There’s no denying it: support for bitcoin among publicly-listed companies is growing. As of June this year, more than 34 public companies collectively held over 213,000 bitcoin on their balance sheet, roughly equating to 1.14% of the asset’s circulating supply. From vehicle manufacturers (Tesla) and business intelligence firms (MicroStrategy) to crypto-native companies (Coinbase, Riot Blockchain, Inc) and fintech platforms (Square, Inc), forward-looking organizations are increasingly backing “digital gold” to provide a handsome rate of return amidst rising inflation.
Why Public Firms Are Buying Bitcoin
This influx is a relatively recent phenomenon. Indeed, it’s been little over a year since Nasdaq-listed MicroStrategy became the first publicly-traded firm to buy bitcoin as part of a capital allocation strategy. At the time, CEO Michael Saylor called bitcoin “a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.”
Six months later, automaker Tesla made a similar remark in a filing with the SEC, claiming its $1.5 billion bitcoin purchase provided “more flexibility to further diversify and maximize returns on our cash.”
In truth, few would bet against this trend continuing. After all, bitcoin’s performance over the past year has helped net a tidy profit for the companies who added it to their corporate treasuries. Or more accurately, for those who held firm amid choppy market conditions, such as when the cryptocurrency plunged 30% back in May – before recovering to end the day down 12%.
While price volatility will remain a major impediment for those with low risk tolerance, a recent report by asset management firm Pantera Capital suggests such swings are becoming less severe, largely due to the market becoming “broader, more valuable, and more institutional.” If this assessment holds true over the coming months and years, more public firms will start seriously considering devoting a percentage of their holdings to BTC, particularly if it continues breaking out to new all-time highs.
Such an eventuality is hardly out of the question. Fidelity Investments Director of Global/Macro Jurrien Timmer thinks bitcoin will hit $100,000 by 2023 while other strategists see the six-figure milestone reached by 2021’s end. In any case, bitcoin’s short-term value mightn’t be as big a driver of acceptance as general cultural sentiment. Sentiment that owes much to events such as the recent launch of the first U.S. exchange-traded bitcoin fund, which attracted a record-setting $1 billion of investor cash.
The appearance of a bitcoin ETF on the world’s biggest equities market is, of course, a major milestone as it effectively represents a seal of approval for bitcoin legitimacy and acceptance by traditional financial institutions. That doesn’t mean that an ETF is the same as individuals physically holding bitcoin, though. Futures ETFs have no bitcoin backing them and…