Cryptocurrency adoption has taken a new turn. More and more people realize their potential following the recent financial crisis. The year 2020 has seen a new trend of businesses moving a significant amount of their cash reserves to Bitcoin. The new trend was the result of traditional fiats no longer viewed as safe havens.
Snappa, an Ottawa based graphics software firm, recently moved a significant amount of its cash reserves into Bitcoin. Snappa, through its co-founder Christopher Gimmer announced that the allocation summed up to 40% of its cash reserves. The Company did not mention the specific amount of BTC bought due to “privacy reasons.”
“We’re still accumulating coins, and we don’t plan on selling anytime soon. If we’re right about where bitcoin is heading then our allocation could get very high.”
Reportedly, Snappa moved its cash assets to Bitcoin. It believes that traditional savings accounts are inferior to other cash reserves options. Gimmer asked:
“Would you rather save money in a currency whose supply is inflating each year? Or would you rather save in a currency whose terminal supply is programmatically fixed?”
Microstrategy Inc., a billion-dollar company with a market cap of about $1.33 billion, recently adopted Bitcoin as its primary treasury reserve. According to reports in August 2020, the Company bought $250 million worth of Bitcoin, about 21,454 BTC. For a long time now, Microstrategy has taken a keen interest in Bitcoin and other cryptocurrencies. Michael J. Saylor, the CEO, Microstrategy explained:
“Our investment in bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our 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,”
Microstrategy recognizes bitcoin as a legitimate investment asset that can be superior to cash like Snappa. Saylor conveyed:
“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.”
According to the CEO, the Company spent months before settling for Bitcoin. He explained that macro factors were considered which helped put things in perspective. These include economic and public health crisis due to covid-19. Other factors were unprecedented government financial stimulus measures and global political and economic uncertainty.
Saylor further explained that during their research, they “observed distinctive properties of bitcoin that led it to believe investing in the cryptocurrency would provide not only a reasonable hedge against inflation but also the prospect of earning a higher return than other investments.”
In September 2020, Microstrategy announced that it had added 16796 BTC worth $175 million to its stash. This brings the total number of the Company’s Bitcoin holdings to 38,250, with a total price of $425 million, including expenses and fees. In their earlier filing with the U.S. Securities and Exchange Commission (SEC), the Company outlined that:
“Bitcoin serving as the primary treasury reserve asset on an ongoing basis, subject to market conditions and anticipated needs of the business for Cash Assets, including future potential share repurchase activity. As a result of this new policy, the Company’s holdings of bitcoin may increase beyond the $250 million investment that the Company disclosed on August 11, 2020.”
Both companies moved their assets to the Bitcoin space because the currency is digital gold. They also view Bitcoin as a more challenging, stronger, faster, and smarter currency than any money that has preceded it. They both believed that moving to Bitcoin in the perfect move, given its potential to speed up in value in the coming days.
A restaurant owner, Ali Hamam, also moved his cash reserves to bitcoin. Hamam owns a restaurant in Ontario with his brother and cousin Omar and Ahmed. Hammam moved his cash reserves after his business got hit by COVID 19 economic shutdown. During the shutdown, the Government gave people money to stay at home, which resulted in increased circulation. Hamam explained:
“Our cash reserves swelled and business was booming again. But it was clear to us that cash didn’t have the same appeal. That with all the excess cash circulating it would be worthless if the thread going on. And that’s why we as a company decided to store all our excess cash reserves into Bitcoin.”