With heavy-hitters such as Tesla, Square Inc. and MicroStrategy making massive balance-sheet allocations to Bitcoin in recent months, the rise of the cryptocurrency in corporate treasuries is one of the most influential fiscal trends to emerge from the COVID-19 pandemic.
The timing of these allocations is no coincidence. While historically low interest rates and multitrillion-dollar stimulus spending has helped economies weather the storm, it is raising the spectre of depreciation of the cash and cash equivalents in corporate treasuries.
As essential tools for managing cash and liquidity, corporate treasuries often hold a range of assets to manage risk and enhance returns. Traditionally, these have included bank deposits, money market funds, treasury bills, commercial paper, repurchase agreement and other low-risk capital allocations. As has always been the case, finding the balance between risk and yield means considering factors such as short and long-term liquidity needs, and changes in foreign exchange rates and interest rates.
That’s where Bitcoin comes in as an asset that can provide alternative stores of value and deliver greater yields. As a recent report by Fidelity Digital Assets points out, “the unparalleled nature of the current economic crisis is pushing forward-thinking corporate treasurers to consider adding Bitcoin to their balance sheets.” This is because it “offers the upside of longer-term investments while providing the liquidity profile of shorter-term investments.”
This view was echoed by MicroStrategy president and CFO Phong Le after the business intelligence giant purchased more than 29,600 Bitcoins for approximately $650 million in late 2020. “The company continues to believe Bitcoin will provide the opportunity for better returns and preserve the value of our capital over time compared to holding cash,” Le said.
Bitcoin is generally uncorrelated to demand shocks, with its diversification benefits, potential outperformance and liquidity profile benefitting corporate treasuries when other investments are disadvantaged by the state of the economy. At the same time, it can act as a hedge against inflation. While central banks continue to print fiat currency to provide pandemic relief, Bitcoin shares its deflationary properties with gold. As a verifiably scarce asset with a transparent monetary policy, Bitcoin protects businesses from the devaluing of cash.
Bitcoin holdings also allow businesses to take advantage of peer-to-peer payment opportunities. While large transactions typically require expensive wire fees, reliance on banking hours, and slow transaction times, Bitcoin reduces the need for third parties and can result in significant appreciation.
Last but certainly not least, buying and holding Bitcoin in a Canadian corporate treasury is remarkably safe and straightforward when facilitated by digital currency platforms such as Toronto-based Bitbuy. “While Bitcoin and cryptocurrency in general is an emerging asset class, corporate treasuries need to be prudent and deliberate in their approach to these investments,” said Trisha Paguyo, vice-president of institutional sales and trading at Bitbuy. “We have helped clients across numerous industries, and we understand the unique challenges they face, from proposing treasury policy changes to reporting and record keeping.”
The Bitbuy team is there to guide businesses of all sizes through onboarding and can help facilitate larger cryptocurrency purchases or sales. Bitbuy also gives clients the option to store their cryptocurrency with them using their institutional grade and fully insured custody solution. Clients can also withdraw the funds to their own self-custodied wallets if they choose. Bitbuy is fully compliant, and registered with FINTRAC as a money services business, under the virtual asset service provider category.
“From understanding the implications on your balance sheet to executing orders with a proven and tested methodical trading strategy to secure the best pricing, Bitbuy is uniquely positioned to help Canadian corporations navigate the entire process of adding Bitcoin to corporate treasuries,” Paguyo said.
For more information, please visit bitbuy.ca/corporate
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