MicroStrategy and Marathon, the companies with bitcoin in their reserves
2 min read
MicroStrategy was the very first major company to announce that it had chosen to hold bitcoin in its reserves.
It did so as early as August 2020, when the price of BTC was around $11,000.
MicroStrategy is a publicly-traded company, so it is obliged to publicly communicate such decisions.
At the time, it announced that it had in fact converted $250 million of reserves into bitcoin, but over the following months, it significantly increased its purchases of BTC on the market, reaching over $1 billion invested.
A few days ago, another Nasdaq-listed company, namely Marathon Patent Group (MARA), announced something similar, as it converted $150 million of reserves into bitcoin.
Why did these companies decide to get rid of such significant amounts of dollars to buy bitcoin to hold in their reserves?
First off, these are companies that have a lot of liquidity, and in particular a significant amount of dollars sitting in their current accounts as reserves.
The US central bank (the Fed) initiated a huge dollar creation campaign in 2020 to deal with the economic and financial crisis as a result of the pandemic lockdown, and this has led to a strong resurgence of inflation fears.
To be fair, such fears have been around for some time, but the Fed’s unprecedented decision has only exacerbated them.
MicroStrategy and MARA: Bitcoin as a store of value
At this point, companies that hold significant amounts of dollars sitting in their accounts as cash reserves have a legitimate concern that these reserves may be losing a lot of value.
Typically, the solution would be to get rid of the cash and invest in assets whose value may be protected from inflation, but thanks to bitcoin it is possible to do this without actually getting rid of the cash, only by storing it in another currency (BTC) instead of dollars (USD).
Although this involves a lot of risk, given the volatility of bitcoin’s value, the fact that it is possible to keep one’s reserves very liquid, simply in another currency, makes this a preferable option for companies more willing to take risks. This is probably why both MicroStrategy and Marathon have decided to invest such large amounts in BTC.
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