MicroStrategy, the largest independent publicly-traded business intelligence company is making Bitcoin its primary capital reserve with a $ 250 million investment. The company is driven by the fear that a devaluation of the fiat currencies threatens its reserves. For Bitcoin, this is the most important news of the year so far. Because the event could trigger a chain reaction.
There are reports that Bitcoiners have been waiting for for years because it is so obvious, but then rub your eyes in amazement when you actually read them. One such announcement is the press release from MicroStrategy, the world’s leading provider of software for corporate monitoring. According to Wikipedia, the US company has 2,600 employees and an annual turnover of 450 million dollars.
MicroStrategy announces that it has bought 21,454 bitcoins for a total of $ 250 million. This purchase was part of the new capital allocation strategy the company announced in its second 2020 financial report. In this strategy, it was decided, among other things, to invest up to $ 250 million in alternative financial products.
MicroStrategy CEO Michael J. Saylor explains that the decision “reflects our belief that Bitcoin, as the most widely used cryptocurrency, is a reliable and attractive investment that has more potential than cash”. The move was driven less by the enthusiasm for Bitcoin – but rather by the unfavorable prospects of the fiat currencies.
Saylor sees “a confluence of macro factors that influence the economy and corporate landscape, and which we think will entail long-term risks for our company’s capital reserves.” Specifically, he means the Corona crisis, unprecedented financial injections by the government and global political and economic uncertainty: “We believe that these and other factors together will have a significant negative impact on the long-term value of fiat currencies and many other conventional investment products.”
Saylor, on the other hand, expects Bitcoin not only to protect against inflation but also to offer the prospect of a higher increase in value than other investments. “Bitcoin is digital gold – harder, stronger, faster and smarter than any money we have known before. We expect its value to increase as technology advances, adoption increases, and the network effects kick in that fueled the rise of so many modern killer apps. ”So MicroStrategy doesn’t just add Bitcoin to its capital reserves portfolio – but makes it its primary reserve.
One has to understand what this means: a relatively large company recognizes risks to its capital stock, which also – perhaps mostly – emanate from the monetary policies of governments trying to solve crises by increasing the supply of money to inflate the stock market. So far that’s not unusual. Many entrepreneurs bear and express such worries, sometimes louder, sometimes quieter. But now, with Bitcoin, there is an alternative to the existing financial system, and MicroStrategy will be the first company to take it. There is a way out, and it’s open to anyone who wants to go through. Bitcoin frees companies from being dependent on the fiat system for better or for worse.
The market seems to be welcoming. The share price of MicroStrategy jumps immediately after the press release was published from 105 to 115 euros. This may also be because the company announced in the same announcement that it would buy up its own shares with $ 250 million. Nevertheless, it at least shows that the broader market is not taking investment in Bitcoin negatively.
This strategy could serve as a role model for other companies. Even if many financial experts assure that inflation is unlikely, hardly any entrepreneur is unlikely to be uncomfortable when the money supply is growing at an alarming rate around the globe. In the eurozone, it rose in June by an impressive 9.4 percent, in the USA by more than 20 percent. Who doesn’t worry that this threatens the future of a company that keeps its capital reserves in fiat currencies? And what signaling effect will it have if MicroStrategy only achieves a profit of 10-20 percent with its investment? Will this put pressure on the competitors?
If other companies emulate MicroStrategy, it could lead to a race for bitcoins that will become very expensive for those who are late. It could also start a chain reaction that will see fiat currencies decline in value and Bitcoin becomes the global standard of value. Maybe the race to the exit has already started.