Bitcoin is over a decade old and has outperformed all major assets in the world. Despite its outstanding performance, renowned individuals and financial institutions have often labeled it with all sorts of distrustful appellations in an attempt to diminish public interest. But the pioneer cryptocurrency is still going strong.

Many businesses and organizations are gradually realizing that bitcoin is powered by a revolutionary technology with solid fundamentals and therefore cannot be ignored. This explains why corporations have been buying up large sums of bitcoin. 

So the question is, is bitcoin gradually making its way as a global reserve asset? Before we answer that question, let’s look at what a reserve asset actually is.

What is a reserve asset?

Reserve assets generally exist in different categories: currencies, commodities, or basically any form of capital, etc. These assets need to be readily available, easy to transfer, and can be used to settle international payments and other kinds of transactions. Again, a reserve asset should be reliable enough in a way that it can be used to restore confidence in financial markets.

The US dollar has been the dominant reserve asset across the world for a long time. That explains why individuals and businesses would hold a substantial amount of dollars.

Which corporations have bought bitcoin as a reserve asset?

1.. Microstrategy

On August 11, 2020, Microstrategy declared that it bought 21,454 BTC, making it the first public company to convert a significant portion of its cash reserves into Bitcoin. A month later, the company went ahead and bought an additional amount of 16796 BTC, making it a total of 38,250 BTC (equivalent to $425million including expenses).

Surprisingly, Microstrategy’s CEO, Michael Saylor was among one of those who rubbished bitcoin years ago. In 2013, Saylor declared on Twitter that the days of bitcoin are numbered. Adding that bitcoin was going to go down the same road as any other online scam. When asked what prompted him to make such a naive statement, Saylor said he forgot ever saying anything of that sought.

With regards to Microstrategy’s decision of purchasing bitcoins, the company outlined the following reasons:

• After months of careful consideration of how to mitigate risk for their corporate treasury program, they came to the conclusion that it would be safer to convert part of their cash reserve to bitcoin. They see bitcoin as a safer store of value than the existing assets in the market.
• As the world’s most adopted cryptocurrency, Microstrategy believes that bitcoin is a dependable and attractive investment asset with greater long term potential to appreciate when compared to holding cash. Noting that bitcoin has emerged as a remarkable addition to the global financial sector with very useful features to individuals and institutions.

2.. Tahini.

Tahini is a middle eastern restaurant chain based in Canada and was motivated by Microstrategy’s acquisition of bitcoins to take a similar move. The company, however, did not convert only a part of its cash reserve like Microstrategy but decided to go all-in by swapping its entire cash reserve into bitcoin.

According to Tahini’s founder, Hamam, he took interest in bitcoin after hearing Warren Buffet refer to it as rat poison. Nonetheless, he went ahead to learn more about the fundamentals of bitcoin and concluded that investing in the pioneer crypto is much safer than holding cash. 

Hamam went further to state that he considers the current traditional financial system to be a “game of musical chairs” as it lacks transparency and can be easily manipulated

3.. Snappa.

Snappa is a Canadian-based graphic software company and was the third to follow in the footsteps of Microstrategy and Tahini. The company’s co-founder, Christopher Grimmer revealed on August 24th, 2020 that they have converted 40% of their cash reserves into Bitcoin. 

When asked what triggered the company to undertake such a move, Grimmer said most of the reasoning behind the company’s decision revolves around the global economic uncertainty, which is caused mainly by the Covid-19. Some of the reasons he outlined for buying bitcoin were as follows:

• The company has been keenly observing how the buying power of the US and Canadian dollars is declining steadily after adjusting for inflation. For that reason, there's no need to risk depending on Fiat money when there’s a superior technology like Bitcoin.
• The company also considered Bitcoin’s transparency to be a major advantage because it's easier to measure bitcoin’s stock to flow model with 100% certainty at any time, (whether it’s in the past or the future). According to Grimmer, such transparency isn’t possible with traditional assets like fiat, commodities, etc which are susceptible to manipulation.
• Grimmer rounded up by saying that the company’s research team strongly believes that massive amounts of quantitative easing without a corresponding increase in production would usually end up in currency debasement. 

From every indication, all the corporations that have invested in bitcoin so far now believe in its fundamentals. As the purchasing power of bitcoin rises, it could serve as major leverage for public corporation's future capital deployment regarding entry into new markets, launching new products, and the acquisition of other companies.

Most fiat currencies tend to lose a small percentage of their buying power over time due to their inflationary nature. And while this is usually not noticeable by the average market participant, those who are keen to analyze market prices are usually quick to notice this phenomenon, which prompts them to immediately adopt a safer means of preserving their wealth. 

Closing thoughts.

Microstrategy was the first public corporation to start converting some of its cash reserves into bitcoin, which immediately prompted other public companies to rethink their stance on the pioneer cryptocurrency. As more of these corporations continue to swap their cash reserves to bitcoin, it indicates bitcoin is emerging as a strong contender among existing reserve assets.

However, for bitcoin to replace a currency like the US dollar, which is the dominant reserve asset in the world, developers of the network would need to address bitcoin’s scalability to ensure mass adoption. This would, in turn, spur investor interest and help to drive more capital inflow into the bitcoin ecosystem, resulting in a stabilized and less volatile market.

A video presentation of this article is available on YouTube.