With the addition of 5,050 Bitcoin (BTC) to its investment portfolio, MicroStrategy’s Bitcoin treasury has officially surpassed cash held by most S&P 500 firms. The Nasdaq-listed software business had 114,042 BTC, and with the additional BTC, the BTC value is now close to $5.3 billion. According to Bloomberg, only 20% of non-financial S&P 500 companies have higher cash amounts making this a remarkable feat.
Cash Spending Patterns of 2020 Among Corporations
When MicroStrategy started buying Bitcoin in 2020 as part of its corporate strategy, other corporations followed suit. Companies that copied this genius strategy included Square and the vehicle manufacturing juggernaut, Tesla. MicroStrategy CEO Michael Saylor explained that the move was to protect the company cash reserves against potential US dollar devaluation because of the pandemic.
Risk aversive companies, however, increased their cash holdings. Bloomberg reported that cash-rich non-financial companies on the S&P 500 raised their cash reserves by 12% in the second quarter of 2020. This was because of the uncertainty brought about by spiking surges of COVID-19 cases across the globe.
By the third quarter, some firms were spending the cash in their reserves. In July, for example, about 2% or $30 billion wasn’t part of the non-financial S&P 500 companies dollar reserves. Examples of these firms are Ford, Electric and Boeing.
Others like Alphabet and Amazon continued adding cash to their reserves without spending. These corporations spent on increased dividends, buying back shared and new businesses. As a result, the cash stockpiles went down from $1.55 trillion to $1.52 trillion. Now, with the end of the pandemic drawing near every day, more companies are spending money. This is clear from the declining cash hoarding trend we are witnessing.
What MicroStrategy’s Corporate Strategy Did for Bitcoin and Crypto Exposure
First, MicroStrategy’s shares have grown by almost 359% in the past year. On a similar trend, Bitcoin has increased in value by 314% in the same time frame. Analysts have interpreted the growth difference as a way for shares investors to get exposed to the crypto market through traditional investing infrastructure.
This means that they are indirectly investing in a company investing in crypto because they have invested in a company investing in crypto. They also anticipate that the growth trends of both Bitcoin prices and MicroStrategy stock will be in sync for the foreseeable future.
Another beneficiary to this partnership is the Amplify Transformational Data Sharing ETF. After snubbing Grayscale Bitcoin Trust, it saw a 6.5% exposure in MicroStrategy stocks (MSTR). The reason for the snub is its policy on restrictions on receiving capital from certain documented exchange-traded funds.
A well-executed strategy on the part of MicroStrategy has led to a $ 242.9 million growth. Even the companies that copied said strategy have benefitted immensely as a result. Bitcoin and other cryptocurrencies are now viewed as a possible way to protect companies from the unpredictability of the dollar. Depending on where you look in the grand scheme of things, with corporates getting into the crypto space, the winds of change are upon us.