Microsoft Alone Holds $123 Billion in "Credit Risk"
Over the past two months, institutional Bitcoin adoption has begun to skyrocket as the U.S. dollar continues to lose traction against other foreign currencies.
MicroStrategy was the first to make headlines in August. The business services company deployed $250 million, then an additional $175 million into Bitcoin over the course of two months. Company chief executive Michael J. Saylor branded this as a move to protect MicroStrategy's balance sheet from detrimental macroeconomic trends:
This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.
Square followed suit. The $80 billion financial technology company led by Twitter chief executive Jack Dorsey allocated $50 million, or one percent of its assets, to Bitcoin.
Both investments are up by millions of dollars apiece.
Other firms are expected to follow suit, especially as cash balances accrue in the coffers of successful companies. Many investors are starting to realize it is foolish to hold cash as central banks and governments inject trillions of dollars worth of stimulus into the global economy, which has been hammered by pandemic lockdowns.
Money on the Sidelines
Unchained Capital's Parker Lewis highlighted the total addressable market Bitcoin has in becoming a reserve asset in a recent tweet.
Citing data from Microsoft's Q2 earnings report, he noted that the international technology company holds $123 billion in "short-term investments" and $13.5 billion in cash equivalents, for a total of $136.5 billion.
These are holdings that are being inflated away rapidly in the most centrally stimulated environment in history.
Lewis is suggesting that it would be wise for Microsoft to deploy capital into Bitcoin to avoid inflationary risk, similar to what Square and MicroStrategy did.
To touch further on Lewis' example of Microsoft, it's worth noting that the technology company has dabbled in Bitcoin in the past. For a number of years, Microsoft allowed Bitcoin holders to use the pioneering cryptocurrency to fund Microsoft accounts. Users could then use those funds to purchase Windows applications, Xbox games, music, and videos.
The company also launched a decentralized identity tool called Ion, which is built on Bitcoin. Development on Ion has been slow, but shows that Microsoft is open to the concept of Bitcoin.
Microsoft isn't the only company, however, that is suffering from holding billions of dollars worth of cash or short-term investments.
A venture investor in the space, Ian Lee, noted that per his calculations, U.S. corporations have a total of $25 trillion in assets at the moment. Willy Woo, a noted on-chain analyst, says that around 20% of that, or $5 trillion, is held in cash or short-term investments.
Woo added in a more recent tweet that there is also $8.5 trillion sitting in sovereign wealth funds that could get siphoned into Bitcoin over time.
Even if only a small percentage of that capital were to enter Bitcoin, the market capitalization of the asset would undergo an exponential surge. This is due to the fiat amplifier effect, which suggests that for every dollar put into Bitcoin, the stated market capitalization of the coin increases by more than that dollar.
Institutional Adoption of Bitcoin Is Already Happening
Analysts argue that the influx of institutional capital has already begun behind the scenes.
"Light," a celebrated Bitcoin trader, recently said that from his analysis, he can tell that there are institutional investors heavily influencing the cryptocurrency market. He wrote the following on October 25th:
A lot of the buy pressure that is competing for tightening BTC sell-side liquidity these last weeks is coming from institutionals. They are buying from people who are in the disbelief stage.
Other investors in tune with the intricacies of the cryptocurrency market have also noted that there seem to be institutional investors buying bitcoin en-masse.
Raoul Pal, CEO of Real Vision and a hedge fund veteran, says that the influx of institutional investment will drive Bitcoin dramatically higher in the years ahead.
He said in an interview with Stansberry Research that this institutional influence could drive prices to $1,000,000 during the current cycle:
Just from what I know from all of the institutions, all of the people I speak to, there is an enormous wall of money coming into this. It's an enormous wall of money — just the pipes aren't there to allow people to do it yet, and that's coming. But it's on everybody's radar, and there's a lot of smart people working on it.