Funding & Investing

Bitcoin’s slow progress towards treasury acceptance

Published: Jan 2025

For all the encouraging noises from digital asset managers, crypto treasury service providers and even some corporate treasurers, Bitcoin has yet to win over those who question its value as an inflation hedge.

Bitcoins in front of charts

In a paper published in December, BlackRock Investment Institute made a case for including Bitcoin in a multi-asset portfolio, noting that it may provide a more diversified source of return since there is no intrinsic reason why it should be correlated with major risk assets over the long term. But as with so many assessments of the highest-profile cryptocurrency, there was a caveat – Blackrock’s assessment of a reasonable range for a Bitcoin exposure was only 1-2%.

Many corporates remain wary, even those in the technology space. For example, only 0.55% of Microsoft shareholders supported a proposal for buying and holding Bitcoin according to the firm’s latest investor relations report.

Data from Bitcoin Magazine Pro indicates that MicroStrategy still dominates the list of publicly traded companies with Bitcoin treasury holdings, accounting for just over 2% of total supply. To put that figure in context, the next 15 organisations on the list (including Tesla) account for just 0.57%.

Footwear company Atoms is one of a new breed of company that has diversified its cash and high-yield savings accounts into Bitcoin. According to Co-Founder & Chief Operating Officer, Sidra Qasim, the question companies should be asking is not ‘why?’ but rather ‘why not?’.

“We have seen a period of high inflation which devalues the purchasing power of our cash,” she says. “A high-yield savings account has never been able to retain that, so we needed to look for alternatives. There isn’t a single product in the market that allows us to keep up with inflationary pressure outside of real estate, which is impractical. Bitcoin is the only option at this point.”

Qasim observes that when people think of volatility – especially when it comes to Bitcoin – they think of wild swings and 70% drawdowns during certain years.

“Volatility in this case has been positive to the tune of Bitcoin having a CAGR of 155%,” she says. “Each order we have accepted in Bitcoin has increased the profit margins of that order as time goes on while lowering the transaction costs with zero risk of fraud and chargebacks.” Given her absolute confidence that the company’s Bitcoin holdings are secure, it is hardly surprising that Atoms intends to continue this strategy.

“We have held every sat (sub-unit of Bitcoin) we have earned since 2020 and have added to that position,” adds Qasim. “We will continue taking Bitcoin payments and finding opportunities to allocate further resources to ensure that we can grow our treasury. Our team is always on the lookout to get more deeply involved in the space and finding ways to build out a circular economy.”

In November, battery materials provider Solidion Technology announced it would allocate a significant portion of its excess cash reserves to Bitcoin.

“Bitcoin offers a unique opportunity to diversify our treasury portfolio by including an asset that is scarce, digital, decentralised, transparent and global,” explains Chief Financial Officer, Vlad Prantsevich. “As it continues to gain broader adoption, it provides potential upside as a store of value and a hedge against inflation and fiscal irresponsibility.”

He describes Solidion’s allocation as a strategic investment in a nascent asset class with long-term potential rather than a bet on short-term performance.

“Cash assets remain essential for liquidity and operational needs, but Bitcoin complements our portfolio as a potential growth asset,” says Prantsevich. “Assets with massive long-term potential often experience price swings on their path to mainstream adoption and we view volatility as an opportunity rather than a risk.” However, to mitigate its impact the company has kept its allocation to Bitcoin within a defined, limited percentage of its total treasury. It also utilises dollar-cost averaging for acquisitions and technical tools to track buying opportunities while continuously assessing market conditions to align with its risk management framework.

“Security is a top priority for us,” adds Prantsevich. “Our Bitcoin holdings are safeguarded using institutional grade storage solutions. We have partnered with trusted custodians with advanced security protocols and we continually review and update our cybersecurity policies to ensure integrity and safety.”

According to Soren Azorian, CEO of fintech Redline Blockchain, there is no easy answer to the question of whether Bitcoin has proved to be an affective hedge against inflation.

“While Bitcoin is often referred to as ‘digital gold’ due to its capped supply, its short history and significant price volatility make it a less proven inflation hedge compared to traditional assets like gold,” he says.

Rob Gaskell, Founder and Partner at Appold digital asset advisory and investment company Appold, agrees that the jury is still out on this point.

“As much as its supply is fixed, its real world performance has been inconsistent regarding its correlation to capital markets,” he explains. “Bitcoin’s short existence, traditionally high price volatility and regulatory uncertainty make it less appealing as an inflationary tool when compared to more traditional hedges.”

“That said, its track record is improving, volatility has fallen due to increased institutional participation in 2024 and the regulatory environment is evolving,” adds Gaskell. “At this stage, it is not a perfect inflation hedge but could be treated as a good diversifier as part of a balanced treasury portfolio.”

Arnoud Star Busmann, CEO at fintech Quantoz Payments is confident that Bitcoin is correlated over the long run with technological progress and is “a hedge against the risk of a money printing-driven debt spiral that many developed countries will need to address sooner or later.”

Corporates need to address many issues when diversifying into digital assets, one of which is whether they are doing it to capture potential capital gain as part of a treasury investment portfolio, having taken the view that the assets are appreciating in value. Even Tim Ogilvie, Global Head of Institutional at crypto exchange Kraken acknowledges that there is no one-size-fits-all solution for corporate Bitcoin investment and that organisations must assess their unique circumstances including risk tolerance, local regulation and security needs.

“If your main objective is cash conservation, Bitcoin might not be for you,” says Pat White, Co-Founder and CEO of digital asset finance platform Bitwave. “But if your business has high exposure to inflation, such as consumer packaged goods or oil and gas, Bitcoin can be a very effective hedge against other parts of your business suffering due to inflation.”

The size of the allocation has to take into account the liquidity of the Bitcoin market suggests Katalin Tischhauser, Head of Investment Research at digital asset banking group Sygnum. “For smaller corporations this is not an issue, but for very large companies and large allocations it should be carefully assessed,” she adds.

According to Noah Herman, Chief Revenue Officer at digital assets treasury operations company Fortris, custody is probably the critical issue facing corporates. Bitcoin experts use the phrase ‘not your keys, not your coins’, which means that without the keys to their Bitcoin wallet, the holder of the cryptocurrency cannot access it.

“Corporates need to carefully evaluate how much third-party risk they are prepared to take on versus the responsibility – but ultimately sovereignty – of self-custody,” he says. “Our research shows that they are taking a pragmatic, hybrid approach, holding some funds in exchange accounts, some with third party custodians and some in self-custody solutions.”

Treasurers also need to ensure compliance with local regulations and assess the potential impact of regulatory changes on their Bitcoin holdings advises Brett Reeves, Head of Go Network at institutional digital asset infrastructure provider BitGo. “They should evaluate the methods for purchasing Bitcoin – including selecting reputable cryptocurrency exchanges or over-the-counter brokers – and establish processes for monitoring its performance,” he says. “Corporates also need to implement accounting systems to track and report Bitcoin holdings accurately and prepare for potential challenges in accounting, such as impairment testing and tax reporting.”

The Financial Accounting Standards Board’s new guidelines for accounting and disclosure of certain crypto assets, including Bitcoin, came into effect on 15th December, allowing these assets to be valued at fair value rather than their purchase price.

“Corporates have previously been concerned over the lack of clarity over [US] governmental regulation,” says Marissa Kim, Head of Asset Management at digital asset platform Abra. “President-elect Trump’s statements that he intends to have a pro-crypto and Bitcoin administration and his cabinet nominees and pro-crypto House and Senate candidates elected this cycle seem to indicate that this concern will be addressed soon.”

In addition to the inclusion of MicroStrategy in the Nasdaq 100 (largely due to its Bitcoin treasury strategy) and the new accounting rules, the prospect of the US creating a Bitcoin strategic national reserve would likely accelerate corporate buying of Bitcoin.

“We also believe we will be in an elevated inflationary environment for the next few years, which will force companies to seek out inflation hedges,” adds Kim.

Tim Renew, Deputy CEO of payment service provider BCB Group assesses the time horizon for holding Bitcoin by looking at its performance over the last decade.

“Bitcoin has an average annual return of over 50% over that timeframe,” he observes. “The worst annual return over any four year period is ~23% but if you reduce the holding period to two years your worst return would be an unhelpful -46%. Bitcoin is therefore most suitable for corporate treasuries that have high liquidity and a time horizon of holding Bitcoin of at least four years.”

A point that is often overlooked in discussions of investment gains is the utility of Bitcoin. Owning cash on the balance sheet is quite onerous – corporations with high cash balances and international operations are required to keep multiple global checking accounts, all of which operate with different banking hours.

In addition, corporate treasurers are under pressure to earn a yield on their float, which often means parking this cash in various money markets or other yield bearing instruments.

“Owning just Bitcoin on a company’s balance sheet can reduce its reliance on third parties and reduce transaction costs and potentially increase yield and payment flexibility,” says Jeff Dorman, Chief Investment Officer and Co-Founder of digital asset management firm Arca.

For corporates seeking flexibility and fungibility there are better options than holding cash. If they planned to spend that cash but everything they might spend it on is going up in price due to inflation, they would need to generate a return on that cash just to keep pace. “If they expect everything to go higher, why not just buy back their stock before it too goes higher?” asks Dorman. “Additionally, any company with a huge cash war chest is inefficiently using that capital and is primed for activism from investors building a position and trying to influence the board to make changes, including investing that cash in Bitcoin.”

American investor and fund manager, Bill Miller, has described Bitcoin as ‘an insurance policy against financial catastrophe’. “In the current environment of escalating fiscal deficits and ever-increasing government debt reaching levels far exceeding the economic output of the country, an insurance policy against potential catastrophic scenarios is well advised,” concludes Tischhauser.

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