There were a lot of different components that led to the creation of Bitcoin, the first digital currency as they’re known today. In addition to seeking a solution that give consumers the ability to control their own funds, instead of relying on third-party solutions such as banks, the concern over continued inflation of fiat and the devaluation of traditional currency shaped the model used to introduce Bitcoin. As a store of value, Bitcoin (BTC) is essentially impervious to devaluation and Jason Simon, a FinTech and cryptocurrency expert, explains how businesses are now using cryptocurrency to give shareholders more value in their investments.
Recently, Tesla announced that it had made a substantial purchase of Bitcoin. It filed a notice with the SEC that it had purchased $1.5 billion worth of the cryptocurrency when the price per BTC was approximately $46,500. Today, the holdings are worth just under $1.9 billion. Explains Simon, “Tesla founder Elon Musk immediately created value for company shareholders by moving asset holdings out of fiat and into BTC. In doing so, he showed other companies the benefits to holding cryptocurrency and other businesses have already begun to follow suit.”
The CEO of MicroStrategy, Michael Saylor, recently participated in an interview with CNN in which he pointed out the importance of moving some company value-driven assets to cryptocurrency. He explained that cash is losing 15% of its value each year and that the next 8-10 years are going to see low interest with high monetary inflation. Saylor added that cash held on balance sheets loses up to 85% of its value every year, but emphasizes the fact that BTC is gaining 200% a year in value. Moving held assets to cryptocurrency provides long-term value to shareholders, much more than what is possible through traditional fiat vehicles.
Adds Simon, “Saylor also highlights how BTC is superior to gold and is the first digital monetary network. Being able to move at the speed of light with lower overhead, BTC is making financial systems more efficient and is inarguably going to replace gold as a non-sovereign store of value around the world. As cryptocurrency becomes more accepted as a store of value, governments are going to be forced to take notice and conventional treasury paradigms are going to have to be reconsidered.”
Tesla wasn’t the first company to make a large purchase of cryptocurrency; however, its involvement catapulted to the forefront the realization that companies around the world can provide better shareholder returns by investing in digital currencies. The number of businesses expected to follow Tesla will triple or quadruple within a year, with even more embracing the opportunity going forward. Ultimately, cryptocurrency is going to be 100 times larger than either Google or Facebook, driven by global institutional adoption that will trigger a greater shift in the entire financial process around the world.