We have a third Wall Street entity that is entering the Bitcoin game.
Following the lead of Microstrategy and Square, Stone Ridge Asset Management, with $13 billion under management, purhased 10,000 Bitcoin. This amounts to $115 million worth of Bitcoin.
It looks like this is the start of a trend whereby organizations are putting a portion of their holdings into the leading cryptocurrency.
While many advertise this as the flight from the USD, the reality is these organizations are looking for a return. Square is obviously a technology company but the other two are investment funds. Their forte is seeking a return.
Over the past decade, Bitcoin is one of the best performing asset classes in the world.
This is the appeal of the investment by companies of this nature. Most mega-corporations have huge nest eggs of cash. They seek to put this to work. In fact, a company like Apple has so much money that it is effectively acting as an investment fund.
It is not likely that this is going to stop. We are seeing the number of Bitcoin produced dwindling. This means that it will get harder to attain as time goes by. In a situation like this, the only variable is the price, which gets forced up.
And this is exactly what these companies are looking for.
Many like to claim that Bitcoin is going to be the digital currency, even the reserve currency. To me, this is not going to happen. As stated in the past, Bitcoin cannot serve this purpose since it is hyper-deflationary. Thus, it will not work as "money".
That said, these companies are approaching Bitcoin for the same reason as individual hodlers: the appreciation that is expected. With the supply being fixed, it only makes sense that BTC will see higher prices in the future. When a company with $13 billion under management drops a portion of their holdings in Bitcoin, you know where their thinking is.
Let's be honest, when it comes to returns these days, there are few choices. When dealing with treasury reserve strategies, the options are limited. There are few that pay anything meaning that the money sits earning basically nothing.
By entering Bitcoin, Microstrategy and Stone Ridge have a chance to achieve much better returns. This shows there is the view there is security in Bitcoin, something that was not there a few years ago.
The evolution of cryptocurrency as legitimate is gaining steam. This is building and will truly be validated when some of the top companies enter the field. Within a year, we will likely see some large caps entering the space.
For now, we will keep working up the scale. There will likely come a day when we see a major corporation purchasing a billion dollars in Bitcoin.
To a company like Apple, it is a drop in the bucket.
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