May i suggest this to be a new thread? It would be useful to discuss how organisations are starting to use bitcoin and crypto in general
Why is Bitcoin "digital gold" crashing right now?
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May i suggest this to be a new thread? It would be useful to discuss how organisations are starting to use bitcoin and crypto in general
It's a landmark move for sure. It's the first publicly listed company to make this allocation. Furthermore, the size of the allocation relative to the overall size of the company is not lacking in conviction. The expectation is that others will now follow.
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I would not be surprised if the share price of the company started following the bitcoin price trajectory as the company is 20% made of bitcoin
Upon that news yesterday, its share price jumped around 15%. This could also be an indirect way for people to gain exposure to bitcoin - for those that don't want to handle the asset directly themselves. Rather than buy into at a premium they can buy into Nasdaq-listed MicroStrategy instead.
The company bought 0.1% of bitcoin supply. Going forward, it won't be as easy for the others that follow them to emulate in terms of percentage.
Potential Implications for International Settlement
There's another aspect to all of this also. Lets say that other corporations follow suit. One of the biggest issues that these guys encounter is friction in terms of international settlement - as the current system involves intermediaries and counterparties - and counterparty risk and delay. These delays cost them a tonne of cash. Maybe they wouldn't have to access that system at all and can go direct? Bitcoin is deliberately basic from a programming point of view. However, my understanding is that it can still do smart contracts. If there is a need for certain conditions to be met in executing a transaction between two corporates, then it may be possible to write that in to a smart contract - with the bitcoin transaction executing upon fulfillment of those conditions.
In this way, the archaic international settlement / banking system can be avoided completely. Trades can then be done incredibly quickly and far more cost effectively.
This may well get tackled using other crypto's. Ethereum/Tezos/Cardano offer far better flexibility in terms of programmability for smart contracts. However, if corporates took to holding bitcoin as a hedge/store of value anyway, then it might make for greater motivation in making corporate-to-corporate international settlement via bitcoin directly possible instead.
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On Friday, former head of Prudential Financial ($1.3 trillion AUM) - George Ball, said that bitcoin is a safe haven asset in the context of ongoing money printing. In an interview with Reuters, Ball stated that he had always seen himself as an opponent of bitcoin but has revised his view in the face of currency debasement through rampant money printing.
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MicroStrategy has completed the purchase of a further $175 million worth of bitcoin, bringing its total bitcoin holding to 38,250 btc (approx. $425 million).
Only 483 individuals / individual entities could possibly obtain this number of btc given bitcoin's fixed cap supply. The MSTR stock price has risen 9% following the news. Podcast with MicroStrategy founder and CEO, Michael Saynor where he explains the company's decision to switch from cash reserves to bitcoin.
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MicroStrategy (US public company) now has a dedicated Bitcoin page on their corporate website with excellent articles and interviews. Being a skeptic is healthy as an investor however successful investors are open to pivot their opinion 180 degrees based on new information that challenges their initial skepticism (pragmatic vs dogmatic).
I'm glad there is still so much skepticism towards bitcoin. It's allowed me to build my holding since 2017. Finally, the number one information resource online for macro-economics, investing, and protecting your wealth is real vision. Take a look at their free content on youtube and I'd recommend paying for their subscription. You will not find these insights on CNN, CNBC, Bloomberg.....and certainly not on RTE, BBC.
2021/2022 is going to be very interesting. Protect your wealth and ensure you're "anti-fragile"
I'm glad there is still so much skepticism towards bitcoin. It's allowed me to build my holding since 2017. Finally, the number one information resource online for macro-economics, investing, and protecting your wealth is real vision. Take a look at their free content on youtube and I'd recommend paying for their subscription. You will not find these insights on CNN, CNBC, Bloomberg.....and certainly not on RTE, BBC.
2021/2022 is going to be very interesting. Protect your wealth and ensure you're "anti-fragile"
Brendan Burgess
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Hi Patrick
That is very funny.
Is your friend a normally stable and sensible person?
I suspect that a stable virtual currency could have a greater application in Africa than in the developed world. And some comments to that effect may have morphed into "they are taking over the African economies."
Brendan
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Brendan Burgess
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Can I give you a betting tip? If you back a horse, make sure that you know its name.
By people, are you referring to the $1.2 billion public company (MicroStrategy) discussed in the posts above yours that has bought $425 million worth of bitcoin in 2020?
If you believe something is 'rubbish', it doesn't seem in any way credible to me that you put 1 cent into it. Why would you do that?
It has often been said that crypto has far more potential in Africa than probably any other part of the world. The crypto subject has been discussed ad nauseum here and I don't remember anyone saying that crypto was going to 'take over' an African economy. Notwithstanding that, it's patently clear that many of them would be much better off had they already adopted it (given flagrant mismanagement of their own sovereign currencies).
Both the number of crypto transactions and the value of those transactions to and from Africa has doubled over the course of the past year. Prior to covid getting in the way, Twitter & Square CEO Jack Dorsey had planned to temporarily relocate to Africa with plans to capitalise on the potential he sees for bitcoin within the continent. Ray Youssef of peer to peer crypto exchange Paxful shares that thesis, on the basis that crypto is being used there for payments rather than investment. Paxful's African trading volume grew by 57% in 2019.
Sounds like your 'friend' isn't a good point of reference for the consideration of cryptocurrency as a proposition.A get rich quick merchant
He'll probably end up thinking he's downloading something from the treasury office in Republic of Congo and end up have any savings he has stolen in a cyber attack.
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The difference between a 'good' investor and a 'bad' investor is timing.
Seeing as no-one can actually time the market, then there are no 'good' or 'bad' investors only lucky investors and unlucky investors.
Your colleague is an unlucky investor, relative to those who invested €5k in crypto and are now standing on €20k
Following MicroStrategy's $425 million bitcoin purchase earlier this year, payments company Square has just followed up with a $50 million bitcoin investment. As per its press release:
"Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose."
"Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose."
DublinHead54
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I don't understand why a corporate treasurer would hold Bitcoin or be allowed to hold Bitcoin as a treasury reserve asset. The same logic applies as to why they don't hold Equities as a primary treasury/liquidity asset because of the volatility and risk associated.
Well, volatility continues to decrease year on year (admittedly a multi year process still). The argument could be made that in 2020, there's a much greater likelihood of major usd volatility than previously. There's also greater upside potential with bitcoin (asymmetric risk). Click on the podcast link in post #467 above to hear Michael Saylor's (MicroStrategy) rationale for buying into bitcoin.
DublinHead54
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Tecate, your points do not address the point.....A significant responsibility of a treasury function is to ensure liquidity of the company. Buying a volatile asset does not support the liquidity of a firm, and if your argument that USD is more volatile then it would not be a good liquid asset. However the volatility of USD is not of much concern because it is cash and the world reserve currency so the volatility of the USD against other currencies has little impact for a company that's liabilities are in USD.
Put it this way if I owe you $100 in 6 months, whats riskier putting $100 cash in a bank account, or buying $100 in Bitcoin?
This is not a debate on the validity of Bitcoin, but its use in the case presented, as such I am highly dubious they really are holding it as a primary treasury reserve and is rather an actual trade / bet on Bitcoin and they have had to structure it this way due to the trading mandate they have signed with clients.
Liquidity in bitcoin itself has reached a significant level over the course of the past 24 months - akin to daily trading levels of German bonds. It can be easily disposed of in a 24/7 'always-on' market.
What is of concern is it's buying power. These companies are utilising bitcoin as a hedge against potential inflation at this time.
Will $100 today buy you the same goods/services in 6 months time?
Have a look at from August. Saylor is clearly saying that its capital allocation strategy is mindful of Bitcoin's dependability as a store of value and as a legitimate and attractive investment asset. You could say that those charged with administrating treasury reserves have a responsibility to take steps to protect against the erosion of those funds and Ray Dalio's notion that 'cash is trash'.
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DublinHead54
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Tecate you are missing the point, I am not talking about the liquidity of Bitcoin, I am talking about the liquidity of the business. A treasury function helps maintain Liquidity and thus should be investing in assets with low volatility.
The fact you didn't answer the straightforward question of the risk associated with $100, shows you are not willing to do anything other than back Bitcoin in every single situation.
It is no different to if I start promoting Tesla stock as the saviour of every financial situation.
DublinHead54
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I suggest if you can't answer this question, you don't understand financial markets.
The liquidity comment is, I think, one of volatility of the asset price rather than liquidity of the asset.
However, there is a difference between a bank or other entity dealing with client protection (where treasury assets are being held to ensure liquidity of the institution) and a commercial entity which has excess assets / capital which they need to decide how to deploy.
The press release sort of clarifies that. The company had $500mm which was obviously deemed surplus to immediate needs (they seem to be generating cash). The laid out a strtaegy of returning half of that to shareholders through a share buy-back and half to be invested in alternative investments or assets. So they decided to invest that $250mm in Bitcoin as opposed to anything else. I think that's interesting for the points mentioned by @tecate. I could imagine a corporate with exposure to many currencies allocating some reserves to Bitcoin as a counter weight.
But it's not quite the same as a Bank deciding to put some of it's liquidity capital in Bitcoin where volatility would be an issue
However, there is a difference between a bank or other entity dealing with client protection (where treasury assets are being held to ensure liquidity of the institution) and a commercial entity which has excess assets / capital which they need to decide how to deploy.
The press release sort of clarifies that. The company had $500mm which was obviously deemed surplus to immediate needs (they seem to be generating cash). The laid out a strtaegy of returning half of that to shareholders through a share buy-back and half to be invested in alternative investments or assets. So they decided to invest that $250mm in Bitcoin as opposed to anything else. I think that's interesting for the points mentioned by @tecate. I could imagine a corporate with exposure to many currencies allocating some reserves to Bitcoin as a counter weight.
But it's not quite the same as a Bank deciding to put some of it's liquidity capital in Bitcoin where volatility would be an issue
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