Bitcoin’s potential upside with Trump’s victory, the need for inflation protection, and diversification have pushed firms to expand their reserves in digital assets.
The Corporate Race to Bitcoin. A firefighter holds a water hose in an attempt to extinguish a fire. It would seem like an ordinary image if it were not that his suit bears a patch in the shape of a yellow B and two stripes: it is the symbol of bitcoin, and what the firefighter seeks to extinguish are the flames of the rally that the cryptocurrency has experienced in recent weeks. Michael Saylor, CEO of Microstrategy, the company that has bet everything on Bitcoin, tweeted this photo with a comment, “Just another day of work.”
Just another day at work. #Bitcoin pic.twitter.com/dLD4yu6vEG
— Michael Saylor⚡️ (@saylor) November 26, 2024
While it is true that the speculative fervor following Trump’s victory in the U.S. elections has been dissipating in recent days, the bitcoin correction has been moderate, and it is trading at $96,000. In the last few hours, it seems to have regained the bullish tone and seeks to reach six figures.
Republican’s promises to the crypto industry continue to resonate in the sector, and the signals sent by the new administration are positive. Industry insiders believe that the momentum is not over and that lax regulation and a favorable environment will expand adoption and consolidate the market, validating bitcoin and increasing its value. Faced with these rises, companies do not want to be left behind and have signed up for a race to accumulate bitcoin for different purposes: to protect themselves against inflation and the devaluation of traditional currencies, to diversify the assets in their reserves, to take advantage of Bitcoin’s appreciation potential, according to Eduard Rosicart, professor at OBS Business School and CEO Kaitaku Digital. In some cases, it is also pure speculation.
Corporate Bitcoin acquisitions
Many tech companies announced their acquisitions a few weeks after the GOP’s victory when the currency was already approaching $100,000. This is the case of Canada’s Jiva Technologies, a plant-based products e-commerce firm, which recently announced approval to purchase up to $1 million in Bitcoin as part of the company’s cash management strategy. “As it continues to gain traction as a widely accepted and trusted asset class, we see a unique opportunity to strengthen our treasury with resilient and innovative investing,” said Lorne Rapkin, the firm’s CEO. “The inherent scarcity and finite supply of Bitcoin positions it as a modern safeguard against inflation and a haven in times of economic uncertainty,” he added.
Online video platform Rumble also approved allocating a portion of surplus cash reserves to the purchase of bitcoin, up to 20 million greenbacks. Beyond hedging against inflation, president and CEO Chris Pavlovski revealed that the company is looking to enter the ecosystem: “We are excited to strengthen our ties with cryptocurrencies and reinforce our efforts to become the leading video and cloud services platform for the cryptocurrency community.”
Genius Group, an edtech company based in Singapore, has accumulated $10 million in this cryptocurrency in two weeks. In addition, a few days after the elections, it announced its new treasury strategy called “Bitcoin-first.” They are committed to maintaining 90% or more of its reserves in this asset. It shares this slogan with Japan’s Metaplanet, which has turned its treasury around by including Bitcoin in the face of high government debt, negative interest rates, and a weak yen. “Bitcoin first, Bitcoin only,” reads a statement from the firm, which aims to raise $62 million through new share subscription rights.
Trump’s return
The fact that companies have boosted or adopted this strategy in the wake of the U.S. elections is not trivial. Trump’s return is synonymous with lax regulation, low taxes, and support for mining. Messages that permeated deeply in the industry are expected to boost the crypto price. Therefore, companies that were already accumulating Bitcoin have increased their purchases.
Mining firm Mara Holdings, which disclosed results below analysts’ expectations with a net loss of $124.8 billion in the third quarter, has already accumulated 34,794 bitcoins, valued at $3.3 billion. “Putting convertible note proceeds to good use,” tweeted the firm’s CEO Fred Thiel, a strong supporter of the project for a reserve of this cryptocurrency in the U.S. The company has announced plans for a private offering of $700 million in senior convertible notes due 2030 to fund its purchases.
With our 0% $1 billion convertible notes offering, we are excited to share an update:
— MARA (@MARAHoldings) November 27, 2024
– Acquired an additional 703 BTC, bringing the total to 6,474 BTC, at an average price of $95,395 per BTC
– YTD BTC Yield Per Share 36.7%
– Total owned BTC: ~34,794 BTC, currently valued at… pic.twitter.com/bzbunlyBRN
Crypto Speculation?
However, in some cases, companies accumulate this cryptocurrency purely on speculation. MicroStrategy is the emblematic example. This software company, founded in 1989, has been betting everything on Bitcoin for the last four years. On August 10, 2020, its founder and current CEO, Michael Saylor, a staunch advocate of cryptos, began buying this asset, in theory, to hedge against inflation. But before long, he turned the company into a bitcoin hoarder: he sold debt to buy this digital asset. No company owns as much as it does: with some $18 billion in Bitcoin on its balance sheet, it recently announced its intention to multiply the figure by selling up to $42 billion in equity and debt.
Ana Elliot, professor of the Master’s degree in blockchain and investment in digital assets at the Spanish IEB, explains that this company seeks to position itself as an indirect vehicle for portfolio managers who want exposure to the asset in a regulated and simple way, as a kind of “Bitcoin fund.” “This goes beyond a traditional treasury strategy, which normally seeks stability and liquidity in safer assets,” confirms David Tercero-Lucas, economics professor at ICADE.
Manuel Villegas, digital asset analyst at Swiss bank Julius Baer, explains that with their purchase plans, MicroStrategy and Mara Holdings would have some influence on cryptocurrency prices. “The annual inflation rate of the bitcoin blockchain is 1.1%, which equates to just over 210,000 tokens. At current prices, this represents about $20 billion. If prices remain stable and everything else remains the same, they would acquire every bitcoin issued over the next two years,” he details.
Effect on bitcoin and risks
Experts agree that Trump’s return to the White House will drive the corporate race, especially those closest to the financial or technology sector, to accumulate bitcoin as part of their investment strategy or brand positioning. This would have a bullish effect on prices by further consolidating the asset and reducing the available supply of a cryptocurrency with limited availability. Rosicart, from OBS, also adds volatility due to the entry of more institutional players that could stabilize the market.
However, this strategy is not risk-free. According to the same expert, market volatility remains risky, especially with current geopolitical tensions. Regulation also plays an important role, as any changes will affect the value and liquidity of bitcoin, impacting the companies that hold it. “Finally, there are the technological and security-related risks since the custody and protection of these digital assets require advanced measures to prevent cyber-attack losses,” he explains.
Elliot also highlights the reputational risk these companies would face in case of losses. In addition, David Tercero-Lucas believes that investors could stop valuing their company based on what it does and produces and value it based on the price of Bitcoin: “MicroStrategy seems to be heading in this direction.”