Bitcoin as Company Cash Reserve

[GreatArkansas]

I found this on twitter 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.

[Kemarit]

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?

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.

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.

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

MicroStrategy Adopts Bitcoin as 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.

[Darker45]

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?

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.

[SquirrelJulietGarden]

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.

[mk4]

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?

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.

[avikz]

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?

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!

[cryptomaniac_xxx]

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?

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.

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

[Upgrade00]

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?

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

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.

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.

[joniboini]

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.

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.

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

[gentlemand]

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.

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.

[kryptqnick]

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?

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.

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.

[erikoy]

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.

[Wexnident]

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.

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.

[carter34]

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.

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.

[zasad@]

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.

[tomahawk9]

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"

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

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 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 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"

[serjent05]

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 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.  

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.

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.

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.

[yazher]

I found this on twitter 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.

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.

[teosanru]

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.

[Debonaire217]

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.

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.