According to BusinessWire, MicroStrategy is regarded as the biggest independent, publicly traded business intelligence firm in the world. It provides an enterprise business analytics platform to some of the biggest companies on the Fortune500.
The purchase of 21,454 Bitcoin forms part of the company’s latest capital allocation strategy following its financial results for the second quarter of 2020. Having met financial obligations to shareholders from profits, the company carried through with plans to invest around $250 mln into an alternative asset class.
Bitcoin’s bright future
While there are a plethora of assets that are considered to be in the alternative class including real estate and precious metals, MicroStrategy has decided to go all in on Bitcoin.
The company’s CEO Michael Saylor said that the investment is looking to maximize long-term value for its shareholders.
“This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. Since its inception over a decade ago, Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions. MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy,” Saylor said.
The cost of Covid-19
MicroStrategy’s business heads reportedly deliberated extensively over the right avenue in which to invest this significant portion of funds. Part of these considerations included current monetary policies of governments around the world, which has seen extensive quantitative easing, or issuance of fiat currency, by various Reserve Banks.
The effect of the global Coronavirus pandemic has forced companies like MicroStrategy to think carefully about holding large amounts of fiat currency in reserve, as Saylor explains.
“Those macro factors include, among other things, the economic and public health crisis precipitated by COVID-19, unprecedented government financial stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty. We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations,” Saylor said.
Banking on digital gold
Bitcoin has long been touted as ‘digital gold’ due to its deflationary mining protocol and finite supply of 21 million coins.
This is part of the rationale behind MicroStrategy’s investment into the preeminent cryptocurrency. The company believes that investing in Bitcoin will be an effective hedge against fiat currency inflation – while recognizing and acting on the potential increase in value of the cryptocurrency in the coming years.
“We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility, and community ethos of Bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value. Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it. We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fueled the rise of so many category killers in the modern era,” Saylor said.
There is no doubting that this is an extremely bullish move by the business intelligence firm. What remains to be seen is if other major business analytics firms and financial institutions will make similar direct investments into cryptocurrencies.