What are the merits of holding Bitcoin as your asset?
Is Bitcoin a new asset? Table of Contents
More Companies holding assets in Bitcoin and Gold
The new coronavirus infection spread to the world with a time lag starting from China and had a great impact on the economy.
In March 2020, the global stock market responded significantly and fell.
In September 2020, the S&P 500 hit a record high in the stock market in early September, but the background of the movement against the real economy is centered around the world.
There are large-scale reprints by banks and a zero interest rate policy.
On the other hand, gold and Bitcoin are in increasing demand as hedge assets for inflation.
This time, let’s consider the reason why not only individual investors but also companies are buying Bitcoin in such a movement.
Change to assets owned by the company
Among the companies that have recently announced their possession of Bitcoin is a company called MicroStrategy.
The company is NASDAQ listed that provides enterprise analytics tools.
At its August 2020 financial results briefing, the company explained to investors that it would hold some of its assets in a mix of Bitcoin and gold instead of cash.
Behind this is the intention to prepare for the risk of a relative fall in the US dollar price due to inflation caused by monetary easing.
The company spends half of its cash, its $ 250 million, on buying Bitcoin and gold.
Until now, there have been cases where hedge funds have crypto-assets such as Bitcoin, but the announcement of Bitcoin holdings by general companies was a remarkable event.
The announcement has been well received by the market and the company’s stock price has risen since the announcement of its financial results.
The company also suggests that it may have more Bitcoin holdings as of September 2020.
Why and how Bitcoin is considered as Digital Gold Safe-haven?
Not cash but Bitcoin and Stocks
In addition, although Bitcoin purchase has not been announced, the SoftBank Group has adopted a similar strategy for domestic companies.
The company also explained that it would increase its cash holdings in case of uncertainty, and at the same time announced that it would manage surplus funds for major IT-related stocks such as Amazon, Apple, and Netflix.
SoftBank Group has explained that holding liquid stocks such as GAFA can be quickly converted to cash if needed, so holding these stocks is not much different from holding cash.
In the case of SoftBank Group, although it is a shareholding, both MicroStrategy and SoftBank Group companies want to increase their current assets and prepare for them amid increasing uncertainty due to the impact of the new coronavirus, but as assets they hold.
In addition to cash, they are incorporating stocks and bitcoins of giant tech companies.
How did Coronavirus affect the Cryptocurrency market?
Diversify your investment
Bitcoin is a high-performing asset from 2019 to May 2020.
As for stocks, their actions seem to make sense given that the best performing asset in the last few years was the stocks of big tech companies such as GAFA.
GAFA continues to grow in double digits in both sales and profits, with market capitalization rising 30-40% each year.
Apple said it had a market capitalization of USD 2 trillion in August 2020, but in just two years it has grown from USD 1 trillion to USD 2 trillion.
It’s doing well, and it’s unlikely that there are other assets with sufficient liquidity.
The recognition of Bitcoin as an asset for its hedging amid concerns about inflation is a positive move for crypto investors.
As a matter of fact, the stock market has a strength in the current situation that the fundamentals of Bitcoin are not clear while the stock price is different from the business performance.
However, there are risks in any market scenario.
As the investment saying, “Don’t put eggs in one basket,” while holding and hedging Bitcoin and gold together, companies will also take the option of holding Bitcoin in the future
Comment by Hans
April 24, 2024
as I am trading here various assets, for me it's the most important feature. i mean, flexibility in tradable markets. i alternate trading styles, meaning that sometimes I trad...