MicroStrategy has adopted Bitcoin (BTC) as its reserve currency, and surprised commentators by buying more than 21,000 BTCs on August 11.
The world’s largest publicly traded business intelligence company has traded fiat money for Bitcoin as its reserve cash asset, but the reasons behind this suggest that more large companies will have no choice but to do the same.
Why did MicroStrategy choose Bitcoin, and why will others do the same?
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Digital gold
In a press release issued on August 11, CEO Michael Saylor went further than most in calling Bitcoin “digital gold.
With no “ifs” or “buts,” Saylor unreservedly placed the world’s largest kryptonite on both fiat money and other traditional safe haven assets like gold.
“Bitcoin is digital gold, harder, stronger, faster and smarter than any money that has gone before it,” he said.
This view closely mimics some of Bitcoin’s leading advocates, especially Saifedean Ammous, who in his book “The Bitcoin Standard” repeatedly explains that the so-called “digital shortage” puts Bitcoin in a different position from any other form of money that has ever existed.
Like Ammous, Saylor also believes that the structure of Bitcoin itself will ensure that its value only increases over time.
He added that:
“We expect its value to increase with advances in technology, expanding adoption, and the network effect that has driven the rise of so many ‘category killers’ (retailers, chain stores, best-selling products, etc.) in the modern era.”
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Doubts about the future of the Fiat
The Bitcoiners were particularly enthusiastic about MicroStrategy because it blatantly replaced fiat currency with cryptomone.
Their purchase of 21,454 BTCs for an aggregate price of $250 million at the end of last month may not only be symbolic (given the total of 21 million BTCs) but also means that the company controls 0.1% of the total Bitcoin supply, something that competitors will find increasingly expensive to replicate.
“MicroStrategy bought 0.1% of the Bitcoin supply. Very few companies will be able to copy this strategy,” tweeted “What Bitcoin Did” podcast host Peter McCormack in response.
For Saylor, multiple red flags convinced him to turn to Bitcoin.
These were “among other things, the economic and public health crisis precipitated by COVID-19, the unprecedented government financial stimulus measures, including quantitative easing adopted around the world, and global political and economic uncertainty,” he said.
Going on, he argued that what began as a result of COVID-19 will only cause more problems later:
“We believe that, taken together, these and other factors can have a significant depreciating effect on the long-term real value of trust currencies and many other types of conventional assets, including many of the assets traditionally held as part of corporate treasury operations.
Cointelegraph has often reported on the damaging effects of practices such as quantitative easing, and voices urging consumers to abandon the fiat system en masse to protect their long-term prosperity.
For Jason Yanowitz, founder of the financial media network BlockWorks Group, Saylor’s reservations will eventually find their way into the entire business sphere.
“The CEO of MicroStrategy said they bought Bitcoin to avoid inflation,” he concluded.
“Eventually, all public companies will do the same.
This week, Cointelegraph noted that the value of Bitcoin seemed to be following the behavior of inflated central bank balance sheets in 2020.
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