MicroStrategy, Tesla and Square have done it. So have many others, although more quietly.
I’m talking about holding corporate treasury reserves in bitcoin. This trend is attracting attention even from trade press. Consultancies and crypto companies are scrambling to launch services to help businesses navigate the process. “Mad Money” host Jim Cramer thinks it’s “almost irresponsible” for companies to not do so. This week, sponsored content from Deloitte explaining the benefits and risks appeared in the Wall Street Journal.You’re reading Crypto Long & Short, a newsletter that looks closely at the forces driving cryptocurrency markets. Authored by CoinDesk’s head of research, Noelle Acheson, it goes out every Sunday and offers a recap of the week – with insights and analysis – from a professional investor’s point of view. You can subscribe here.
Whether it’s a good idea or not – that’s up to each corporate treasurer to decide – one question we’re starting to hear is: “What about ether?”
Would the native token of the Ethereum blockchain make a good corporate reserve asset?
Bitcoin on balance sheets
The main arguments for bitcoin as a corporate reserve asset are:The asymmetric risk return As part of a future-first strategy In preparation for accepting bitcoin as payment It is more likely to hold its value going forward than the dollar
This last point is key, as the main role of the corporate treasury function is the preservation of capital. Here bitcoin’s leading value proposition – as a store of value – comes into play.
Critics will point out that bitcoin is way too volatile to be a store of value. That’s a short-term view of the concept, however. Over the next week, month, perhaps even year, bitcoin’s price may fall relative to fiat currencies. Longer term, however, in an environment of money supply increasing much faster than demand, a fixed-supply bearer asset such as bitcoin is likely to appreciate...