Could Bitcoin move from the world of speculation?
This is something that many are wondering. With the attention that Michael Saylor and Strategy is getting, it only reinforces the notion of speculation. Companies like these are taking things to another level by offering leverage, financing the acquisition of Bitcoin via debt.
As long as the price keeps going higher over time, all is well.
These are famous last words in the speculation market. The challenge is that markets never head in one direction. If there is an up, we also have down. Anyone who is involved in crypto for any length of time knows this very well.
Is there another use case for Bitcoin?
The idea of an asset that holds (or gains) value over time is nothing new. Could Bitcoin perform this role for millions of companies across the globe?
The Future of Bitcoin As A Savings Asset
Saylor pioneered a new model which many are following. We now have Tom Lee and Bitmine mimicking this using Ethereum.
Will this work out long term?
As the global economy struggles to get its footing, the future of crypto-assets is precarious. We are looking at a risk off scenario of things take a major downturn.
This could wipe out the treasury companies as the leverage starts to unwind. Since the positions are no longer backed, calls could be made. This is the risk Saylor, and others, are running. For most of these companies, profits are almost non-existent so financing the tough times might be difficult.
Is there another solution?
If we move away from speculation and consider investing, does Bitcoin offer a solution for millions of companies?
Instead of issuing debt to raise money for BTC, how about simply rolling in a portion of the profits? Corporations have done this with many asset classes over the decades.
Instead of buying Treasuries, some of the proceeds could end up buying BTC and placing it on the balance sheet. Tesla is a company that did this. It rode the price appreciation over the last few years to a nice gain.
There was no debt issued to acquire this asset. It simply used cash that was already on hand. Now, $250 million great to over $1 billion.
Bitcoin Treasury
The difference between Strategy and Tesla is obvious. When it comes to the interest in Bitcoin, one makes it the primary focus whereas the other is using it as a small investment.
Could the latter become the norm?
Treasury companies are being known for their large accumulation. Tom Lee has set a goal of 5% of the Ethereum supply for his company. This is putting a lot of the float in the hands of a few.
What happens if these companies blow up? Naturally, a lot of the asset (either BTC or ETH) will hit the market.
A Bitcoin treasury funded out of profits makes a lot of sense. This would be a slower path for companies but more stable. Price moves will not affect things since there are profits from operations along with other assets on the balance sheet.
Opting for a new path might be the way that BTC and ETH find their way onto the financial statements of millions of companies. This will happen slowly over time if it is embraced by the masses.
It could be a way for many businesses to enhance their standing.