{"id":250998,"date":"2021-05-16T16:07:00","date_gmt":"2021-05-16T13:07:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/inflation-winds-stiffen-as-bitcoin-ballast-on-balance-sheets-proves-its-value\/"},"modified":"2021-05-16T16:07:00","modified_gmt":"2021-05-16T13:07:00","slug":"inflation-winds-stiffen-as-bitcoin-ballast-on-balance-sheets-proves-its-value","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/inflation-winds-stiffen-as-bitcoin-ballast-on-balance-sheets-proves-its-value\/","title":{"rendered":"# Inflation winds stiffen as Bitcoin ballast on balance sheets proves its value"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a363eb2cdba3\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a363eb2cdba3\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/inflation-winds-stiffen-as-bitcoin-ballast-on-balance-sheets-proves-its-value\/#A_longer-term_trend_or_seasonal_fashion\" >A longer-term trend or seasonal fashion?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/inflation-winds-stiffen-as-bitcoin-ballast-on-balance-sheets-proves-its-value\/#Tesla_allocated_8_%E2%80%94_Is_it_too_much\" >Tesla allocated 8% \u2014 Is it too much?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/inflation-winds-stiffen-as-bitcoin-ballast-on-balance-sheets-proves-its-value\/#A_%E2%80%9Ctectonic_shift%E2%80%9D_in_global_finance\" >A \u201ctectonic shift\u201d in global finance?<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Inflation winds stiffen as Bitcoin ballast on balance sheets proves its value <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>It surely hasn\u2019t escaped their notice, after all, that a number of public companies that \u201cjoined\u201d Bitcoin (BTC) in a big way over the past year recently broadcast strong Q1 2021 earnings. Square, which holds $472 million worth of BTC, for instance, reported a quarterly gross profit increase of 79% year-over-year, doubling analysts\u2019 expectations. While Tesla, which plunked down $1.5 billion \u2014 8% of its cash \u2014 into BTC in February, posted record earnings with revenues surging 74%. MicroStrategy, which made Bitcoin its primary<em> <\/em>corporate reserve in 2020, notched a 10% gain in Q1 revenues.<\/p>\n<p>\u201cIf inflation picks up, or even if it doesn\u2019t, and more companies decide to diversify some small portion of their cash balances into bitcoin instead of cash, then the current relative trickle into bitcoin would become a torrent,\u201d <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/millervalue.com\/bill-miller-4q-2020-market-letter\/\">wrote<\/a> storied investor Bill Miller in a market letter earlier this year. Already, \u201ccompanies such as Square, MassMutual, and MicroStrategy have moved cash into bitcoin rather than have guaranteed losses on cash held on their balance sheet,\u201d he added. <\/p>\n<p>Elsewhere, Ark Investments <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/ark-invest.com\/newsletters\/issue-258\/\">commented<\/a> in a company <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a>letter: \u201cMicrostrategy, Square, and now Tesla are showing public companies the way to add bitcoin as a legitimate alternative to cash on their balance sheets.\u201d<\/p>\n<p>But Bitcoin remains a volatile asset \u2014 as the most recent BTC price drop to $46,000 reminded users again \u2014 so maybe its embrace by corporate treasurers is really just a short-term h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>enstance? On the other hand, if the trend does have legs, is it really appropriate for all companies? If so, at what level of allocation is appropriate? <\/p>\n<p>Overall, what does this say about the global economy if public firms now look to a 12-year-old digital currency to keep its cash stockpiles liquid and secure?<\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_longer-term_trend_or_seasonal_fashion\"><\/span>A longer-term trend or seasonal fashion?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>\u201cI do not view this as a fad,\u201d Paul Cappelli, a portfolio manager at Galaxy Fund Management, told Cointelegraph. Bitcoin\u2019s \u201cinelastic supply curve and deflationary issuance schedule\u201d make it a \u201ccompelling hedge against inflation and poor monetary policies that could lead to cash positions becoming devalued over time,\u201d he told Cointelegraph, predicting:<\/p>\n<blockquote><p>\u201cCorporations will continue to use Bitcoin as one of the tools available to preserve the value of their balance sheets.\u201d<\/p><\/blockquote>\n<p>David Grider, lead digital asset strategist at Fundstrat, informed Cointelegraph that as crypto becomes more mainstream, he expects to see \u201cmore corporates holding crypto for legitimate business purposes.\u201d Exchanges could hold it as inventory, tech companies might use it to stake tokens and participate in networks, while multinational corporations could accept it for payments. <\/p>\n<p>\u201cI expect two types of companies to consider early adoption of crypto \u2014 ones led by leaders who are strong believers in crypto, as well as companies that may have unique cross-border needs that are a good fit for Bitcoin transfers,\u201d Gil Luria, director of research at D.A. Davidson &amp; Co., told Cointelegraph. <\/p>\n<p>If so, doesn\u2019t this represent a sea change for corporate finance officers? \u201cWhen I did my treasury exams, the thing we were told as number one objective is to guarantee security and liquidity of the balance sheet,\u201d Graham Robinson, a partner in international tax and treasury at PricewaterhouseCoopers and adviser to the United Kingdom\u2019s Association for Corporate Treasurers, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.reuters.com\/article\/us-crypto-currency-bitcoin-treasury-insi\/rush-to-bitcoin-not-so-fast-say-keepers-of-corporate-coffers-idUSKBN2B00FY\">told<\/a> Reuters. BTC with its volatility might simply not fit the bill. <\/p>\n<p>If Bitcoin were to be used as a corporate treasury reserve, and its price plunged, that company might not be able to meet its working capital requirements, noted Robert Willens, adjunct professor of Columbia Business School, in January, when he <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2021-01-16\/bitcoin-swings-undermine-cfo-case-for-converting-cash-to-crypto\">described<\/a> it as \u201ca high-risk, high-reward strategy.\u201d<\/p>\n<p>Has Willens changed his views? \u201cI still believe it is a high risk\/high reward strategy,\u201d he told Cointelegraph, acknowledging that \u201clately, the rewards have far outweighed the risks.\u201d He does see more firms following the lead of Tesla and Square, \u201cas crypto investments become more \u2018respectable\u2019 and emerge as a viable outlet for corporate cash balances.\u201d Asked who might lead the way, Willens answered:<\/p>\n<blockquote><p>\u201cI think companies with iconoclastic leaders \u2014 not necessarily confined to a particular industry \u2014 would be the most likely to take the plunge and commit a decent amount of the corporation\u2019s cash balances in crypto.\u201d<\/p><\/blockquote>\n<p>Fundstrat\u2019s Grider, citing the OTC trading firm Genesis\u2019 Capital trading data, told Cointelegraph that more corporations may be buying crypto than has been reported in earnings statements. The Genesis Q1 2021 \u201cMarket Observations Report,\u201d for example, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/f.hubspotusercontent00.net\/hubfs\/6024551\/Genesis%20-%20Quarterly%20Reports\/Genesis21Q1QuarterlyReport-H%5B2%5D.pdf\">reported<\/a> a striking jump in \u201ccorporates\u2019\u201d share of crypto trading volume to ~27% from ~0% in the quarters prior. \u201cAs corporate clients began buying bitcoin for their treasuries in Q1, our ratios shifted,\u201d noted Genesis.<\/p>\n<p>As corporate finance leaders prepare to set sail into the post-COVID-19 world amid inflation storm warnings, an increasing number of corporations are taking stock of their treasury reserve holdings. If the worst happens, and the dollar and other reserve currencies weaken, are they sure that all their balance-sheet cash is lashed down securely?<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/64bd8e46-070d-40ef-9d2b-1138caceb82c.png\"><\/figure>\n<h2><span class=\"ez-toc-section\" id=\"Tesla_allocated_8_%E2%80%94_Is_it_too_much\"><\/span>Tesla allocated 8% \u2014 Is it too much?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Assuming that a company believes that crypto should be part of its treasury reserves, how much should it actually allocate? Last year, Cappelli told Cointelegraph that an investment of 50 basis points to 2% of reserves was about right, given crypto\u2019s volatility. But since then, crypto prices have skyrocketed, and Tesla allocated a whopping 8% \u2014 or $1.5 billion \u2014 to its corporate cash reserves. Is the recommended allocation growing?<\/p>\n<p>\u201cI don\u2019t think there\u2019s a bright-line rule that we can apply here across the board,\u201d Willens told Cointelegraph, \u201cbut I think something well north of 2% would be appropriate \u2014 perhaps as much as 8%\u201310% might even be acceptable.\u201d<\/p>\n<p>\u201cIt will all depend on the company,\u201d Cappelli said this past week. \u201cCorporations manage their balance sheets to fund operations and maintain a certain amount of liquidity.\u201d Bitcoin is still a very volatile asset, \u201cso while it does provide a hedge against inflation, it does come with a certain amount of market risk. I\u2019d be very surprised to see a company allocation much more than a ballpark of 5% currently, but that may change over time.\u201d<\/p>\n<p>Still, what about Robinson\u2019s contention that a corporate treasurer\u2019s job is to guarantee liquidity and security of the balance sheet \u2014 and could Bitcoin not do that?<\/p>\n<p>\u201cIf you think about crypto purely as cash, it is still very volatile relative to the dollar,\u201d Grider told Cointelegraph. \u201cBut some assets like Bitcoin are becoming less volatile lately, and we are seeing strong liquidity emerge in crypto, which is encouraging.\u201d<\/p>\n<p>One way a firm could think about holding crypto is as an alternative to cash, continued Grider, \u201cbut you can also think about it like inventory or a marketable securities investment or an intangible long-term asset. That means even if not an ideal treasury asset in all respects, corporates could still hold crypto for other reasons,\u201d such as:<\/p>\n<blockquote><p>\u201cCertain incumbent businesses could buy crypto as a hedge against tech disruption, just like doing M&amp;A of a competing startup.\u201d<\/p><\/blockquote>\n<p>\u201cI think the liquidity concern is a valid one,\u201d responded Willens, \u201cbut limiting the investment to 8%\u201310% of the investible funds ought to insulate treasurers from criticism since the balance of the funds would be deployed in cash and cash equivalents with a readily realizable value.\u201d<\/p>\n<p>There is a sizing exercise that occurs for every investment, added Capelli, and \u201ctaking all balance sheet investments into account\u201d is part of any corporate treasurer\u2019s or chief investment officer\u2019s job. Meanwhile, Luria declared that \u201ccrypto assets are liquid enough that this should not be a constraint.\u201d<\/p>\n<p>A more significant disincentive to using crypto as a corporate treasury reserve, in Willens\u2019 view, may be the accounting treatment to which it is subjected at present \u2014 i.e., \u201cthe odd way investments in crypto are accounted for \u2014 they are treated as \u2018indefinite-lived intangible assets,\u2019 and thus any declines in the value of the asset must be reflected in income from continuing operations, whereas price increases cannot be so reflected.\u201d He described this \u201cunfavorable accounting treatment [&#8230;] as the most unattractive aspect of an investment therein.\u201d<\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_%E2%80%9Ctectonic_shift%E2%80%9D_in_global_finance\"><\/span>A \u201ctectonic shift\u201d in global finance?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>All in all, the current monetary environment has raised serious corporate concerns about inflation and the continued strength of the United States dollar. It should not be surprising, as Grider said, \u201cthat corporations would become more open to alternatives like crypto.\u201d<\/p>\n<p>But something even larger may be going on. As Perianne Boring noted recently in the New York Times, a \u201c<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.nytimes.com\/2021\/05\/10\/us\/politics\/as-scrutiny-of-cryptocurrency-grows-the-industry-turns-to-k-street.html\">tectonic shift<\/a>\u201d may be underway in global finance thanks to cryptocurrency.\u00a0\u201cDigital assets have brought forth a new paradigm in global finance,\u201d concurred Cappelli, though we are still in the very early stages:<\/p>\n<blockquote><p>\u201cWith every cycle, there are always pockets of froth, but structurally, what we have seen built over the last few years certainly provides a strong foundation for this new asset class.\u201d<\/p><\/blockquote>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/inflation-winds-stiffen-as-bitcoin-ballast-on-balance-sheets-proves-its-value\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Inflation winds stiffen as Bitcoin ballast on balance sheets proves its value &#8221; It surely hasn\u2019t escaped their notice, after all, that a number of public companies that \u201cjoined\u201d Bitcoin (BTC) in a big way over the past year recently broadcast strong Q1 2021 earnings. Square, which holds $472 million worth of BTC, for&#8230;<\/p>\n","protected":false},"author":1,"featured_media":250999,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDUvMTQyOGIyMWMtMjIzYS00NTdiLWI4NDgtODk0ZTYyMjEzNGM0LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74927,74355,117,70551,36402],"class_list":["post-250998","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-square","tag-adoption","tag-business","tag-inflation","tag-tesla"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/250998","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=250998"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/250998\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/250999"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=250998"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=250998"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=250998"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}