Bitcoin Forum

I found this on twitter (https://twitter.com/saifedean/status/1311358424035340288/photo/1) which this guy told that they already moved to a bitcoin standard which they are using Bitcoin as their primary reserve asset.

At first, I am glad reading this, I hope this is true.
I know there are lot of advantages and disadvantages for this, especially they are buying Bitcoins with the company's money and it will become a reserve asset.

The question here is what could be the difference of a company holding an Bitcoin for reseve asset than an ordinary man buying holding a Bitcoin?

Since for me, it is a purely risky since it is company and a lot of people are relying on the company itself. But somehow, there's also a lot of possibility that their reserve will generate a huge returns for them if ever Bitcoin will continue to increase it's price.

No difference, except that companies putting their assets to Bitcoin might somewhat affect the price in a positive way. Specially if they are going to move huge fiat reserves to Bitcoin economy.


Definitely, there is a big risk for this companies. But MicroStrategy has set the precedence already:

MicroStrategy Adopts Bitcoin as Primary Treasury Reserve Asset. (https://www.businesswire.com/news/home/20200811005331/en/MicroStrategy-Adopts-Bitcoin-Primary-Treasury-Reserve-Asset)

So it depends on the risk aversion of the company, it they think they can handle bitcoin's volatility and look at them as more as an investment or hedge, then we might hear more companies having this kind of strategies as well.

The difference is that an ordinary man buying and hodling his own Bitcoin does not have a huge responsibility over other people or a business operation while a company choosing Bitcoin as its primary reserve has the fate of its future in its hands.

I own and hodl Bitcoin. I can absorb the severe ups and downs of Bitcoin's price. I can hodl it as long as I want. My losses may remain to be paper losses. That may not be true to a company. If Bitcoin falls hard to, say, $3,000 and the company badly needs money to spend on something and there's nowhere to go but to its own reserve, they might end up sealing its loss.

The tweet does not disclose details how the company, the CEO stores bitcoin for company's cash reserve.

- Hot or cold wallet.
- Standard or multi-signature wallet.

As a company, they should use cold wallet, multi-signature wallet.

Completely depends. Depending on how much bitcoin a certain company holds, they may be forced to liquidate the bitcoin if it comes to the point that they need more cash to keep the company running. This is why I find it really risky for MicroStrategy to be holding a huge amount of bitcoin(in contrast to their company's assets and marketcap). But then again, I'm pretty sure their CEO is a hundred times smarter than me so who am I to judge his choice.

There are few companies who have moved to bitcoin standard in recent times. One prime example is Snappa who have converted 40% of their cash reserve into bitcoin very recently.

In a way it makes no difference for the company but such kind of holdings come with a great risk because we all have seen the price fluctuation of bitcoin. So bitcoin is not a great asset for capital protection which is the sole reason for a company to keep cash reserve. But it seems the management of such companies are bullish about bitcoin and that's why they have taken such move.

However, when an institutional investor buys bitcoin in bulk it definitely brings more liquidity as well as high credibility into the market. So that's the only difference in terms of overall positivity. Otherwise, all remains same!

Yes, we don't know if the company is mid to huge corporations.

1. So for small to mid companies, I would say that there is a huge risk, might not be recommended at all
2. So big companies, well it's at least 50-50 in my opinion, they can't really put their reserves to an asset that is very unstable and in a blink of an eye, their reserves might dwindle. So there could also be in dire need of fiat and then liquidating their reserves which has lost so much value is a failure for the company

For the Bitcoin network, it could be seen as the next step in adoption; If large multi-million dollar companies switch to a Bitcoin standard, holding their reserve in Bitcoin, it reflects growth and trust in the asset, pushing the idea that Bitcoin can serve as a reserve currency globally, as an alternative to fiat and gold.
Few years ago, individuals investing in Bitcoin could be considered to be taken a wrong, and highly risky investment, it is still a risky investment now, but people/companies are looking beyond that now and recognizing the huge potential the network has and taking positions to stay ahead of the curve

Bitcoin is risky but resistant to shocks in supply and has a finite supply, so there can only be so much in circulation; meaning it is highly resistant to inflation making it suitable for long-term investments. More large investments like these, would also improve the stability of bitcoin, making it more attractive for new investors.

I suspect their other reserve is liquid enough to support them when bad things happens. No way in hell they go all in without any preparations. If they did, then I'm pretty sure their company won't survive that long.

I think they will buy it from OTC to avoid changing the market dynamics. Just like how others do it.

While it's an interesting development I do wonder how this is going to pan out. If it becomes some sort of bubble in its own right then it's going to end up proper messy. Company money is just as prone to panic and ballsing up as any individual and they have many obligations and requirements on top too.

I don't think many companies will have the means or the will to sit through many years of bear like an individual can.

I agree with this. It's not the first case of putting the company's money in Bitcoin that I encounter. I believe there was a restaurant doing a similar thing. I have mixed feelings about this. While it's potentially good for and price and shows that trust in Bitcoin is growing, this is a huge risk for a company, and the general rule is to invest what one can afford to lose (whereas a company clearly cannot afford to lose all that money). Bitcoin is volatile and a big drop can happen at any point and last for a while. The company, in the meantime, might need to use some of that money, and it will feel that hard loss and won't be able to just hodl through it. In the end, a couple of catastrophic cases would discourage others to have anything to do with Bitcoin.

We can't get their actual reason why they make bitcoin as their reserve cash or asset but they are free to decide on that matter and it is none of our business. If we will going to speculate why this private company had been eyeing this kind of decision then I am more positive that he sees bitcoin will going to grow as time passes by. Yes, it has been good to make bitcoin as a company cash reserve but this there are lots of advantage and disadvantage as what OP mention. Probably, they decide to risk it all and will hold it only if they can't get return to it and will eventually use the funds if they can get a good return from a good bitcoin market.

Other than them possibly losing more than what a normal man could? Not much I suppose. In the end, investment is still an investment, even when done by a company or a single person. The only difference is it's like a single person deciding is at most, a 2x2 Rubix cube, while a company deciding whether to invest is also a 2x2 Rubix cube, just that there are around 4-5 hands moving together at the same time without actually having the mind to coordinate with each other.

Surely it is an advantage on the side of the company because apart from bitcoin that is bought as an asset which is like another investment or savings made by the company, the company also has other sources of income different from bitcoin. That is the source of generating money to run, finance and payment of salaries. Buying bitcoin will not be risky but advantage.

This topic constantly comes up in discussions, read what the famous cryptographer and Bitcoin developer Peter Todd writes
https://twitter.com/peterktodd/status/1176313278114476032
"It means nothing because Google's quantum breakthrough is for a primitive type of quantum computing that is nowhere near breaking cryptography.

We still don't even know if it's possible to scale quantum computers; quite possible that adding qbits will have an exponential cost."

I don’t think anything will change in the next 10 years.

Looks like the word is spreading among small companies. A few months ago a canandian company went on to put to move a % of their cash reserve to BTC too.
Source: https://www.coindesk.com/canadian-software-startup-puts-40-of-cash-reserves-into-bitcoin

man, sometimes i shudder whenever i see the words "bitcoin" and "primary reserve asset"

Probably because that's not an official statement from the company or the CEO, but rather a friendly message sent to the author of a book

I often wonder if it's worth all the hassle and all that preparation and the possible headaches & stress in case of a massive btc crash just to say "we're using bitcoin as a reserve asset! yay"

I also think that the company have reserve asset that can accommodate an event where their Reserve Cash  suffer a great loss such as Bitcoin price crash.  I believe their company had sorted it out since I am sure they know how risky it is to use BTC as their Company Cash Reserve.  I also believe that they are bullish in Bitcoin hoping that their Cash reserve will balloon in value one day.  


Well it is both an advantage and disadvantage if we look at its two side.  But I believe the company's move on this relies on their calculated risk management.

I consider this strategy as a gamble or might look good for some reasons because who knows when they need that reserved money. If they bought BTC with the reserved money from its lowest price, their company reserved money had been increased significantly today. This is some good strategy they got here as long as they've bought BTC at its low price. Because no matter how bad the situation of the market is, the price will recover after some few months of decline.

Working of companies(of a reputable scale) isn't that simple. They contain complex structure and rules even for the use of money. I mean generally companies set out a risk management policy for their Financial Advisors and they take their risks accordingly. No prudent company would go with it's full cash in Bitcoin.

Moreover in most of the countries companies are administered by central laws and these laws generally also administer how companies use their money. Because in companies the money generally doesn't solely belongs to the directors the money is of the shareholders and Law creates lot of responsibilities upon Director to take care of this money

Difference of company having reserve is merely one and that too is applicable for larger companies. That is if the companies are holding risky assets such as bitcoin. Generally they won't directly buy bitcoin they would rather buy synthetic derivatives of such coins so that they just have to pay the margin money thereby increasing their ROI. This would lead to increase of an OTC market which would mean that new investment banks could join this field.

For me, the reason is quite simple, they see bitcoin as a good place to store their company's asset. That is because of the current performance and service that bitcoin has provided to us, we didn't also see bitcoin drop so bad that it took away millions of dollars. But right now, bitcoin is performing quite better and with stability. Relating it to the characteristic of bitcoin, in the future, it will be more difficult to acquire one, so they are also taking advantage of the time to convert their funds to BTC as they see it's price going up in the future.

The chance for it to be truth 90% because alot of private companies are somehow investing in Bitcoin ever since Bitcoin prove itself to be potential currency during the total lockdown and some company in Brazil have also join th race.

Reserve asset are fund kept as a backup for country or company and it also use as fund for balance international transactions and payments. So, they definitely see Bitcoin as the currency to expand their company asset and also to go globally.

The decision is risky but if they learn from crypto exchange site system and how they manage their reserve asset to make a profit through it, the risk can be avoided.

I am sure that many companies have decided to buy Bitcoin as company cash reserve. Because the price of Bitcoin continues to rise,
which takes into account why many companies decide to use Bitcoin as company cash reserve. Even I, who own a small business,
have made Bitcoin a company asset. Because I believe that if the Bitcoin price goes up, make my business finances healthier. Indeed,
the decision to make Bitcoin as company cash reserve is a bit risky, because the price of Bitcoin could fall and make the company's
finances unhealthy. Therefore, the company must have a financial advisor who can analyze the Bitcoin market well. That way it will be safer,
because the company can make risk management.

I wonder what would happen if they need some quick capital and has to liquidate their bitcoin by converting it to fiat. You know right, the price of bitcoin does not continue to rise each and every day? I mean What if the price has tanked to the bottom and it is that exact moment they are needing the cash most? Wouldn't they be making a huge loss by converting their reserves at the moment? This will also make it harder for them to repay debts. They will have to take every financial decisions very carefully.
Since you also use bitcoin as a reserve for your "small" company, would be great if you let us know how would you be managing the risks.

Not sure if the tweet is real. Holding reserves in Bitcoin seems risky.

Bitcoin is still an investment not a safe store of value for a company and it's because although I believe in Bitcoin and know it's going to gain value over time it has periods of short term bearishness where it can take months or even years before the price normalizes.

As a company you may need the money here and now because of expansion or a worse year that makes you reach for reserves. You can't wait 2 yearsfor the bear market to be over.

We know the risk but there are people/company/businesses that do embrace it out in spite of the chance or possibility on getting negative instead.

I dont know if they do make out some analysis first before making such step or just purely rushed into making such decision on putting up their primary reserve into bitcoin.

havent reached out into their consideration about the risk that could happen?If they do then i can say that they have somewhat that gambling kind of mind.To be frank, we cant really deny the risk of losing money
no matter how bullish you are with BTC but you cant just risk out that big amount.

Good thing for them if the market rose but if it would dumped? Panick will surely be felt.

Large companies that start to adopt bitcoin and make Bitcoin as their Main Reserve asset, is certainly a big step. We know Bitcoin is a digital asset with high votality and risk, but the company makes it their main reserve.

Chances are they have already thought of a strategy how they can benefit more from bitcoin. They may have bought bitcoin at the lowest price and then held it until the price went up and made a profit. What is certain is that they already have an expert in the field of digital asset trading who has thought about what strategies are good and profitable, they also realize that Bitcoin will be very risky. They are professionals and they know what to do.

Additional to this topic.
MicroStrategy company which is major in mobile application and cloud services providers.

"MicroStrategy Buys $175M More in Bitcoin, Upping BTC Holdings to $425M." - Source (http://MicroStrategy Buys $175M More in Bitcoin, Upping BTC Holdings to $425M)

This company can be our example for using Bitcoin as company cash reserve. I really admire the CEO of MicroStragey, it's really a risk taker and also one of the big supporter of Bitcoin.

You can check on his tweet here (https://twitter.com/michael_saylor/status/1305850568531947520?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1305850568531947520%7Ctwgr%5Eshare_3&ref_url=https%3A%2F%2Fwww.coindesk.com%2Fmicrostrategy-buys-more-bitcoin).

https://i.imgur.com/m9W3D5T.png

With the current price climate of bitcoin, chances are they can't pull out the their reserve immediately. The emergency and the prices might not match which might cause shortage in funds or worse bankruptcy. If I were the CEO of a company, I would hedge my bet on putting my reserve in a 50:50 split of cryptocurrency and fiat because cryptocurrency is not yet widely adopted.

this is what we all wanted to happen,that companies worldwide will consider cryptocurrencies are their reserve like what these companies now are doing.
Microstrategy find it reliable thats why the break the silence and start using bitcoin to be in their reserve,better than Gold Bitcoins volatility and decentralization is why people like CEO of Microstrategy trust and now using Bitcoin.
 to follow are other company
 from every part of the world will Buy bitcoin and that will be the true spike of adoption and the 6 digits that we all waits will soon to come.
i have some gold also as investment but  majority
 is Bitcoin and some altcoin that i really trust and support.

Agreed. Only few companies are risking there reserve in BTC because its too risky currency to use for reserve just like what happened on other venture capital that invest on BTC last crypto hype and lost tons of money after the huge dump. I believe hedging there reserves in crypto is the best way to protect there reserve value if they really to invest in crypto. Even a 50:50 ratio is very dangerous considering the amount of money they are holding, just like what you said, liquidity might not be enough in case they decided to liquidate there BTC position.

You said the difference already.

Putting the money that is being reserved by a company to an asset which is considered high risk as of this moment is considered a risky move by them. It may also affect the price movement of Bitcoin depending on the number of BTC they will buy and they will sell. One thing more to this is that, this is risky because anytime the price of Bitcoin can goes down and their reserved money can go lower because of this. Instead of just holding cash since it is just a reserve, they risked it and put it in Bitcoin.

An ordinary man holding Bitcoin is different since he is just thinking of himself when he is investing into it unlike the company where he is thinking the whole company and the employees. Chances of the company doing this is low since they see some risk in doing this.

reserved funds means that its not thier primary funds thats why its okay for them to trust this funds in bitcoin and there is not only risk on here but theres mostly rewards that they can get .

i think if im the company leader ill also suggest this and will do the same instead of seeing the funds in the corner and not growing . why worry when you are not part of the company anyway ? but you should be happy instead for this news and for them .

The only difference from that of a single guy purchasing btc with that of the company was ofcourse, those private companies can purchase huge amount of bitcoin. And if they'll gonna use it as a reserve asset, they'll taking the risk but gaining for real. Of course, it may ffect the market if they'll sell off their holdings.
 
 And it is not surprising that more companies are jumping into cryptocurrency as their reserve asset, it will gonna help the company grow financially. I believe, they've seek advice from other companies that already been doing this since before. They'll not gonna take this risk if they haven't seen such success from the other companies as well.

Such a courageous decision if we take into consideration Bitcoin high volatility.

Whenever the company holding a Bitcoin for reserve assets it highly affects bitcoin price.
The company positively takes the market with highly invest. While an ordinary man can not help much for the market.
Bitcoin will be the future of money and a lot of companies gonna make benefit from it.
I've assumed that bitcoin didn't drop so bad its stable. For me its the right time for companies to use bitcoin as an asset.

This is quite a risk that this CEO has taken here. Imagine that the price of Bitcoin happens to crash to a very low price, it’s going to put the company in jeopardy.

On the other hand if there happens to be another bull run that is similar to the one that happened back in 2017, the company is going to be doubling its net worth and will become very rich which is a nice thing. I just hope that they mess everything up for themselves. Maybe putting half would have been a better choice? Than going all in with the company’s reserve?

It's the riskiest move but the smartest one at the same time, it's like a Va-Bank. I think they have a huge hope after a lot of predictions that company will profit without problem in near future and probably on long term and it won't have a need of using reserves, it's like: We are sure we will grow and don't need any reserves but why to just leave our reserves put on the table? Let's convert it into bitcoin and if bitcoin rises, we will have a decent profit and it will help us with upcoming profit to expand and develop even further. Yesterday's 10K USD tomorrow will turn into 100K.
That's what I think about it, otherwise to convert your asset reserves into bitcoin is a very, very risky move (especially without smart plan) and playing of Russian roulette for a company.