Cryptocurrency folklore has a famous story that dates back to 2008, about a cryptocurrency developer who was hungry for success – and pizza apparently. The story goes that on May 22 of that year, when virtually no one knew what a virtual Bitcoin (BTC) was, software programmer Laszlo Hanyecz offered to trade 10,000 BTC he owned for two large pizzas. When the deal went down at that time, the total of that nascent digital currency was worth about $41 US – a nearly perfect equivalent for the pies plus a nice $15 tip.
Nearly 13 years later, that pizza pair in today’s BTC valuation per coin ($57,842) would be valued at more than $578.4 million. At that price, one would hope Laszlo at least got a free side of breadsticks and dipping sauce.
That unprecedented runup in valuation has led to a BTC market cap of more than $1 trillion – placing that solitary asset in the same value class as Apple and Amazon. And BTC got there in a fraction of the time it took those two tech giants, and its market cap is larger than Boeing, 3M and GM combined – and corporate America is taking notice.
According to crypto financial services company Bitgo, there’s a collection of more than 30 public and private companies that have BTC reserves on their respective balance sheets, with a combined total of $55 billion. Among those BTC believers are names such as Mass Mutual, MicroStrategy, and Tesla.
There are several reasons why BTC is an attractive investment for corporate leaders to consider now, as compared to a few years ago, according to Justin Woodward, a tax attorney who specializes in digital assets and is the co-founder of TaxBit.
“Cryptocurrency is really coming into its own right now. It’s an amazing technology that is presenting provocative and innovative functionality for corporations to consider at an accelerating pace,” said Woodard.
During a conversation with CEOWorld on this topic, Woodward outlined several areas where investing in cryptocurrencies – specifically Bitcoin – may make more sense for companies than carrying dollars and cents on a balance sheet.
- Store of Value: According to MicroStrategy CEO, Michael Saylor, BTC is “the apex asset on the open monetary system…the most disruptive technology in the world.” Many describe BTC as “digital gold” due to many factors, including its finite supply. Only 21 million BTC will ever be produced, and the halving of Bitcoin mining every four years ensures continuing appreciation of each token as the produced supply available each year is cut in half compared to growing demand.
“In recent years, the use case for Bitcoin has evolved into a strong case for its store of value. It’s scarcity, transparency, mobility, and other attributes truly set it apart from other assets – providing an excellent addition to a diversified corporate portfolio,” said Woodward.
- Inflationary countermeasure: BTC is a strong hedge against inflation and global currency headwinds due to its inherent ability to beat currency manipulation resulting from its technological attributes (i.e. distributed ledger, blockchain security, encryption, production halving, finite supply…etc.). Woodward acknowledged that many governments continue to print and pump trillions worth of fiat currencies into their respective markets to try and jumpstart economic activity as we emerge from the global pandemic. “If governments continue with these fiscal and monetary policies, this fiat influx will increase inflation and devalue corporate cash. Cryptocurrencies are a viable alternative,” he said.
- High liquidity and monetary velocity: Bitcoin is unique among assets in that despite its ultra-high liquidity it still appreciates like a value stock, and it can be simultaneously staked to transform it into a stable interest-bearing asset still owned and accessible by the company at any time, with nearly instant transferability and settlement to anywhere in the world with Internet connection. “Right now, a lot of companies in the markets still use money wires, which can take a few days to clear. Whereas value transfers using digital currencies are settled incredibly quickly by comparison. In our global economy, being able to move assets without delay can be very important,” he said.
- Lower financial transaction fees: Whether you’re dealing with a bank, accounting firm, or some other financial intermediary, corporations can incur thousands of dollars processing fees on an annual basis for a host of necessary financial services. “A lot of money processors take a cut out of holding and moving funds, making payments, or managing financial transactions. Cryptocurrencies can dramatically reduce those expenses with increased security because it’s on an encrypted blockchain with a distributed ledger that allows peer-to-peer interactions by removing the middleman. These are innovations that simply weren’t available a few years ago and they can give corporations a competitive edge,” Woodward stated.
It’s clear by all measures that Bitcoin and blockchain platforms are gaining traction among various public/private companies, universities, institutional investors, and endowment funds. It’s also clear that while some obstacles to accelerated corporate adoption may exist, early adopters stand to benefit the most by diversifying into cryptocurrencies now.
“While it might pose accounting challenges when it comes to tracking acquisition dates, cost basis variances, and holding periods for digital assets – similar challenges exist for all other assets and they can be addressed more easily for crypto due to automated, purpose-built accounting, and tax solutions that weren’t around five years ago. So, at the end of the day, it’s a brilliant move to diversify into it at this time,” said Woodward.
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