Why shareholders want Amazon to bet on Bitcoin, and why it matters

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As someone who has spent over three decades navigating the ever-evolving landscape of technology and finance, I find myself increasingly intrigued by the meteoric rise of Bitcoin and its potential impact on corporate treasury practices.

Could we imagine a scenario where Amazon decides to invest in Bitcoin for their reserves? Given Bitcoin’s impressive 125% growth this year, some investors are advocating that now is the ideal time for the company to delve into the cryptocurrency market.

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Amazon under pressure to add Bitcoin to reserves

The massive global corporation Amazon is encountering growing demands from its stockholders to expand the composition of its financial holdings by integrating Bitcoin (BTC) into their investments.

There’s been pressure from shareholders on Amazon to think about investing a modest portion of their reserves into Bitcoin, as much as 5% suggests a proposal by the National Center for Public Policy Research.

As a forward-thinking researcher, I am contemplating the path taken by pioneering companies like MicroStrategy, Tesla, and Block, who have adopted Bitcoin as a strategic move to safeguard their assets from inflationary pressures and augment long-term shareholder worth.

Despite Bitcoin’s tendency for significant fluctuations in value, advocates contend that its volatile nature shouldn’t eclipse its possible ability to surpass conventional investments such as bonds, similar to how Amazon’s stock can be volatile yet still outshine more traditional investments.

By December 9th, Bitcoin has demonstrated impressive strength, soaring by an astounding 125% just in 2021, significantly outperforming conventional investment options such as gold and the S&P 500.

Contrastingly, MicroStrategy, a company that’s significantly invested in Bitcoin, has observed a staggering increase of nearly 450% in its share price. This surpasses Amazon’s growth of just 51% during the identical time frame.

Critics suggest that, given Amazon’s substantial total assets valued at $585 billion, including $88 billion kept in liquid cash and low-return investments such as bonds, Amazon might want to reassess its financial approach.

Microsoft facing its own Bitcoin dilemma

Just like Amazon, Microsoft is also grappling with a similar decision point regarding Bitcoin. With Bitcoin’s value soaring and hitting an impressive high of $100,000, shareholders from Microsoft have been advocating for the company to emulate firms such as MicroStrategy by incorporating Bitcoin into its financial holdings.

On December 10th, we’ll be voting on the proposition named “Evaluation of Bitcoin Investment,” which is supported by the NCPPR organization.

Nevertheless, Microsoft’s board has recommended against adopting the suggested plan. Co-founder Bill Gates, who has openly expressed his doubts about cryptocurrencies, has cautioned that the current cryptocurrency market is based on what he refers to as the “wisdom of the crowds theory” – essentially, a speculative bubble.

The board’s position mirrors that of Gates, as several members hold the view that Microsoft is already sensibly investing its funds, and there seems to be no pressing need for them to delve into areas of such significant risk or instability.

Indeed, MicroStrategy’s executive chairman, Michael Saylor, has personally advocated for Microsoft’s board to examine Bitcoin. He believes it plays a significant role in corporate digital transformation and is among the top-performing assets that companies could hold.

As a researcher, I’m eagerly anticipating the forthcoming vote at Microsoft. Should the proposition be approved, it would undeniably mark a significant milestone. This move would suggest that established corporations are starting to acknowledge Bitcoin as a bona fide and worthwhile component in their financial planning, paving the way for wider acceptance in the mainstream business world.

MicroStrategy’s shift to Bitcoin

In recent times, MicroStrategy, previously recognized predominantly for its software and business intelligence services, has experienced a significant shift in its identity.

Historically, our company has specialized in offering business analytics tools tailored for enterprises, enabling them to base their decisions on data.

However, in the year 2020, MicroStrategy made a daring and unorthodox decision: it started allocating significant amounts of its funds towards Bitcoin. This action has since reshaped the company’s essence.

The main factor behind this move was the worry about the declining worth of money in an economic climate characterized by low interest rates and high inflation. Under the guidance of CEO Michael Saylor, MicroStrategy’s management team believed that Bitcoin, due to its limited supply and deflationary nature, would serve as a superior form of value preservation compared to traditional cash.

The company started purchasing Bitcoin vigorously, referring to it as “digital gold” and an essential element of its strategic approach for managing corporate reserves.

Over time, MicroStrategy’s purchases of Bitcoin noticeably quickened. Initially, it took close to a year to acquire the first 100,000 Bitcoins; however, the speed at which they bought increased substantially in later years.

By December 9th, MicroStrategy owns an impressive 423,650 Bitcoins, with each coin purchased at approximately $60,324. This amounts to a total investment of $25.6 billion, placing it among the top corporate Bitcoin holders. In fact, this surpasses Nvidia Corporation’s cash reserves and the bitcoin holdings of most non-financial companies listed in the S&P 500 index.

Over the last five years, MicroStrategy’s stock (MSTR) has skyrocketed, increasing by an astonishing 2,500%. As of December 9th, it was trading at $377. Notably, earlier in November, it reached its highest point for a year ($543), only to then experience a slight dip.

The rise in Bitcoin’s value has positively affected MicroStrategy’s overall worth, but due to the fluctuating nature of this cryptocurrency, MicroStrategy’s success is now strongly linked to the fluctuations in the crypto market.

Bitcoin could change corporate treasury practices

Should businesses such as Amazon and Microsoft adopt Bitcoin as part of their financial holdings, this move might reshape traditional corporate cash management strategies on a worldwide level.

Typically, companies spread out their investments among cash, bonds, stocks, and other safe assets as a strategy to balance risk and maintain easy access to funds during market fluctuations.

Considering Bitcoin – a digitally-created asset that has a limited quantity – may appear unusual, yet it fits the increasing demand for assets that offer resistance to inflation and deliver high returns.

Obtaining approval for the initial spot Bitcoin ETF in January marked a significant step forward for institutional acceptance. This validation established Bitcoin as a sanctioned investment option, triggering a surge of curiosity among both corporate entities and individual investors alike.

Currently, as of December 9th, Bitcoin Spot Exchange-Traded Funds (ETFs) collectively manage more than $115 billion in assets, making them among the swiftest-expanding ETFs ever in the financial sector’s history.

It’s particularly noteworthy that the interest remains high: since November 29, Bitcoin Spot ETFs have experienced nothing but net increases in investments, amassing more than $3 billion within a short period.

By incorporating Bitcoin into their investment portfolios, corporations such as Amazon and Microsoft might significantly boost their financial tactics in numerous ways. A relatively modest investment – for example, 5% of their total reserves – could yield substantial returns, particularly considering Bitcoin’s historical tendency to exceed the performance of conventional assets like gold and bonds over the long term.

Additionally, investing in Bitcoin would place these companies within the swiftly expanding network of institutional acceptance, a phenomenon underscored by the rapid expansion of ETFs and the entrance of prominent figures such as BlackRock into the Bitcoin market.

Making such a move could have significant far-reaching impacts. Should the world’s leading corporations adopt this strategy, it might make Bitcoin a more common investment option for treasuries in various sectors, prompting smaller businesses to do the same. This domino effect could lead to an increase in Bitcoin’s value as demand rises due to widespread adoption.

Crypto’s growing role and the road ahead

Over the past several years, the landscape of cryptocurrencies has undergone significant transformation, with much of this evolution stemming from increased participation by influential individuals, corporations, and governing bodies.

A significant instance occurred when President-elect Donald Trump named David Sacks as his advisor on AI and Cryptocurrency (often referred to as the ‘AI & Crypto Czar’). This move underscores the increasing recognition that artificial intelligence and blockchain technology are crucial for innovation, indicating a more serious approach towards these technologies by the U.S. administration.

Just as technologies such as the internet and cloud computing transitioned from being specialized domains to becoming integral parts of everyday life in a similar manner, so too is the widespread use of cryptocurrencies progressing. Initially met with skepticism by businesses in the 90s regarding the internet, today it’s indispensable for conducting commerce. In much the same way, crypto is now experiencing this transition to becoming a fundamental aspect of business and transactions.

With an increasing number of businesses, ranging from tech powerhouses to banks, seeking ways to invest in cryptocurrencies, it’s evident that we are stepping into a new era. Over the next several years, these trends are likely to become mainstream, potentially making crypto as commonplace in corporate portfolios and financial plans as other traditional asset classes.

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2024-12-14 12:14