Tesla’s $1.5B Bitcoin purchase leaves treasury experts scratching heads

Some treasury experts are finding it difficult to understand why Tesla recently bought $1.5 billion worth of Bitcoin — the best performing asset of the last decade.

Corporate treasury commentators are criticizing Tesla’s $1.5 billion Bitcoin splurge, echoing the well-worn rhetoric of BTC’s volatility.

Speaking to Financial Times, Jerry Klein, managing director at New York-based investment management firm Treasury Partners said that there was no use case for plowing corporate cash into Bitcoin.

Another critic quoted by FT, Campbell Harvey of Duke University in Durham North Carolina, called Tesla’s Bitcoin acquisition “unusual” and “risky” adding that it will not serve as a hedge against market uncertainties.

Critics of Tesla’s Bitcoin purchase say the move potentially puts shareholders at risk given the volatility of Bitcoin. Some point to historical crashes like the 2018 bear market and the 50% dump that occurred on Black Thursday in March 2020.

However, these arguments seem to leave out Bitcoin’s established “no look-back price trajectory” wherein each crash does not revert to a price level before the previous all-time high.

Also, Bitcoin’s parabolic bounce from its lows does not appear in these anti-BTC arguments. For instance, the Black Thursday crash of 2020 was followed by an almost eight-fold increase by the end of the year.

Since August 2020, business intelligence firm MicroStrategy has been acquiring Bitcoin and has spent about $1.1 billion in buying 71,079BTC. At the current price, the company’s Bitcoin stash is valued at almost $3.3 billion — a 200% gain on its investments.

Bitcoin was the best performing asset of the last decade, gaining almost 9,000,000% and far outstripping all other asset classes. Indeed, as of the time of writing, only Bitcoin bought above the $47,000 price level is currently at a loss.

Speaking to CNBC, MicroStrategy CEO and Bitcoin bull Michael Saylor countered the volatility rhetoric, saying holding cash reserves amounted to a stable loss of 75% of their shareholder value over the last decade whereas investing in BTC offered a volatile appreciation that doubled every six months. According to Saylor:

“Companies that are converting their dollars into Bitcoin are taking a non-performing asset [cash] and they are turning it into the best performing asset. Bitcoin has been appreciating at something like 230% year after year for a decade […] I’d rather have a volatile appreciation at 230% a year than a stable depreciation at a rate of 15 to 20% a year.”

The billions of dollars in economic stimulus packages by major economies are also expected to exert further downward pressure on fiat currencies.

Apart from the backlash over Tesla’s Bitcoin investment, these corporate treasury critics also said that other companies will not be lining up to follow Tesla’s lead.

However, Tesla is only the latest in an expanding cast of public companies holding Bitcoin on their balance sheets. As previously reported by Cointelegraph, 1,400 firms signed up for MicroStrategy’s Bitcoin-buying bootcamp.

Indeed, Apple bull RBC Capital Markets recently clamored for the iPhone maker to follow Tesla’s example in buying Bitcoin. RBC even called on Apple to go a step further by creating a Bitcoin exchange.

The largest cryptocurrency by market capitalization is currently up almost 60% year-to-date.

[…]
Learn more