As business leaders prepare to head into the post-COVID-19 world amid inflation warnings, a growing number of companies are assessing their reserves. If the worst happens and the weak dollar and other reserve currencies, are they confident that all of their balances will be reliably pegged?
After all, they certainly haven’t escaped the fact that a number of public companies that have “joined” Bitcoin (BTC) as a whole in the past year recently had high revenues in the first quarter of 2021. For example, Square, which has 472 million. Dollars in bitcoin, and posted a quarterly gross margin of 79% year-over-year, double that of analysts’ expectations. Whereas Tesla, which made $ 1.5 billion – 8% of the cash – in Bitcoin in February, posted record revenue up 74%. MicroStrategy, which made Bitcoin its primary reserve for the company in 2020, saw its revenue increase 10% in the first quarter.
He wrote: “If inflation rises, or even if it does not, and more companies decide to diversify a small fraction of bitcoin cash instead of cash, the current relative decline of bitcoin will become an outflow.” Lead investor Bill Miller at a market speech earlier this year. “Companies like Square, MassMutual and MicroStrategy have already switched cash to Bitcoin instead of guaranteeing cash balances,” he added.
Elsewhere, Ark Investments commented in a newsletter, “Microstrategy, Square, and now Tesla publicly traded companies are showing a way to add Bitcoin as a legitimate alternative to cash on the balance sheet.”
But Bitcoin is still a volatile asset – the recent drop in Bitcoin’s price to $ 46,000 reminds users once again – so maybe a company cashier’s hug is a really short-term event? On the other hand, if the trend has legs, is it really suitable for all businesses? If so, what is an appropriate level of distribution?
Overall, what does this say about the global economy if public corporations are now looking at a 12-year-old digital currency to keep cash reserves steady and secure?
Perennial trend or seasonal fashion?
“I’m not taking that a whim,” Paul Cappelli, portfolio manager at Galaxy Fund Management, told Cointelegraph. He told Cointelegraph that “the inelastic supply curve and the deflationary release timeline for Bitcoin” makes it “a compelling hedge against inflation and bad monetary policy that could lower monetary positions over time,” predicting:
“Companies will continue to use bitcoin as one of the tools available to preserve the value of the balance.”
David Greider, chief digital real estate analyst at Fundstrat, told Cointelegraph that with the cryptocurrency becoming more widespread, he expects to see “more companies using the cryptocurrency for legitimate business purposes”. Exchanges can store it as inventory, technology companies can use it to host tokens and participate in networks, and multinational companies can accept them for payment.
“I expect two types of companies will consider early adoption of cryptocurrencies – those led by leaders who strongly believe in cryptocurrency, and companies that may have unique cross-border needs well suited for bitcoin transfers” – Jill Luria. This was announced for Cointelegraph by the Director of Research at DA Davidson & Co.
If so, wouldn’t this be a game-changer for business leaders? “When I took the government exams, we were told that the main objective was to ensure the integrity and liquidity of the balance sheet,” said Graham Robinson, international tax and treasury partner at PricewaterhouseCoopers and a consultant to the UK Treasury Association. Reuters. BTC with its volatility does not match the bill.
If Bitcoin is used as a capital reserve and the price drops, this company may not be able to meet the working capital requirement, Robert Willins, an assistant professor at Columbia Business School, noted in January, when he described it as “a strategy with high risk and high reward”.
Willens change his mind? “I still think this is a high-risk, high-reward strategy,” he told Cointelegraph, acknowledging that “the reward in recent times has far outweighed the stakes.” He is seeing more and more companies following Tesla and Square “as cryptocurrencies become more” respectable “and a vital source of cash.”