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MicroStrategy, which began making heavy Bitcoin purchases, now has a BTC balance larger than many S&P 500 firms’ cash reserves.
MicroStrategy Inc (NASDAQ: MSTR) currently has Bitcoin holdings worth more than 80% of S&P 500 companies’ cash treasuries. The company’s total Bitcoin portfolio now stands at 114,042 BTC, worth $5.3 billion, after its recent purchase of 5,050 BTC for nearly $250 million. This gives the Nasdaq-listed company a bigger BTC value than the cash coffers of 80% of non-financial S&P 500 organizations.
Microstrategy and Non-financial S&P 500 Companies Chose Different Hedge Strategies Against COVID
MicroStrategy first officially prioritized buying Bitcoin last year as a way of protecting its interests against potential dollar devaluation. As of the end of 2020, the company had surpassed the US government as the fifth-largest individual holder of BTC. Soon after MicroStrategy’s move, companies like Tesla Inc (NASDAQ: TSLA) and Square Inc (NASDAQ: SQ) also began to replace portions of their cash reserves with Bitcoin.
In the second quarter, non-financial companies on the S&P 500 increased the cash value in their treasuries by 12% YoY. This was a result of the rising uncertainty caused by the pandemic. Companies such as General Electric Company (NYSE: GE), Ford Motor Company (NYSE: F), and Boeing Co (NYSE: BA) began to spend out of their saved cash reserves in the ongoing Q3. By July, there was a $30-billion-dollar reduction in dollar reserves for non-financial S&P 500 companies. This also represents a 2% drawdown from a year ago.
However, not all popular non-financial companies were spending out of their cash reserves. Amazon.com Inc (NASDAQ: AMZN) and Alphabet Inc (Google’s parent company) were still stockpiling cash but did not seem to change their overall dollar spending. The total cash reserves of American corporations dropped from $1.55 trillion to $1.52 trillion. This was due to several acquisitions of new businesses, share buybacks, and dividend increase.
The decline in the need for companies to hold onto cash suggests a growing belief that COVID is almost over. Publicly traded firms are now becoming more comfortable spending their money without fear that they can recoup.
MicroStrategy (NASDAQ: MSTR) shares are up almost 359% in the past 12 months. This seems to directly correlate with BTC’s value which is up 314% in the same period. Some analysts believe owning MSTR shares provides investors with leverage to the benchmark crypto market through traditional infrastructure. For instance, analyst Kingdom Capital said about MSTR:
“The [clearest] reason I can see is it is one of the few companies with a large market capitalization in the BTC space.”
Amplify Transformational Data Sharing (ATDS) ETF, which currently handles $1.2 billion worth of investments, gained 6.5% MSTR exposure. ATDS got this after snubbing Grayscale Bitcoin Trust because the latter has restrictions on receiving capital from certain funds and ETFs. Also, the Siren Nasdaq NexGen Economy ETF has exposure to MSTR, but just like ATDS, holds no GBTC.
Missouri-based investment firm, Kingdom Capital, says that MSTR and Bitcoin prices may continue to move bound to each other, unless more crypto stocks become available.