Bitcoin treasury firms are a fad: here’s why

Surprisingly, this second approach is one of the most important deals in encryption at the present time, and dozens of companies enter the event. According to a site called Bitcoin Crensuries, there are now 160 companies all over the world with Bitcoin to their public budget, including 90 in the United States alone. These include familiar names such as Gamestop, Block and Tesla, as well as the Trump and Technology Group, which is controlled by the president’s family.

In theory, this trade is meaningless. Certainly, the value of the company’s assets helps to inform its share price, but any change in the price of these assets must be related directly.

If Nike decides for some reason its reserve cash to buy one million inch of corn, and the price of the atom increases, the price of its share may increase to the same degree. But this will not mean that the bullish investor on the atom should buy Nike shares instead of corn – and if anything, it is possible that Nike shareholders will punish the company for using its capital for something that has nothing to do with its business.

For some reason, a different encryption. Crypto’s companies on their public budgets have seen a jump in their share price away from the value of the encryption they added.

The most famous example is the strategy, previously known as Microstrategy, a single -based cyberspace company based in Virginia. Several years ago, Michael Sailor’s charismatic founder moved away from the basic works of the strategy to focus on obtaining Bitcoin, and today he has a hideout characterized by about $ 74 billion. This axis has proven great success, until late July, the company’s market value was 112 billion dollars, although it completely dropped its electronic business.

No wonder that more CEOs shy with the same tactic. After all, if you can achieve a significant increase in your company’s share price by simply switching one currency on your public budget for another, why not? To learn the popularity of tactics, here is a screenshot of the Bitco Bitcoin’s list for companies trading to the public with most Bitcoins (Bitcoin currently is about $ 118,000):

“M -effect”

While only some of these companies have been created to invest in Bitcoin, many of which are companies that include their basic business. Mitchell Petersen, a financial professor at the University of North Western, resembles the phenomenon of the Internet inventory for 2000 when companies discovered that they could boost their share price simply by adding “Dotcom” to its name.

However, Petersen is skeptical in the current direction of companies that put their backup money in encryption. It indicates that major companies such as Apple and Microsoft invest their money as part of corporate financing operations, but they do so as part of a wider liquidity strategy. This strategy includes earning a little return by maintaining short -term assets such as money market boxes or corporate bonds, while maintaining a rainy day fund for emergency situations or opportunistic acquisitions.

Petersen added that the reporting rules do not require companies to reveal the details of “monetary equations” in their financial data, but these are always consisting of safe liquid assets. The only exception that can be remembered is the mining companies that have sometimes used their money to put gold in their public budget, and justified this step by demanding special experience in the direction of gold prices.

This same logic can be found in some companies above. Specifically, companies that participate in bitcoin mining and are well aware of the periodic patterns of the encryption industry. Some investors may look at him as worthy of this effort to pay a bonus of their stock price.

In the case of other companies circulating for the public, it is difficult to see a convincing reason to believe that their bitcoin purchases are based on any specific experience. At the same time, the volatile nature of the encryption markets means that many of these companies can find themselves in a difficult place during the inevitable decline.

This raises the issue of whether the current trend of public companies purchasing the encryption is sustainable. According to another expert in corporate financing, the answer is simple: it is not sustainable.

“It is a Mimi effect that has nothing to do with the ingenuity of investment or the strategy of good companies,” says Dove Duffy, a financial professor at Stanford University.

Duffie considers the opinion that companies should use their capital to invest in their basic competencies instead of trying to compete with hedge funds on speculative plays. He acknowledges that, in the case of Michael Celor’s strategy, the company’s arrow’s performance was very good – but he says that with more and more companies trying to copy, the market will eventually reach its senses.

“It is a heresy and will go away and one day one day you will replace it,” Dofi said.

On the new wealth Playbook Crypto Vodast, luckParking encryption experts dismantle the formation of the largest forces that make up the encryption today. Watch or listen now