Chinese technology firm Meitu has followed in the footsteps of American counterparts MicroStrategy and Tesla, purchasing around $40 mln of BTC and ETH.
The firm formally announced that it had made significant investments in the two cryptocurrencies, buying ~380 BTC worth around $18 mln and 15,000 ETH worth around $22 mln. While the likes of MicroStrategy and Tesla have been acquiring BTC as a treasury holding, Meitu has indicated that it also intends to integrate blockchain technology into applications that it is developing which will be powered by its Ether holdings.
The firm also noted that its board of directors had signed off on its cryptocurrency investment plan and Meitu may purchase up to $100 mln worth of cryptocurrencies financed by existing cash reserves as well as any remaining proceeds from Meitu’s initial public offering back in 2016 in which it raised $629 mln.
Meitu is famous for its ‘Selfie’ mobile applications developed for smartphones and has attracted over 1 billion users worldwide, and its latest interim results from 2020 indicated that its total monthly active users across all of its apps was 295.4 million in June 2020.
The Meitu board believes that blockchain technology has the potential to disrupt the global financial and technology industries in similar fashion to the rise of the Internet in the 1990s as well as the mobile internet industry in the 2000s.
“Against this backdrop, the Board believes cryptocurrencies have ample room for appreciation in value and by allocating part of its treasury in cryptocurrencies can also serve as a diversification to holding cash (which is subject to depreciation pressure due to aggressive increases in money supply by central banks globally) in treasury management. More importantly, the Board considers this a demonstration to investors and stakeholders that the Group has the vision and determination to embrace technological evolution, and hence preparing its foray into the blockchain industry,” the company’s statement read.
Noting that the cryptocurrency markets are still subject to volatility, the Meitu board took a decision to invest in Bitcoin and Ether, given that they are by far the two biggest cryptocurrencies by market capitalization and have the best chance to ‘enhance shareholder value in the long-term’.
ETH purchase to power blockchain foray
Meitu’s announcement also said its $22mln investment in Eth would power its integration of blockchain technology into its future mobile application development .
Ethereum has become the blockchain platform of choice for developers to build decentralized applications powered by smart contracts. Even before the Decentralized Finance space exploded in 2020, Ethereum became home to some of the most popular and widely used dApps in the world.
With this in mind, Meitu has purchased a sizeable amount of Ether to power dApps that it plans to build and run in the future:
“The Group is currently evaluating the feasibility of integrating blockchain technologies to its various overseas businesses, including but not limited to launching Ethereum-based dApps, as well as identifying suitable overseas blockchain-based projects for potential investments (many blockchain-based projects accept Ether as consideration for investment) that can be synergistic to its large user base that has hundreds million monthly active users globally. Purchasing Ether is therefore a logical preparation for both initiatives, as the Ether purchased would become the gas reserve for the Group’s potential dAPP(s) to consume in the future, as well as being used as consideration for investing in blockchain-based projects that take Ether as consideration.”
BTC becomes a treasury asset
While Meitu’s Ether investment is set to be used for the day-to-day running of its own Ethereum-based applications in the future, its $18mln BTC acquisition is intended to serve as an alternative store of value for the firm’s treasury holdings.
The mobile app developer pointed to some key characteristics that have long been credited for giving Bitcoin it’s reputation as a new age ‘Digital Gold’ as a driving factor behind it’s acquisition of 379.1214267 BTC.
“Bitcoin is a cryptocurrency launched more than 10 years ago. It has several features that enable it to be a good alternative store of value, such as being limited in supply, its exchangeability into fiat money or goods and services, portability, and its potential to act as an effective hedge against depreciation of fiat currencies due to aggressive increase in money supply by central banks globally. Some of these features potentially even render Bitcoin as a superior form to other alternative stores of value such as gold, precious stone and real estate. Being an alternative store of value, its price is primarily a function of future demand that is driven by consensus of investors and the general public.”