Last week, we featured a piece on why everyone is buying gold? One of the reasons was the natural hedge that gold provides against impending inflation given the extraordinary amount of stimulus pumped in by central banks and governments globally. The same logic is extended to cast a shadow on the future of fiat currencies as the sheer amount of money printing by central banks makes people lose faith in the value of such currencies. Whilst the gold standard is long gone, given its limited supply relative to fiat currencies, gold still retains people’s confidence as a reliable store of value. But it no longer enjoys a monopoly as an alternative store of value to fiat currency. Indeed, Bitcoins and other cryptocurrencies have staged an even smarter rally than gold in recent months. Over the last decade, cryptocurrencies, despite their boom-bust tendencies have grown in stature, not just as a store of value but also a growing means to transact digitally in an increasingly digital world, something that gold cannot boast of. Given Covid might just have accelerated the move towards digital, one can no longer dismiss cryptos as just a punt by digital extremists. So how mainstream are we talking about? Whilst several governments and central banks themselves are talking about digitising their currencies, this blog talks about cryptos emerging as a legitimate asset class amongst institutions:
“If you take a step back, there have been two distinct Bitcoin bubbles thus far, mostly led by money laundering and retail enthusiasm. While both drivers are still alive and well, the coming Bitcoin super-bubble will be led by institutional demand—only these super-whales have the sort of buying power to move an asset class worth roughly $200 billion.”
The author highlights a recent move by a $1bn market cap to allocate a significant portion of its treasury assets to Bitcoin:
“…last Tuesday, August 11th. MicroStrategy (MSTR – USA) announced that they had purchased 21,454 Bitcoins for a total purchase price of $250 million dollars. The headline says all you need to know “MicroStrategy Adopts Bitcoin as Primary Treasury Reserve Asset.””
The author quotes from the company’s press release:
“This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash… MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.
…Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program—risks that should be addressed proactively…We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.
…MicroStrategy believes digital transformation has quickened amid rapidly shifting market requirements. These dynamics have many corporations rethinking their offerings, operations, and systems, as well as their balance sheets and financial strategies.”
“If you take a step back, there have been two distinct Bitcoin bubbles thus far, mostly led by money laundering and retail enthusiasm. While both drivers are still alive and well, the coming Bitcoin super-bubble will be led by institutional demand—only these super-whales have the sort of buying power to move an asset class worth roughly $200 billion.”
The author highlights a recent move by a $1bn market cap to allocate a significant portion of its treasury assets to Bitcoin:
“…last Tuesday, August 11th. MicroStrategy (MSTR – USA) announced that they had purchased 21,454 Bitcoins for a total purchase price of $250 million dollars. The headline says all you need to know “MicroStrategy Adopts Bitcoin as Primary Treasury Reserve Asset.””
The author quotes from the company’s press release:
“This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash… MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.
…Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program—risks that should be addressed proactively…We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.
…MicroStrategy believes digital transformation has quickened amid rapidly shifting market requirements. These dynamics have many corporations rethinking their offerings, operations, and systems, as well as their balance sheets and financial strategies.”
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Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.