The entry of firms such as Square, MicroStrategy, and Stone Ridge can open the floodgates of BTC and provide “confidence for other companies to follow in their footsteps.”
On October 8, mobile payments giant Square, the firm that boasts a market capitalization of $ 86.6 billion, announced that the inversion of $ 50 million in Bitcoin (BTC). Five days later, asset manager Stone Ridge Holdings, the firm that manages more than $ 10 billion in assets, revealed that it bought more than 10,000 BTC, valued at about $ 114 million, as part of its cash reserve strategy.
The two mentioned firms followed the footsteps of MicroStrategy, a Nasdaq-listed asset manager, which gained $ 425 million in Bitcoin the last month, making BTC the foremost holding company for its cash reserve strategy.
On the one hand, three public companies and three large BTC purchases sound like a mere coincidence. On the other hand, the Federal Reserve’s balance sheet soared by $ 3 trillion since the beginning of 2019, while the US dollar got depreciated 70% against BTC, as noted by Stone Ridge founder Ross Stevens in the company press release dated October 13.
The fight for alternative investments has just begun.
Edward Moya, a senior market analyst at Oanda – a currency trading company told that the COVID-19 pandemic has changed the macro backdrop for fiat currencies, adding: “The Federal Reserve, in particular, clearly shown that an ultra-modern monetary stance will hold for a few years, and that is causing many institutional investors to scramble for alternative investments. “.
Gold, the traditional haven in times of crisis, recently disappointed, and as a result of this decrease, “it will likely attract new institutional investors consistently,” Moya said. Ammous also added: “There is a short-term concern of the devaluation of the dollar in light of increased government spending and stimulus in response to the coronavirus panic crisis.”
The critical long-term problem many companies face with the diminishing returns they can get from their cash reserves.
The anguish caused by COVID-19 may soon retrocede. This action leads to “the critical long-term problem many companies face with the diminishing returns they can get from their cash reserves by holding them in banks or treasuries,” according to Ammous.
In the past, companies were able to maintain their reserves in government bonds as well as being reasonably sure of exceeding the consumer price index (CPI), which is inflation. But today, “there seems to be a growing segment of companies that no longer reasonably expect that in the future,” Ammous said.
Indeed, hidden in the Stone Ridge announcement was a call for banks and philanthropists to also make Bitcoin the main component of their treasury reserve strategies. To do this, Stone Ridge started offering the services of its New York Digital Investment Group unit, which is licensed by the State of New York to turn dollars into cryptocurrencies and vice-versa, along with custody, financing, anti-money laundering, and well-planted customer policy.
By: Jenson Nuñez.
