BTC-3.27%
Crypto
Corporations Purchased $8 Billion Worth of BTC in Q1 2021
Retail investors have flocked to Bitcoin in our latest bull run—and they aren't alone.
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It is no surprise that institutional money is involved in crypto. The landscape is very much different from what it used to be five or six years ago, back when Bitcoin was worth around $450. Corporations have been paying attention to the industry, watching it grow and mature. However, it might be shocking to find out just how involved they really are.
In an interview with Blockworks, CEO of institutional trading firm Genesis, and former Citigroup associate, Michael Moro, explained how corporations had bought $8 billion of Bitcoin using their service in the first quarter of 2021. This made up 25% of Bitcoin purchases on Genesis within that time. Moro gave two reasons why companies had chosen to do so.
Corporations Follow Tesla, MicroStrategy and Square into BTC
According to Moro, one of the big reasons corporations have just recently increased their BTC holdings is because they want to follow in the footsteps of companies like Tesla, MicroStrategy, and Square. All of which are known for buying up huge quantities of BTC within this year. Corporations saw the financial gains these companies had, as well as the positive media coverage, and wanted in. Moro referred to these as the “buy and hold” corporations– in other words they are not interested in turning a quick profit, but rather watching their assets appreciate over a period of time.
Clearly, any company doing this believes that Bitcoin is nowhere near its lifetime price ceiling. Some might also believe in the technology, such as Tesla, who are now accepting BTC as a payment option. These are companies who are happy to have BTC show up on their balance sheets as it helps to diversify their portfolio.
Some Corporations are “Trading Their Treasury”
Along with those who are “buying and holding”, there’s another group of corporate figures who have entered the Bitcoin market early this year. Michael Moro referred to these as “guys who are trying to trade their treasury”. They are people who have a separate treasury department who are attempting to actively manage a company’s Bitcoin portfolio by trading around different price points. They would be the equivalent of retail day-traders, only they are working with significantly larger sums of money.
Some are also engaged in trading options, hedging exposure, and experimenting with derivatives, as they are “getting creative playing with volatility”. Essentially, this is the opposite of holding.
The fact that corporate treasuries are involved in Bitcoin is especially fascinating as one of the primary roles of a treasury is to manage and assess financial risk within a company. This could mean that companies are faithful that Bitcoin is still being undervalued, which is fantastic news for the crypto industry as a whole, as the question of Bitcoin’s worth is one that looms on most enthusiasts’ minds. This fits with the current activity regarding macro conditions, which seem to suggest Bitcoin could reach $100k this year.
Where Will Corporate BTC Involvement Lead the Industry?
This is a tough question to answer as different people have different ideas of what crypto and Bitcoin should be about. Many people consider Bitcoin to be a financial tool designed for the masses, and worry that corporations making use of it goes against the ethos of the industry, possibly even harming decentralization when it comes to mining practices.
On the other hand, corporations are instrumental in increasing adoption; for many people, corporate involvement legitimizes the crypto industry, as it shows that the upper levels of the economic world are paying attention and giving their approval. Of course, corporate involvement has thus far appeared to play a major role in Bitcoin’s price. It may take some years before we can be certain just how significant corporations are on both Bitcoin’s price, and the way it functions.
Q1 of 2021 has been extremely positive for Bitcoin, what do you think Q2 will look like? What are your opinions on corporations jumping into Bitcoin? Let us know your thoughts in the comments below.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
