Should Businesses Buy Bitcoin?

Önemli noktaların özeti

• Bitcoin’s decentralized and inflation-resistant properties make it a versatile tool for institutions to hedge against economic uncertainty and preserve long-term value.

• Institutional purchases of Bitcoin often signal confidence and innovation, while sales are for profit taking or cash flow management.

• The growing use of Bitcoin as an investment asset in Asia, along with moves by governments from El Salvador to the United States to recognize it as a strategic asset, underscores the growing influence of bitcoin in shaping global economic strategy.

1. Giriş

As an investment asset, Bitcoin has attracted much attention due to its different characteristics from traditional assets such as gold. Bitcoins decentralization and anti-inflation characteristics bring new possibilities to institutional asset management strategies.

MicroStrategy is a well-known example of an organization that strategically leverages the benefits of Bitcoin. The company effectively used Bitcoin to combat inflation risk and strengthen its financial position. This success story has prompted many companies and financial institutions around the world to re-examine their investment strategies.

However, Bitcoin investment may not be suitable for all institutions. Although Bitcoin purchases often attract public attention, many companies have cautiously sold their Bitcoin holdings. This report aims to analyze the reasons behind institutional investment in Bitcoin, explore the key factors that influence different institutions buying and selling decisions, and study institutional strategies under similar market conditions. As Bitcoin continues to rise in status as a corporate investment asset, this report will also analyze the views and corresponding strategies of the Asian market.

2. Bitcoin as an investment asset

Institutions have traditionally favored investment assets such as bonds, gold, and foreign currencies because of their ability to hedge risk and sometimes preserve value during times of economic uncertainty. Bitcoin has emerged as a strategic investment asset, providing institutions with an effective, inflation-resistant, and profitable alternative to traditional assets such as bonds and gold. The total number of Bitcoins is fixed at 21 million, which ensures scarcity and makes it an attractive long-term value preservation option.

2.1. Bitcoin’s role as an inflation hedge

Rodriguez and Colombo conducted a study in 2024, Is Bitcoin an Inflation Hedge? They analyzed Bitcoins response to inflationary pressures using key economic indicators such as the US Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) data over the past decade. The results show that Bitcoins returns will increase significantly after a positive inflation shock. However, this effect is sensitive to price indices (mainly applicable to CPI shocks) and is more significant in the early stages before Bitcoin is widely adopted by institutions. This suggests that Bitcoins ability to hedge inflation depends on the specific situation and may weaken as its adoption expands.

2.2. Profitability of Bitcoin as an investment asset

Kaynak: TradingView

In 2024, Bitcoins return rate is about 127%, significantly exceeding golds 27% increase and the SP 500s approximately 24% increase during the same period.

However, the value of Bitcoin as an institutional investment asset lies not only in its investment returns. Traditional investment assets have limited trading time and complex transaction processes, making it difficult to respond quickly to interest rate changes or market shocks.

In contrast, Bitcoin has global liquidity, is not restricted by borders or time zones, and can be traded in real time 24/7. High liquidity enables the rapid conversion of Bitcoin into cash in any country, which distinguishes it from traditional financial assets. These characteristics enable institutions to effectively manage assets and respond to market conditions.

With its high profitability and utility, Bitcoin is expected to become an increasingly important investment asset in institutional portfolios.

2.3. Bitcoin as a lever for the attention economy

With more than 3,300 companies listed on the Nasdaq, the number of listed companies worldwide has grown to a massive scale. As a result, it has become increasingly difficult to attract investors attention based solely on strong fundamentals. To increase market visibility, companies are now investing more in marketing.

In such a market environment, Bitcoin creates additional publicity. Since only a few public companies hold Bitcoin, the mere announcement of buying Bitcoin as part of a portfolio diversification strategy can generate huge media exposure.

Such media coverage has brought many positive results to the company, enhancing brand value, attracting interest from retail investors, and strengthening the image of innovation and forward-looking. In addition to increasing the value of assets, Bitcoin also plays a role in increasing the value of enterprises.

3. Institutional buying and selling behavior

As Bitcoin becomes an integral part of institutional portfolios, a unique trading pattern has emerged. Institutions often publicly announce their purchases of Bitcoin, sending a strong signal to the market. This strategy helps highlight the companys innovative stance and enhance market confidence. In contrast, Bitcoin sales are cautious, usually occurring when profits are realized and funds are reinvested to strengthen core business operations.

3.1. Institutional purchasing behavior: MicroStrategy

MicroStrategy’s Bitcoin purchase history, source: saylortracker.com

MicroStrategy is a leading example of using Bitcoin as an investment asset. The company has gained widespread attention in the market by allocating more than 446,400 BTC. The strategy aims to achieve two key goals: to protect against inflation and to enhance financial stability.

Source: Michael Saylors X account

CEO Michael Saylor has captured the market’s attention by radically changing his view on Bitcoin. From a former skeptic to an enthusiastic advocate, he emphasized that “cash, low-yield bonds, and overvalued tech stocks are vulnerable to inflation and should be avoided.” In the current market environment, Saylor proposed stock buybacks and Bitcoin as the best use of corporate surplus funds, choosing Bitcoin as a long-term means of hedging against unlimited quantitative easing.

Contrary to early concerns, MicroStrategys Bitcoin investment strategy has received widespread support from many companies. In addition to being an inflation hedge, Bitcoin is now seen as digital gold, reshaping the way companies manage their assets. In addition to traditional assets, this innovative move to use Bitcoin to diversify reserves points to a new direction for global corporate financial strategies.

Boyaa Interactive Announcement

MicroStrategys success story is also affecting the Asian market. Boyaa Interactive has converted its Ethereum holdings into Bitcoin, and MetaPlanet is actively buying Bitcoin in 2024. These moves reflect the growing recognition of Bitcoins utility in volatility management and long-term value preservation in the Asian market.

3.2. Institutional selling: Tesla

Tesla is one of the highest-profile companies to adopt Bitcoin, offering a very different case from companies like MicroStrategy. The company sold 75% of its Bitcoin holdings in 2022, attributing the decision to liquidity needs amid uncertain economic conditions. More recently, in October 2024, Tesla moved $760 million worth of Bitcoin to an unknown wallet, sparking speculation about further sales.

Teslas Bitcoin investment has been strategically used to support its operational and expansion needs, including the construction of new factories in Austin, Texas and Berlin. Tesla Chief Financial Officer Zachary Kirkhorn said that investment in Bitcoin provides the company with liquidity and a certain degree of return, demonstrating its flexibility as a financial tool for capital-intensive enterprises.

Similarly, when Bitcoin reached $100,000, Meitu made a significant profit from the sale. Compared to Tesla’s strategic profit-taking, Meitu’s decision appears to be a deliberate move to sell at the market high. Unlike Tesla, which has kept a low profile, Meitu publicly explained the sale as a step to strengthen its financial position amid challenges in its core business. This is in stark contrast to Tesla’s secretive sale, suggesting that public disclosure helps reduce market uncertainty caused by institutional sales.

The strategic reasons why institutions buy and sell Bitcoin are directly related to their financial goals and operational needs. Companies often sell Bitcoin to make profits at market peaks, such as what Tesla did in 2022, or to convert the kriptocurrency holdings into working capital to reinvest in the core business. The main reasons behind the selling behavior can generally be divided into the following categories: 1) Profits in favorable market conditions to expand and improve business operations; or 2) Need funds to address cash flow challenges. This raises questions: whether any future sales are motivated by strategic financial planning or as a stopgap measure to solve cash flow problems. Moreover, if the motivation for the sale is to make profits, it raises questions about how these profits will be used. Are they reinvested to enhance the business or primarily benefit stakeholders? In any case, such actions may result in missing out on opportunities for further appreciation and weaken the long-term advantages of holding Bitcoin as an investment asset.

4. Asian institutional Bitcoin buying and selling behavior

MetaPlanet is an example of aggressive Bitcoin adoption in Asia. True to its nickname, “Asia’s MicroStrategy,” the company has purchased 1,018 Bitcoins in 2024 alone, demonstrating its strong commitment to long-term Bitcoin investment.

MetaPlanets case highlights the successful transformation of a zombie company. Zombie companies generate profits that are just enough to cover operating costs and repay debts, but lack the capital to drive growth. Despite its large cash reserves, MetaPlanet failed to attract the attention of the stock market. By benchmarking MicroStrategys strategy, the company successfully achieved a turnaround.

In addition to Bitcoin investment, MetaPlanet also announced plans to expand into new business areas. The companys strategy includes using a variety of financial instruments such as loans, stocks and convertible bonds to purchase Bitcoin, while also generating profits through put options. This practice is considered an active profit model that goes beyond the simple asset holding model.

However, this strategy is not applicable to all zombie companies. Its success depends on whether the companies that have already established a foothold in their respective stock markets can implement a differentiated strategy. Blind imitation by latecomers may increase risks and should be treated with caution, taking into account factors such as corporate cash reserves, market conditions, and risk management capabilities.

5. Sonuç

In summary, the evolution of Bitcoin as an investment asset marks a major shift in the institutional financial sector. Bitcoin’s decentralized nature, inflation-resistant properties, and unparalleled liquidity make it an attractive option for asset diversification and long-term preservation of value.

Some governments are also exploring the potential of Bitcoin. El Salvador’s adoption of Bitcoin as legal tender is one example, highlighting the asset’s role in national strategies for economic growth and financial inclusion. Recently, Trump announced that the United States will make Bitcoin an investment asset, or as he put it, “a permanent national asset for the benefit of all Americans.” These government moves show the growing importance of Bitcoin not only for businesses, but also for policymakers who aim to modernize the financial system.

It turns out that buying and selling Bitcoin can be beneficial for companies, especially during market uptrends. In an uptrend, buying indicates confidence in Bitcoins growth potential, while selling allows companies to realize profits and reinvest in their core business. However, in a downtrend, these actions can have negative effects. Buying can raise concerns about whether corporate funds are being used for speculative investments, while selling can raise questions about whether companies are cutting losses or liquidating assets to cover operating expenses.

For decision makers, the implications are clear: Bitcoin has great potential as an investment asset, but it needs to be carefully integrated into corporate strategy. Companies must weigh the financial benefits of holding Bitcoin (such as liquidity and inflation protection) against operational risks and associated market volatility. Whether for long-term reserves or short-term liquidity needs, the effective use of Bitcoin requires careful alignment with corporate goals and market conditions.

This article is sourced from the internet: Should Businesses Buy Bitcoin?

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