According to a study carried out by ADAN and KPMG in 2023, nearly one French person out of ten owns cryptoassets, and mainly bitcoin. While the 2010s marked a gradual adoption by individuals, the 2020s marks a completely new trend. Today, some of the world's biggest companies are integrating bitcoin into their balance sheets and proudly claiming it.
This trend, currently observed in the United States, seems to be entrenched in the long term. But why do these companies choose to invest part of their cash in bitcoin? What are the pros and cons? Is the DCA (Dollar-Cost Averaging) investment method suitable for businesses? We discuss all of these questions in this article.
The enthusiasm of businesses for bitcoin
Among the big companies that own bitcoin, the most famous is certainly Microstrategy. Under the aegis of its CEO Michael Saylor, this Nasdaq-listed company has opted for a particularly daring strategy, consisting in converting a large part of its cash into bitcoin. At the time of writing, Microstrategy owns around 189,150 BTC, valued at $8.1 billion. Notably, Saylor never sold the bitcoins acquired by Microstrategy. In 2021, He said on Twitter :
In the presence of galloping inflation, liquidity and credit become liabilities that devalue. Convert your cash into bitcoin to turn your liabilities into assets.
This strategy seems to be working. Although Microstrategy made several purchases at the top of the market in 2021, the company is currently recording an unrealized gain of more than $2.2 billion on its bitcoin investments.
Tesla is also among the companies that hold a significant amount of bitcoin in cash. Under the leadership of Elon Musk, the richest man in the world, Tesla caused a lot of noise in 2021, announcing a colossal investment of 1.5 billion dollars in BTC. Later, the company finally had to sell a large part of its bitcoins when the price had fallen. Nonetheless, Tesla still holds around 9,720 BTC in cash to date.
Other big companies have also invested in bitcoin. For example, Nexon, the South Korean video game giant, owns 1,717 BTC. Block (formerly Square), run by Twitter founder Jack Dorsey, owns 8,027 BTC. In 2018, Dorsey said in An interview given to The Times :
The world will eventually have a single currency, the Internet will have a single currency. Personally, I think it will be Bitcoin.
This trend, which began in 2020, of adding bitcoin to corporate balance sheets marks a growing recognition of this asset as a real currency. But in making this choice, what are the goals of these companies?
What are the advantages of integrating bitcoin into your treasury?
As with retail investors, businesses will see different benefits in bitcoin depending on their situation.
First of all, one of the main qualities of Bitcoin is its natural resistance to inflation. The total number of BTCs that can be created is strictly limited to 21 million units. This ceiling is imposed by the consensus of users. Unlike fiat currencies, it is not possible to arbitrarily increase the quantity of bitcoins in circulation. The inelasticity of its monetary supply protects it against the loss of purchasing power, a phenomenon that is found in fiat currencies such as the euro or the dollar.
By holding a portion of their reserves in bitcoin, companies can thus preserve the value of their capital over the long term thanks to a hard currency. Bitcoin can therefore be considered as a form of economic insurance, at a relatively low cost, against the depreciation of fiat currencies.
In addition to its resistance to inflation, bitcoin offers businesses the opportunity to diversify their assets. By integrating it into their cash flow, they can reduce their dependence on traditional fiat currencies and financial markets. In addition, bitcoin is distinguished from many other financial assets by its high liquidity. As the massive acquisitions of Microstrategy and Tesla have shown, businesses can easily convert their euros into bitcoin and vice versa. This liquidity makes it possible to quickly release funds in case of need.
Bitcoin not only distributes financial risks, but thanks to its peer-to-peer payment system, it also ensures that counterparty risks are reduced. If a company holds its bitcoins directly, it protects this portion of its cash flow against risks associated with trusted third parties, such as bank failures.
From an operational point of view, bitcoin facilitates access to international markets. It allows transactions to be carried out anywhere in the world, 24 hours a day, 7 days a week. It also offers the possibility of saving on bank fees related to international transfers and on exchange fees.
Finally, investing in bitcoin can also improve a company's brand image. This allows it to be positioned as an innovative company that knows how to adapt to technological developments, which can attract new customers, partners and investors who value innovation. While Bitcoin did not necessarily have good press in the past, its growing adoption by large companies and by some countries proves that it is now perfectly accepted in the institutional landscape. It can thus be integrated into a marketing strategy to strengthen the reputation of the company.
What are the disadvantages of integrating bitcoin into your treasury?
Of course, bitcoin is not a magic asset. Integrating it into a company's treasury certainly offers advantages, but it also comes with some risks that should be considered.
On the one hand, although the Bitcoin protocol is gaining technological maturity, its underlying asset remains relatively recent compared to traditional assets. This youth gives bitcoin a potential for appreciation, but also exposes it to significant short-term fluctuations. Thus, it is crucial to avoid management like Tesla, which was forced to sell its bitcoins when the market was low to generate liquidity, and to ensure that a reasonable proportion of bitcoins is allocated to its treasury, according to its working capital needs.
On the other hand, the risk associated with asset management should not be underestimated. Opting for autonomous storage of your bitcoins means taking full responsibility for their security: 100% self-custody implies 100% responsibility.
Some business owners are ready to accept this risk, but others prefer to delegate the storage of their bitcoins. That's why the Bitstack Business service gives you total flexibility. After acquiring bitcoins on our platform, you are free to choose. You can transfer all or part of your bitcoins to an external wallet under your control, or choose to entrust us with their security.
This last option minimizes the risks to your cash flow. Indeed, not only does Bitstack meet high cybersecurity standards, but we also took the initiative, as early as 2022, to implement segregation of our customers' accounts, thus going beyond the obligations incumbent on us as a digital asset service provider. Your bitcoins are therefore both physically and legally separated from Bitstack accounts. Regardless of the storage option you choose on Bitstack Business, you remain the sole owner of your bitcoins.
The DCA: an effective purchasing strategy for businesses
The Dollar-Cost Averaging (DCA) investment strategy is proving to be a particularly attractive method for a company to acquire bitcoin, as it helps mitigate the effects of market volatility.
Its principle is simple: it involves investing a fixed amount in euros in bitcoin at regular intervals, whether weekly or monthly, regardless of the Bitcoin price at those times. For example, for an investment of €24,000 in BTC over two years, a DCA strategy would be to set up recurring purchases of €1,000 each month during this period.
This method aims to reduce the risks associated with short-term market fluctuations. It is a prudent and pragmatic approach that makes it possible to smooth the purchase price, in order to expose yourself to bitcoin without stress, over the long term, while avoiding the behavioral biases inherent in this type of investment.
The association of this investment method with the constitution of a Bitcoin cash flow is particularly relevant. DCA encourages the gradual accumulation of capital each month, without requiring a massive initial investment that could upset the balance of your cash flow. Bitcoin, on the other hand, makes it possible to protect this capital against the risks mentioned in the previous parts.
The DCA is used by big organizations like Microstrategy and El Salvador. Michael Saylor's company has been making recurring purchases since 2020, while El Salvador adopted this strategy in 2021. Thanks to the regularity of their investments, these two entities record a latent gain in value on their bitcoins. Conversely, Tesla, which had opted for a one-time purchase, found itself forced to sell some of its bitcoins soon after with a loss on its investment. These examples clearly illustrate the value for a company to spread its purchases using the DCA method, in order to reduce the risks associated with price volatility.
With Bitstack Business, setting up a DCA strategy on bitcoin becomes easy. Our flexible offer allows you to manage your investment with complete freedom. You can easily adjust the amount of your DCA, by increasing it or decreasing it, according to your cash flow and the evolution of your working capital needs.
The gradual adoption of bitcoin by businesses marks a new trend in cash management. Bitcoin not only offers protection against the depreciation of fiat currencies, but it also helps to diversify company assets and reduce counterparty risks. Its market is becoming more and more mature, and now offers good liquidity, allowing major organizations such as Microstrategy, Block and the Government of El Salvador to position themselves.
However, as Tesla's poor experience demonstrates, it is important to remain vigilant in the face of Bitcoin's short-term volatility. The Dollar-Cost Averaging strategy offers a pragmatic response to this challenge by allowing the gradual integration of bitcoin into cash while smoothing its purchase price. This is why we have developed Bitstack Business, a complete and flexible solution for businesses, allowing them to invest peacefully in bitcoin with the DCA method.
