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Is Bitcoin Now A Must-Have Asset For Public Companies?
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The amount of bitcoin held by companies worldwide only increases, accounting for nearly 8% of the total 21 million hard cap supply.
Companies with bitcoin on their balance sheets now hold 1,660,473 BTC, almost 8% of the total bitcoin supply, according to data from Bitcoin Treasuries. MicroStrategy leads the way with 108,991 bitcoin being held, around half percent of the total supply, representing a whopping 75% of the software intelligence company’s total market capitalization.
Tesla sits in second place, still holding the 43,200 bitcoin it acquired at the beginning of 2021. The electric car maker is followed by Square, Marathon Digital Holdings, and Coinbase. The fintech payment solutions firm holds a little over eight thousand BTC, whereas the bitcoin miner MARA has allocated 5,425 bitcoin to its balance sheet. Coinbase, the largest U.S. exchange, closes up the top five with a shy 4,487 bitcoin bag.
Michael Saylor’s MicroStrategy is the publicly traded company with the highest bitcoin allocation, both in absolute terms and relative to its market cap. The software intelligence firm, which yesterday purchased an additional 3,907 bitcoin for $177 million in cash, has been leading the way in the corporate world with the simplest yet most effective pair of strategies – DCA and HODL. The firm’s current bitcoin bag of 108,991 BTC, which cost nearly $3 billion at the time of purchase, is now worth well over $5 billion and represents 75% of its total market capitalization, currently at $7.12 billion. MicroStrategy’s bitcoin holdings have increased by nearly 180% in dollar terms and represent approximately 0.52% of the total supply of 21 million coins.
Publicly traded companies, private firms, governments, and ETF-like offerings combined currently hold 1,660,473 bitcoin, per Bitcoin Treasuries data, approximately 7.91% of the total supply. This percentage figure does not account for lost or inaccessible bitcoin, and thus the percentage of actually usable coins is likely more significant.
Given that most of the companies that added bitcoin to their balance sheet did so in 2020 or 2021, the corporate bitcoin accumulation race has just started. As more firms realize what Bitcoin actually is and its unique possibilities in the upcoming years, the race is set to heat up significantly, further drying up supply in the market. And while they don’t realize that, the Bitcoin plebs can enjoy stacking sats consistently at lower prices.
On Feb. 19, Bitcoin’s (BTC) market capitalization surpassed $1 trillion for the first time. While this was an exciting moment for investors, it also concerned investors that the asset is in a bubble.
Although a handful of listed companies ever achieved this feat, unlike gold, silver, and Bitcoin, stocks potentially generate earnings, which in turn can be used for buybacks, dividends, or developing additional sources of revenue.
On the other hand, as Bitcoin adoption increases, those same companies will likely be forced to move some of their cash positions to non-inflatable assets, ensuring demand for gold, silver and Bitcoin.
In fact, data shows that diversification between Bitcoin and traditional assets provides better risk-adjusted performance for investors, which is getting increasingly difficult for companies to ignore.
Bitcoin continuing to push above the trillion-dollar mark is also easy to overlook until one compares it to the market cap of other significant global assets. To date, less than ten tradable assets have achieved this feat.
As depicted above, the world’s 44 most profitable companies combined generate more than $1 trillion in earnings per year. One must keep in mind that stockholders might as well reinvest their dividends into equities, but some of it might end up in Bitcoin.
Corporate earnings are not the only flows that may trickle into scarce digital assets. Some analysts estimate that part of the real estate investment, especially those yielding less than inflation, will eventually migrate to riskier assets, including Bitcoin.
On the other hand, current holders of lucrative real estate assets might be willing to diversify. Considering the relatively scarce assets available, stocks, commodities, and Bitcoin are likely the beneficiaries of some of this inflow.
According to the above chart, the global agricultural real estate is valued at $27 trillion. The U.S. Department of Agriculture estimates a return on farm equity at 4.2% for 2020. Albeit very raw data, considering there are multiple uses for agricultural real estate, it is quite feasible that the sector generates over $1 trillion per year.
As recently reported by Cointelegraph, there are 51.9 million individuals worldwide with $1 million or higher net worth, excluding debt. Despite representing only 1% of the adult population, they collectively hold $173.3 trillion. Even if those are unwilling to sell assets in exchange for BTC, an insignificant 0.6% annual return is enough to create $1 trillion.
These numbers confirm how a $1 trillion market capitalization for Bitcoin should not be immediately considered a bubble.
Maybe those Bitcoin maximalists are correct, and global assets are heavily inflated due to a lack of scarce and secure options to store wealth. In this case, which doesn’t seem obvious, a global-scale asset deflation would certainly limit BTC upside potential. Unless they somehow think a cryptocurrency can extrapolate global wealth, which seems odd.
Back to a more realistic worldview, the above comparison with equities, agricultural real estate, and global wealth also confirms how insignificant Ether’s (ETH) current $244 billion capitalization is, let alone the remaining $610 billion in altcoins.
Assuming none of the corporate profits or real estate yield will be allocated to cryptocurrencies seems unlikely. Meanwhile, a mere $100 billion annual inflow for Bitcoin is five times higher than the $20.3 billion newly-minted coins per year at the current $59,500 price.
For example, $100 billion flowing into Bitcoin would only be 5% of the $1 trillion yearly corporate dividends and 5% from global wealth or agricultural real estate returns. Even though the impact on gold’s $11 trillion market capitalization would be negligent, such allocations would certainly play a vital role in Bitcoin’s path to becoming a multi-trillion dollar asset.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Own 1 #bitcoin regardless of price and just wait.
The printing press is just firing up. Dollar cash reserves will soon be #btc for many companies. https://t.co/4EUCUE97bn
We’ve compiled our list of the most influential projects and companies in what was a historically productive year for Bitcoin.
The post The 21 Most Influential Bitcoin Projects And Companies Of 2020 appeared first on Bitcoin Magazine.