From investment giants to listed companies, can the Bitcoin buying boom last?

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Since 2020, world-renowned listed companies have accelerated the pace of Bitcoin deployment. According to statistics from the Bitcoin Treasuries website, currently, more than $6.9 billion in Bitcoin is held by listed companies, including US software giant MicroStrategy, asset management companies Grayscale and Galaxy Digital, and Jack Dorsey’s mobile payment platform Square.

Since MicroStrategy bought a large amount of bitcoin in September, the number of bitcoin held by listed companies has increased. This trend means that mainstream listed companies are increasingly interested in Bitcoin. While paying attention to or holding Bitcoin, they use it as a store of value and a tool to hedge against inflation.    

1603201078485095▲ Bitcoin holdings of public companies/institutions Source: bitcointreasuries.org

The statistics show that Microstrategy, Galaxy Digital (Digital Galaxy Capital), and Square are among the largest companies paying attention to and holding Bitcoin. Among them, MicroStrategy currently has 38,250 BTC (currently valued at approximately US$425 million), second only to Grayscale Investment Corporation.

Why do these big companies suddenly buy bitcoin in large quantities? How will this “buying tide” affect the Bitcoin market?

MicroStrategy: Bitcoin is “harder” than gold

Microstrategy (micro strategy) is a large-scale business intelligence company, and also a NASDAQ listed company (NASDAQ: MSTR), founded in 1989. The company has maintained 20 years of continuous growth since its establishment, with annual revenue of more than 500 million US dollars, mainly from BI (Business Intelligence) software and services.

In August 2020, MicroStrategy CEO Michael Saylor revealed that his company purchased $250 million worth of Bitcoin on August 11 and announced that it would start using BTC as the main holding type of its asset reserve strategy.

Subsequently, on September 14, the company issued another statement stating that it had purchased an additional 16,796 BTC worth US$175 million.

So far, MicroStrategy has converted its $425 million in cash into 38,250 bitcoins, becoming the first public company in the world to publicly announce bitcoin as an asset allocation.

Why did MicroStrategy suddenly buy bitcoin in large quantities? In MicroStrategy’s view, Bitcoin may be used as a hedging tool in an uncertain global situation. “This investment reflects our belief that Bitcoin, as the most widely used cryptocurrency in the world, is a reliable store of value and an attractive investment asset with long-term appreciation potential than holding cash. .”

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In a recent interview with Stansberry Research, Michael Saylor elaborated on his concerns about the macro economy and his reasons for buying Bitcoin instead of gold:

“In the past decade or so, I didn’t care much about the macro economy, but when the interest rate dropped from 2% to 0%, everyone started to care about the macro economy. We will encounter the largest economic intervention in the history of the Fed. This has given me a lot. I began to study the money supply. I found that the money supply has increased by 7% in the past ten years. The inflation rate is not 2% but 7% to 8%. In a few years, the asset inflation rate will reach 10% or more. Thinking that assets will depreciate by 10% in three years, I imagined a scenario where 1.5 million US dollars were burned or melted, which made me very anxious.”

Bitcoin is obviously a reliable store of value better than cash. Although the price of gold will rise, Bitcoin will still be a hard currency 100 years later, and the production of gold can be controlled by people. “In the long run, Bitcoin is harder than gold.”

Square: Bitcoin is the native currency of the Internet

One month after MicroStrategy announced its investment in Bitcoin, on October 8, Square, a mobile payment giant with a market capitalization of $86.6 billion, announced that it had purchased 4,709 bitcoins for $50 million (that is, an average of $10,600 per bitcoin) . As of the second quarter of 2020, this investment accounted for almost 1% of the company’s total assets.

Square is a payment company founded by Twitter CEO Jack Dorsey Jack Dorsey ) . Square users (consumers, businesses) use mobile card readers provided by Square to work with smartphones to make payments and collections anywhere.

In November 2017, Cash App, a mobile phone application owned by Square, added a cryptocurrency purchase service and tested it for the first time. Since then, it has been active in the Bitcoin field. As of the first half of this year, Square’s Cash App and Grayscale investment company GrayScale consumed more than 50% of Bitcoin mining.

For this investment in Bitcoin, Dorsey tweeted and attached Square’s investment white paper. The white paper pointed out that from the perspective of the macroeconomic and monetary system, in view of the rapid development of cryptocurrencies and unprecedented uncertainty, Square believes that now is the right time to diversify assets and liabilities denominated in US dollars and invest in Bitcoin.

In addition, Square’s Chief Financial Officer Amrita Ahuja said, “We think Bitcoin has the potential to become a more common currency in the future.” “As the adoption rate of Bitcoin grows, we intend to learn and learn in a disciplined way. participate.”

So far, Square has become the second US listed company to invest in Bitcoin after MicroStrategy.

Galaxy Digital: Bitcoin price potential exceeds 60 times

In addition to MicroStrategy and Square, which announced the purchase of Bitcoin in the last two months, in the data statistics on the Bitcoin Treasuries website, the number of Bitcoin holdings ranked second is Galaxy Digital Holdings, which purchased value on June 30, 2020 134 million US dollars in Bitcoin.

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Galaxy Digital Holdings (Galaxy Digital Holdings) is an crypto crypto currency commercial bank in the United States. The main business of the bank is crypto currency trading, ICO investment, third-party asset management, and consulting services. It is committed to providing crypto currency and blockchain industries. Provide full-service commercial banking. Its founder and CEO Mike Novogratz is a firm believer in cryptocurrency and an early billionaire. He revealed his cryptocurrency positions on Twitter in September, and Bitcoin accounts for 87% of his portfolio.

On November 19, 2019, Galaxy Digital Holdings Ltd. announced that its subsidiary Galaxy Digital Capital Management Co., Ltd. Galaxy Digital has launched the Galaxy Bitcoin Fund and the Galaxy Institutional Bitcoin Fund . Provide investors and institutional investors with safe third-party custody services.

In September 2020, Galaxy Digital released the latest report stating that as of August 31, its initial assets under management were US$404.9 million. At the same time, it expressed its interest in the value of Bitcoin and its potential as a store of value.

“The market value of gold currently exceeds US$12 trillion, and the market value of Bitcoin is currently about US$200 billion, less than 2% of the gold market. If Bitcoin as an alternative crypto storage of value assets grows to the level of gold, then this will Provide more than 60 times the market expansion opportunity.”

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Whether it is a commercial listed company or an asset management company, we have seen a new trend. These institutions and large enterprises in the traditional financial sector are using Bitcoin as part of their reserve assets, and this behavior seems to be delivering a kind of Signal: The recognition of the value of Bitcoin is increasing.

The impact of the company’s “buying tide” on the market

So, what is the profound impact of this large-scale company’s purchase of Bitcoin on the Bitcoin market?

First of all, the “mainstream trend” of Bitcoin can continue.

These global well-known listed companies include Bitcoin in their balance sheets, which will cause peers and even more global companies to begin to pay attention to crypto assets such as Bitcoin, forming a “domino effect.”

Obviously, this effect is already happening quietly.

Just five days after Square announced its Bitcoin investment, on October 13, according to Forbes, Stone Ridge, an asset management company with assets under management of more than $10 billion, confirmed that it had purchased more than 10,000 coins through the New York Digital Investment Group (NYDIG) Bitcoin, as part of its asset reserve strategy, the number of these Bitcoins is about 115 million U.S. dollars based on current value.

There is no doubt that more and more companies will join the ranks of buying Bitcoin.

Second, strengthen the buying confidence in the Bitcoin market.

The customer groups targeted by large enterprises and institutions are mainstream qualified investors. Therefore, the investment allocation of Bitcoin by these companies will undoubtedly give more mainstream investors a new understanding and understanding of Bitcoin, and even generate a desire to buy.

After Square and other companies invested in Bitcoin, on October 9th, senior market analyst Peter Brandt tweeted that there will be a huge buy signal in the Bitcoin market.        

1603201079496236 ▲  Bitcoin weekly chart Source: Twitter   

“A global company now includes Bitcoin on its balance sheet. This is a major development. Both the weekly and daily charts will send a huge buy signal.”

Therefore, in addition to the strong “overweight” of Bitcoin by investment institutions such as Grayscale this year, the growth of interest in Bitcoin by listed companies represented by MicroStrategy may also attract more “smart money” into the Bitcoin market. The rise in currency prices is accumulating power.

As for Bitcoin itself, from the “plaything” in the hands of geeks, to controversial investment products, to the hedging tools of investment institutions, to the asset reserves of listed companies, its value has been told by history.

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