Tech giant Microsoft has made the decision not to allow Bitcoin on its balance sheets. In a motion voted against by shareholders, it is believed it could have added to its market cap. We discuss the decision and what it means for Bitcoin in the article below.
Despite a wave of enthusiasm across the globe, Microsoft has decided against adding Bitcoin to its balance sheets. Many believe this could be a huge mistake for the company, as Bitcoin starts to be universally accepted across the board and in other TradFi sectors.
Microsoft Shareholders Decide Against Bitcoin
The decision was made on December 10th. The proposal was that Bitcoin would be added to the company’s balance sheets. Microsoft’s board of directors advised shareholders to vote no, meaning the result was hardly a shock. However, it could have long-standing ramifications for the company.
The proposal was made by a think tank in Washington, DC, named The National Center for Public Policy Research. Amazon goes to a similar vote in April, and this has been in part down to their campaigning. Shareholders will have to decide if the company will adopt Bitcoin as a treasury asset.
Their suggestion was that by adding $100 billion in Bitcoin per year to the assets, Microsoft could add trillions to its market cap. This is an extremely large amount and would make it the largest corporate holder of Bitcoin in the world. To put it in perspective, the largest Bitcoin ETF holds $54 billion. This move has been made on the back of a wave of renewed optimism for cryptocurrencies. In part, this is due to global events and Bitcoin smashing a new all-time price record.
Bitcoin Reaches All-Time High
The middle of December saw the Bitcoin price hit a new high of $107,000. A large amount of this has come from institutional buyers and Bitcoin ETF inflows. In the previous week, $2Bn was recorded in inflows. This has happened in seven of the last nine weeks. There are also predictions it will reach $200,000 by the end of the year, a huge jump in a short amount of time.
Estimates are that 683,000 tokens have been bought so far this year, mainly via spot ETFs. Of that total, 245,000 have happened since early November. This huge flow is expected to carry on into 2025. As the price of Bitcoin rose steadily, so did the value of many other cryptocurrencies.
Bitcoin ETFs
An ETF is an exchange-traded fund. It allows investors to buy into a company that owns a basket of commodities, like minerals or oil. In this case, the commodity is Bitcoin. Thus, the investor does not own the coin, but rather a share in the company that does. They can be bought into via traditional exchanges, meaning they provide Bitcoin assets to those from a more traditional finance background. They also help to hedge against some of the volatility associated with cryptocurrency.
The idea for Bitcoin ETFs came from its upward trajectory. As it gained value, it was priced out of the market of average investors. Thus, a Bitcoin ETF was conceptualized in 2013. The first Bitcoin-linked ETF was launched in 2021. However, they used futures contracts, and actual spot Bitcoin ETFs were not approved until January 10th, 2024, after a court order in 2023 asked the Securities and Exchanges Commission to look at them again.
While they do have several advantages, there are some downsides to Bitcoin ETFs as opposed to holding the actual currency itself. The first is that investors may encounter tracking errors, which means the value of the ETF does not always match the value of Bitcoin and can take time to catch up.
Despite the approval of Bitcoin ETFs, regulation is still evolving on the use of cryptocurrencies, and it remains volatile. Changes to regulations could and probably will still occur. This makes investing in Bitcoin ETFs still a risky business. Finally, as crypto is a digital asset, it is susceptible to the risks of all digital products, such as online fraud.
Currently, there are few major tech companies that have Bitcoin on their balance sheets. The ones that do tend to be crypto-related, showing the currency still has to make the leap to traditional financial institutions. The only exception to this is Tesla. This may not always be the case. There have been talks about large companies in the biotech sphere changing tact and allowing Bitcoin onto the books.
This type of Bitcoin optimism can only help push the price up even further. It has confidence from individual investors and confidence from Wall Street. It is likely that it will also soon have the backing of the US government. While this shunning by a major tech company may seem a blow, it will only be a matter of time before someone else takes the opportunity. Now could be a great time to buy and hold.
