Bitcoin (CRYPTO: BTC) is increasingly an asset that major businesses are looking to buy and hold. That doesn’t necessarily mean that average investors should copy their move — after all, it doesn’t make sense to buy most of the other assets that companies need to operate.
Still, it’s worth diving a bit deeper into this trend to see if it’s worth following by buying more of the coin, or if it’s a better idea to stick to your prior plans.
According to Elliot Chun, a partner at Architect Partners, a cryptocurrency advisory group, by 2030, roughly 25% of the companies in the S&P 500 (SNPINDEX: ^GSPC) will hold Bitcoin as a long-term asset on their balance sheet. There are a handful of reasons he expects that to happen, starting with the idea that the coin can behave as a hedge against inflation in fiat currencies. It would also be a convenient way for corporate officers to diversify their treasuries, and thereby potentially reduce risk. And, if the coin continues to gain in value over time, it would prevent those officers from getting dinged for not giving their organization some exposure to the upside.
Today, Chun says there are just 90 publicly traded companies holding Bitcoin as a treasury asset, and those are mainly not part of the S&P 500. If a total of 125 companies (25%) in that set held the coin, it would mean a large cohort of the world’s largest players would be invested in it. The way they’d become invested in it is by buying it, and they’re (largely by definition) among the most moneyed businesses that exist. Therefore, if Chen’s prediction plays out, and it might, investors could see the benefits of a large amount of new demand for Bitcoin over the next few years.
The question is: Does that make the coin worth buying? In a word, yes.
The adoption of Bitcoin by corporate actors and financial institutions is accelerating, and, as mentioned, they tend to have more money to invest than anyone else. That means if they actually decide to hold Bitcoin on their balance sheet, they will be buying a vast quantity as a group. When more money chases the same amount of coins available to buy, the price increases.
The piece of the puzzle that’s a bit more complex is whether the new set of buyers can be expected to retain their coins for long enough to make the trend itself something that’s worth investing based off of. After all, if businesses treat Bitcoin as just another form of cash, their purchases of it will quickly be matched by sales of the asset when they want to exchange it for goods or services. Major liquidations to fund big capital expenditures might even reduce its price. But that isn’t very likely in this case.
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