(P) Why Microstrategy and Square, two american companies, invested $475 millions into Bitcoin? Moving the company treasury money into Bitcoin is the new trend
Bitcoin gains more supporters every day, but Microstrategy CEO Michael Saylor’s decision to convert $425 million of cash to digital gold may be part of one of the biggest volte-faces in crypto history.
MicroStrategy, a business intelligence consulting firm, made headlines when it bought up hundreds of millions of dollars worth Bitcoin in August and September.
“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,” said Saylor in an August press release announcing the initial purchase of $250 million worth of BTC.
MicroStrategy Inc. Chief Executive Officer Michael Saylor says the Federal Reserve’s recent relaxing of its inflation policy helped convinced him to put the remainder of the enterprise-software maker’s cash into Bitcoin.
“We feel pretty confident that Bitcoin is less risky than holding cash, less risky than holding gold,” Saylor said in an interview.
Before the Covid-19 crisis, the Tysons Corner, Virginia-based company had about $500 million mostly invested in short-term U.S. government securities. Saylor began to question that conventional strategy when yields tumbled in the wake of the pandemic. He estimates that so-called asset inflation will surge to more than 20% a year, eroding purchasing power.
“Once the real yield on our treasury got to more than negative 10%, we realized that everything we are doing on P&L is irrelevant,” Saylor said. “We really felt we were on a $500 million melting ice cube.”
MicroStrategy invested some money in a share buyback and considered real-estate investments, but much of the commercial market has been decimated by Covid, he said. Gold is still being mined, decreasing future returns, unlike the finite amount of Bitcoin to be issued, he said.
So this summer, MicroStrategy became the first public company to invest the lion’s share of its treasury in Bitcoin. In mid-August, the company announced it has purchased $250 million of the cryptocurrency, and on Sept. 15, Saylor bought an additional $175 million. He intends to continue buying with cash from operations.
Other private and public companies will likely get into Bitcoin in the next three to six months, he predicted.
Another company followed this new trend in October 2020, Square, Inc. (NYSE: SQ) announced that it has purchased approximately 4,709 bitcoins at an aggregate purchase price of $50 million. Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose. The investment represents approximately one percent of Square’s total assets as of the end of the second quarter of 2020.
"Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system," the company said.
"More important than Square investing $50mm in #Bitcoin is sharing how we did it (so others can do the same)," Twitter chief executive Jack Dorsey said in a tweet.
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