At the time of writing, about 3.6% of bitcoin (BTC) has been opened into long-term assets by institutional investors. According to the data, 13 organizations have collected about 600,000 BTC – about 2.85% of all bitcoins, and their value is about $ 6.9 billion.
MicroStrategy tops the list with 38,250 BTC (about $ 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 payments company Square Inc., founded by Twitter CEO Jack Dorsey. Separately, some companies help their clients invest in BTC. One such company is Grayscale Investments with a GBTC fund of about 450,000 BTC.
However, the number of companies listed in bitcoin is a reserve for the share of the company’s own bonds worldwide. In fact, the real amount of cash in reserves is estimated at trillions of US dollars. But think about it: nine companies in the S&P 500 have nearly $ 600 billion in cash and short-term investments, and if only 5% (or $ 30 billion) of that amount were 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”. Finding a balance between traditional 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. To see the month of the bitcoin price, you may need to transfer at least 5% of this amount.
Some investment firms 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 over $ 1 billion worth of cryptocurrencies.
What is driving this movement?
To better understand this phenomenon, I recently conducted a media interview with Michael Sailor, founder of MicroStrategy. In particular, I thought it was very interesting to choose 100 years as the basis for measuring the success or failure of Reserve Capital.
Of course, most companies have relied on predicting their existence for some time – preferably centuries. Even for individuals, it still makes sense to see how investments can change over a hundred years, as it is possible to accumulate wealth assigned to heirs, or even for close reasons such as climate change. As Michael Saylor said:
“A good 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 100 million dollars in coins in some of the largest cities in the world, and I would go into the next 100 years and invest in the best bank. “In the city, I had two risks; Counterparty risk and inflation risk. In terms of counterparty risk, all major banks in every major city in the world have gone bankrupt within 100 years. The probability that they will all lose is 90%.
Of course, inflation is the most obvious weakness to look at when looking at the dynamics of reserve assets over 100 years. Of all asset classes, fiat currency is subject to the most inflation over time. For example, what could have been bought for $ 5 in the 1920s is much more than it was in 2020. According to a website that collects and processes government data for the general good, the US dollar loses about 2% of its value purchases. everytime. General.
What about other assets?
While real estate may seem like a great asset to own as a long-term reserve, it is subject to depreciation due to things like taxes. Most importantly, real estate faces risks associated with changes in regulation or governance. In 100 years, it is highly likely that a government that respects ownership of private property will be replaced by a government that does not. In fact, this has happened several times around the world in the last century.
Meanwhile, stocks are also under threat from poor governance and regulatory changes. Michael Sailor cited the example of electricity and water, where high-margin companies were nationalized. We cannot say with certainty that ISPs, for example, will not be transformed into tools in the next 100 years.
Even gold and other precious metals face problems when you look at them 100 years from now. While they’ll appreciate it over time, so will the logistics.