Beyond the Hype: Why Smart Companies are Holding Bitcoin

The digital revolution is upon us, and businesses need innovative solutions to survive and thrive. Bitcoin, the leading and most dominant digital asset, is emerging as a powerful tool for forward-thinking companies. Businesses have begun to invest in Bitcoin as a store of value, with some even holding a percentage of their cash reserves in the digital asset. Lets discuss why smart companies are holding Bitcoin.

Publicly traded companies like Tesla and MicroStrategy have paved the way. Now, buying Bitcoin as part of corporate treasuries is becoming more common. But you don’t need billions of cash to buy bitcoin as a company.

With support from Florin21, you can do this as a large, small or medium-sized business. Let’s take a look at why you should consider it.

Which Company’s already hold Bitcoin?

Publicly traded companies are investing in Bitcoin, with two main motivations:

Future-Oriented Vision: Forward-thinking companies are embracing Bitcoin as a potential store of value and a hedge against currency debasement in our increasingly digital world. They see it as an emergent monetary good with the potential to disrupt traditional payment networks.

Strategic Investment: Businesses directly involved in the cryptocurrency space, like miners and exchanges, hold Bitcoin due to its inherent connection to their core operations. Their success is intricately tied to Bitcoin’s growth.

As of April 2024, a number of publicly traded companies have significant exposure to Bitcoin. Some of the most notable include:

• MicroStrategy: A business intelligence company and newly rebranded as a Bitcoin development company founded by Michael Saylor. The company currently holds 214,246 BTC ($14.53Billion).
• Marathon Digital Holdings: A company mainly engaged in Bitcoin mining. The company currently holds around 16,930 BTC ($1.148Billion).
• Tesla: An EV car manufacturer and clean energy company led by Elon Musk. The company currently holds around 9,720 BTC ($659Million).
• Coinbase: A cryptocurrency exchange platform led by Brian Armstrong. The company holds 9,480 BTC ($643Million).
• Block (formerly Square): A fintech and payments provider led by Twitter Co-founder Jack Dorsey. The company holds 8,027 BTC ($545Million).

Why Companies buy Bitcoin

Despite its youth, Bitcoin has weathered numerous storms in its decade-long existence. Here’s a look at some of its battle scars:

• Exchange Hacks & Bankruptcies: Events like the Mt. Gox hack (2014) and FTX collapse (2022) challenged Bitcoin’s resilience. However, Bitcoin’s price recovered from these events, demonstrating the continued faith of investors.
• Regulatory Scrutiny & Government Bans: Bitcoin has faced government bans and restrictions in certain regions, yet continues to operate globally.
• Bitcoin Forks: Internal disagreements led to “forks” where Bitcoin split, causing temporary volatility but not derailing its growth.

Today, Bitcoin is gaining mainstream acceptance. Blackrock, the world’s largest asset manager, now considers it a long-term store of value, and Bitcoin ETFs have seen record-breaking launches.

Bitcoin has been the best performing asset class in 11 out of the last 14 years with annualised gains of over 152%. Companies are starting to take notice as confirmed by CoinCorner, the UKs largest Bitcoin exchange.

Bitcoin is a unique asset that offers long term store of value characteristics similar to gold. Yet it’s fully digital and operating on a decentralized, tamper-proof ledger that is independent of nation-states, banks, and other centralised actors. Bitcoin operates independently of traditional financial systems. It provides an opportunity for businesses to hold assets outside the traditional system.

Reasons why companies should consider buying Bitcoin include:

• Future proofing your business: Holding Bitcoin can help a company to preserve the value of capital. It also allows it to save, build capital reserves and plan for the future. With timing, it can boost a company’s balance sheet and allow for a higher multiple at exit. If that’s the plan.
• Asset diversification: Bitcoin can provide an additional layer of diversification to a company’s portfolio, which can help to spread risk and potentially increase returns.
• Hedge against monetary debasement: Bitcoin is not controlled by any government or central authority, which means it is not subject to the same monetary policies as traditional currencies. The capped supply of 21 million Bitcoin addresses the issue of inflation and devaluation that has plagued traditional currencies. With a finite supply, Bitcoin inherently resists inflationary pressures that erode the value of other currencies. This means that individuals and institutions who choose to store their wealth in Bitcoin can expect their purchasing power to be preserved over time. Since 2020 The US dollar and UK pound lost around 25% of its value while Bitcoin jumped around 800% in the same period.
• Hedge against currency risk: Bitcoin is not pegged to any particular national currency, which means it can provide protection against fluctuations in the value of traditional currencies. It is also completely independent of nation-state influence on its monetary policy. Argentina devalues currency 50% over night.
• Exposure to a new, forward thinking, emerging asset class: Bitcoin has grown significantly in recent years and has the potential to continue growing in the future, providing companies with an opportunity to gain exposure to a new, potentially high-return asset class.
• High Level of security: Bitcoin is highly secure due to its decentralized network and advanced cryptography. By using multi-signature, multi-location setups, businesses can add an additional layer of security to their Bitcoin holdings and protect against potential security breaches. Florin21 can help with this!

Some extra considerations:

• Volatility: Bitcoin is highly volatile, it is important to use only a portion of a company’s treasury or cash flow to buy Bitcoin (2–5% seems to be typical). This is not money that is needed to make payroll or pay vendors. A Bitcoin stash is a long-term treasury management strategy outside of the traditional banking system’s current uncertainty.
• Investment horizon: It is also ideal to have a holding strategy of 4–10 years (ideally forever) as Bitcoin appreciates in value over time. The fragility of the global financial system is a result of constant state intervention. They do this by increasing the money supply to stimulate consumption. The problem is that an increase in the money supply leads to inflation; the loss of purchasing power of individual monetary units and the associated increase in the price of products (rising prices). This inflation can have a two-fold impact: The purchasing power of saved money diminishes, potentially discouraging future savings and Inflation can make long-term financial planning more challenging, impacting those who plan for the future. The result is a difficult and unhealthy economic environment which we are witnessing.

Conclusion

Bitcoin’s unique characteristics as an asset are making it increasingly attractive to companies as a form of investment. It allows them to diversify, and hedge against monetary debasement and currency risk. Bitcoin’s potential becomes particularly attractive in today’s climate of high inflation and geopolitical uncertainty. In this environment, traditional currencies are experiencing devaluation at an alarming rate, unseen in decades. This raises concerns about their ability to hold value over time.

With Bitcoin you also gain exposure to a new and potentially high-return asset class. As the digital economy continues to grow and evolve, Bitcoin’s value as a decentralized, tamper-proof, and finite currency may become even more apparent. This makes it a valuable addition to a company’s portfolio.

Having ZERO exposure to Bitcoin is now risky for business owners.

Florin21 can help with Education, Adding Bitcoin to you balance sheet, inheritance planning and so much more!

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