At the time of writing, around 3.6% of Bitcoin (BTC) is booked for long-term assets by institutional investors. According to the data, 13 organizations have collected around 600,000 BTC – around 2.85% of all bitcoins and their value is around 6.9 billion dollars.
MicroStrategy tops the list with approximately 38,250 BTC (around $ 450 million). Second on the list is Galaxy Digital Holdings with a value of 16,651 BTC (~ $ 198 million). The third, with 4,709 BTC, is the payment company Square Inc., founded by Twitter CEO Jack Dorsey. Separately, some companies help their customers invest in BTC. One such company is Grayscale Investments through GBTC Trust, which owns around 450,000 BTC.
However, the amount of bitcoins that listed companies have as a reserve makes up a small fraction of the company’s own bonds worldwide. In fact, the actual amount of cash in reserves is estimated to be in trillions of US dollars. But think about it: nine companies in the S&P 500 have about $ 600 billion in cash and short-term investments, and if only 5% (or $ 30 billion) of that amount was converted to Bitcoin, the price could easily quadruple.
Of course, the question arises where to place Bitcoin in the company’s investment portfolios. The most likely category is “alternative investments”. The need to find a balance between conventional and alternative investments can reduce the market’s appetite for cryptocurrencies.
However, the potential demand is still high. As mentioned in a recent Fidelity report, by the end of 2018, the alternative investment market had grown to $ 13.4 trillion, with very little bitcoin in it. To see Bitcoin Price Moon you may need to transfer at least 5% of this amount.
Some investment companies have decided to create completely separate holding companies for bitcoin and other cryptocurrencies. For example, Stone Ridge launched the New York Digital Investment Group, which today owns more than $ 1 billion in cryptocurrencies.
What drives this movement?
To better understand this phenomenon, I recently conducted a helpful interview with Michael Saylor, founder of MicroStrategy. In particular, I thought it was very exciting to choose 100 years as a basis for measuring success or failure for reserve assets.
Of course, most companies have relied on predicting its existence for some time – preferably for centuries. Even for individuals, it still makes sense to see how investments can change over a hundred years, as one can accumulate wealth assigned to heirs, or even for reasons that are close to their hearts, such as climate change. As Michael Saylor said:
“A great way to evaluate any investment is to take $ 100 million, move it a hundred years ahead and ask what’s going on. If in 1900 I had coins worth $ 100 million in some of the largest cities in the world, and I went 100 years ahead and invested in the best bank in the city, I would have two types of risks; counterparty risk and inflation risk. In terms of counterparty risk, all major banks in all major cities in the world have gone bankrupt in 100 years. The probability that you will lose everything is 90%.
Of course, the most obvious weakness to note when looking at the performance of reserve assets over a 100-year period is inflation. Of all asset classes, the fiat currency is exposed to the most inflation over time. For example, what can be bought for $ 5 in the 1920s is much more than it did in 2020. According to a website that collects and processes government data for the common good, the US dollar loses about 2% of its purchasing power each time. Public.
What about other assets?
While real estate can seem like an excellent resource to keep as a long-term reserve, it is also subject to depreciation due to things like taxes. Most importantly, real estate faces risks associated with changes in regulation or government administration. In 100 years, it is very likely that a government that respects ownership of private property will be replaced by a government that does not. This has actually happened several times around the world in the last century.
Meanwhile, equities are also at risk of mismanagement and regulatory changes. Michael Sailor cited the example of electricity and water supply, industries in which high-margin companies were nationalized. We cannot say with certainty that ISPs, for example, will not switch to services for the next 100 years.