🔗 ⛓️
► Microstrategy Announcement: https://www.businesswire.com/news/home/20200811005331/en/MicroStrategy-Adopts-Bitcoin-as-Primary-Treasury-Reserve-Asset
► Interview with Saylor: https://www.theblockcrypto.com/daily/78646/microstrategy-ceo-interview-bitcoin-gold-dollar
► Microstrategy Purchase: https://www.microstrategy.com/en/bitcoin
► Square Whitepaper: https://images.ctfassets.net/2d5q1td6cyxq/5sXNrlEh2mEnTvvhgtYOm2/737bcfdc15e2a1c3cbd9b9451710ce54/Square_Inc._Bitcoin_Investment_Whitepaper.pdf
► Total Balance Sheet Cash: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/us-companies-fortified-balance-sheets-in-q2-as-cash-holdings-hit-record-60485670
► Bitcoin News: https://news.bitcoin.com/nasdaq-microstrategy-bitcoin-425-million/
💸 Microstrategy Purchase 💸
Microstrategy had purchased almost $425 million in Bitcoin. This was after they sold off their US treasury balance and it effectively meant that they had over 90% of their balance sheet in Bitcoin.
They did this becuase they wanted to preserve the value of their treasury holdings. This would be to blunt the impact of that inflation on their balance sheet. They also did it as they wanted to use Bitcoin in their broader treasury strategy.
This is because using Fiat in order to get a lot of other currencies in other countries takes time and there are a lot of fees involved in this.
🟫 Square Joins In 🟫
Square decided that they were going go buy $50m Bitcoin as part of their strategy to empower Bitcoin use. This was only about 1% of the balance sheet which is less than the proportion that was taken in by Microstrategy.
They think that Bitcoin is going to be used more like an actual currency in the future. This is of course not too surprising given the general corporate strategy of Square and Jack Dorsey’s highly optimistic view
I am of the view that Square was just testing the waters. They are a company that is long term bullish on Bitcoin with a founder that is a known Bitcoin bull.
🛣 Laying the Groundwork 🛣
By being one of the first corporates who are doing this, Square and Microstrategy are laying the groundwork. They have established processes in place that other companies can follow if they want to buy Bitcoin.
Companies like MicroStrategy have now created a simple precedent that other companies can easily emulate should they want to invest a part of their balance sheet into Bitcoin.
💰 Why Would They Invest? 💰
Currently, US corporates are sitting on some record stockpiles of cash. In Q2 of this year, we were sitting at record levels for the ratios. Cash holdings among non-financial S&P 500 companies rose by $90 billion to a record $1.89 trillion in the second quarter.
Traditionally they could consider investing it in future business. Spending on Capex and growing out business lines. The problem with this is that the future is more uncertain now than it has ever been.
They can keep that in treasuries but the rates on those are near zero.
This is why they are likely to have taken notice from the Microstrategy announcement. They would have seen that value that came from diversyfing assets away from traditional treasury assets and preserving their wealth.
💸 How Would Companies Invest? 💸
S&P 500 corporates would probably want to ease into it with a small allocation to start off with. We can assume that they would be conservative and invest about 5% of their Cash into Bitcoin.
Based on the figure quoted above, 5% of all that cash is $94 billion. That’s almost half of the entire market cap of Bitcoin. I obviously don’t need to tell you the impact that this could have on market demand for Bitcoin.
You then also have to consider the fact that there are a number of other publicly listed companies that are not on the S&P500. You also have a host of private companies as well as companies in other parts of the world.
📜 Disclaimer 📜
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading Forex, cryptocurrencies and CFDs poses considerable risk of loss. The speaker does not guarantee any particular outcome.
#Bitcoin #BTC #Crypto #Square #Microstrategy #adoption #corporates
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