A few weeks after the presidential election, Joe Davey, CEO of marketing firm Banzai, sent an email to the company's board of directors. He said he wants Banzai to start buying Bitcoin.
Entering the freewheeling world of cryptocurrencies was a seemingly strange move for Banzai, a Nasdaq-listed company known for its corporate webinar products. However, the election of Donald J. Trump, who supported Bitcoin during his election campaign, revitalized the virtual currency industry and caused prices to soar. Davie claimed that the investment would protect the company's finances if the U.S. dollar depreciated due to inflation, a claim that is common but widely disputed among crypto enthusiasts. .
On November 26th, Banzai announced that it would allocate up to 10% of the funds held in its corporate treasury to Bitcoin. (The company reported $4.3 million in cash in its most recent quarterly report.) “It ended up being a pretty simple conversation,” Davie said in an interview. “It makes sense to own this.”
As the price of Bitcoin soars, a small but growing number of companies with no connection to cryptocurrencies, such as Banzai, begin to accumulate stockpiles, tying their financial performance at least in part to volatile digital currency markets. are.
This investment is a significant shift from the traditional corporate finance department's cautious approach, which focuses on preserving cash rather than taking risks for higher returns. Typical reserve assets include stable and predictable securities such as U.S. Treasury securities and money market funds.
Naresh Agarwal, associate director of the Corporate Finance Association, an industry group, said: “Despite knowing that digital assets are highly volatile, we are not sure how risk-averse boards are choosing to invest in them.'' I don't understand how this can be justified.” “It's a very uncertain market.”
Companies buying cryptocurrencies are following the example set by MicroStrategy, a business analytics software company that started accumulating Bitcoin in 2020. Since then, the company has built a Bitcoin stash that has grown to more than $40 billion, dwarfing the value of its software business. Michael Saylor, the company's executive chairman and former Bitcoin skeptic, has become a prominent evangelist for the digital currency.
This strategy has yielded surprising returns for shareholders. MicroStrategy's stock price has increased more than 2,000% over the past four years. It currently acts as an agent for Bitcoin prices. Bitcoin prices were worth about $12,000 per coin when the company started buying them, and have soared to a milestone of $100,000 last month.
By some estimates, more than 70 publicly traded companies are currently investing in Bitcoin, including some that started buying Bitcoin when Mr. Trump promoted the cryptocurrency last year. Many of these companies work directly in the cryptocurrency industry, like Coinbase, a prominent US exchange. But the group is expanding. Conservative-leaning social media company Rumble announced in November that it planned to invest up to $20 million in Bitcoin. Other companies that have bought the assets include a medical technology supplier, a cannabis cultivation company, and Elon Musk's electric car maker Tesla.
“We are just believers,” said Bruce Rogers, CEO of LM Funding. The company, which was founded as a real estate debt collection business, transitioned into Bitcoin mining a few years ago and held more than $14 million in cryptocurrencies as of mid-December. . “I'll save up as many coins as I can.”
The increasing adoption of Bitcoin by businesses shows that the cryptocurrency, once dismissed as a fad, appears to be gaining mainstream legitimacy. The purchase also means more investors are exposed to the vagaries of cryptocurrencies, which are prone to sudden spikes and crashes, whether they know it or not. In December, MicroStrategy joined the Nasdaq 100 Index, the foundation for college savings plans and retirement accounts.
Lee Reiners, a former Federal Reserve official and professor at Duke University Law School, said: “Cryptocurrency and crypto volatility will be in more people's portfolios, whether they are intentionally investing in it or not.'' It will happen,” he said.
Bitcoin was not created as an investment tool for businesses. It was designed to provide the basis for a rebellious financial system that would allow people to exchange funds without relying on banks or other intermediaries. Early proponents also envisioned it as a long-term store of value, with supply programmed so that the government could not print any more.
Bitcoin's price has fluctuated wildly over the years, plunging in late 2022 after a series of bankruptcies disrupted the industry, before surging last year after Trump promised deregulation.
As Bitcoin begins to soar in 2024, Semler Scientific, a California company that manufactures medical devices and develops software for disease detection, decides on a new way to use its reserves. The company had considered using the funds to acquire other businesses or buy back stock, a general use of corporate cash.
Ultimately, the company decided to invest everything in Bitcoin starting in May, except for the cash needed for day-to-day operations. The company’s chairman, Eric Semler, said in an interview that he spoke with managers of large funds who were restricted from buying cryptocurrencies and were looking for other ways to earn their high returns.
“There aren’t many agents for Bitcoin in the stock market,” Semler said. “There are reasons to own differentiated stocks like ours and MicroStrategy.” This is due to both the rising value of the company's Bitcoin holdings and the increased demand for its stock as a cryptocurrency alternative. This means that you may benefit from The company's stock price has risen more than 80% in the past six months.
Shortly after the election, Rumble CEO Chris Pavlovsky mused online about adding Bitcoin to his company's balance sheet. MicroStrategy's Thaler responded, “We'd be happy to talk to you about the why and the how.”
The two sides eventually spoke over the phone, and on November 25, Rumble announced that it would use up to $20 million of its surplus funds to purchase Bitcoin due to the “election of a crypto-friendly US presidential administration.” Rumble's stock price has risen about 70% in the last month, thanks in part to a major investment in the company by cryptocurrency firm Tether.
Rumble representatives did not respond to requests for comment.
Not everyone reacted with enthusiasm to corporate Bitcoin purchases. Banzai Chief Executive Davy said the company had responded to concerns voiced by shareholders after revealing its plans. Banzai's stock price had fallen so low that in the months before the announcement, it had restructured its debt and completed a 1-for-50 reverse stock split to maintain its listing.
“People were divided” about the Bitcoin plan, he said. “I've gotten a few phone calls from people saying, 'What the hell is going on there? What are you thinking?'
And despite the market's rapid growth, some companies are moving away from cryptocurrencies, showing that Bitcoin's appeal has its limits. Last year, Reddit sold most of its cryptocurrency holdings, months after revealing that Bitcoin was part of the Treasury.
In December, the Free Enterprise Project, a conservative advocacy group, introduced a proposal at Microsoft's shareholder meeting asking the company to consider putting Bitcoin on its balance sheet. Saylor praised the effort on social media and in a presentation to shareholders. This proposal was opposed by Microsoft management, but was rejected by only about 0.5% of shareholders who supported it.
“You can see that mainstream investors are still a little bit blind to this opportunity,” Saylor said in an interview. “It will be brought up on many other topics as well.”
