While Bitcoin is trading around $39,000, institutional investment in cryptocurrencies increased by $109 million in the last week, according to the latest CoinShares report.
The Coinshares report highlights that this is the fifth week of incoming capital flows to cryptocurrencies, after three weeks in which BTC sales by investors predominated.
Despite the global macroeconomic climate given by Russia’s invasion of Ukraine, the crypto economy shows a turning point, since institutional investors and large corporations have decided to adopt them, in a sustained manner, since 2020, and they do not stop doing so now.
In 2021, there was plenty of news about crypto investment by major players like PayPal, Mastercard, Tesla, MicroStrategy, Square, and some of the world’s most prestigious banks. That is considering only twenty-three companies, according to data provided by Trustnodes, an investment of a figure close to one million Bitcoins was made in that year.
Impact of This Corporate Adoption on Cryptocurrencies
Cryptocurrencies give corporations very important support and generate greater confidence in the public, including, of course, SMEs. The adoption of cryptos encourages companies with inefficient financial systems, where exposure to inflation is a problem, to use cryptocurrencies on a day-to-day basis and to convert part of their currency funds to cryptocurrencies.
Gone are the days when risky individual investors were the only ones owning cryptocurrencies. Today, many companies around the world use Bitcoin and other cryptocurrencies so that their capital does not lose value and even becomes profitable, in addition to having a diversified investment portfolio. This logic finds reason in the monetary emissions of past years throughout the world.
On February 1, 2022, MicroStrategy announced the purchase of 660 BTC. Thus, it already accumulates more than 125,000 Bitcoins. According to Michael J. Saylor, CEO of the company, there are exactly 125,051 BTC, purchased at an average price of $30,200 per unit; about 3,776 million dollars invested in total. Thus, with the price of the cryptocurrency over 39,000 USD, the amount accumulated by MicroStrategy exceeds the market value of more than 4,700 million dollars. This equates to a 25% increase in the valuation of the portfolio in question on average.
It is worth noting that when the company had a $5 billion investment in Bitcoin as of May 2020, it communicated the following: “This investment reflects our belief that Bitcoin, as the world’s most widely adopted cryptocurrency, it is a reliable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.”
In a way, what Microstrategy said then is that it did not see why, in an inflationary environment, it should continue betting on dollars if the rates paid in that currency are zero.
Derived from the above, it is reasonable to conclude that investment in cryptocurrencies by financial institutions, large companies, and SMEs is an irreversible habit in a robust crypto ecosystem, which offers solutions to specific problems. Experience indicates that including assets such as DAI in the financial strategy of SMEs helps to gain agility in environments where exposure to inflation is corrosive and costs for international transfers are very high.
By Audy Castaneda
