As a seasoned investor with a keen eye for trends and a knack for spotting potential, I find the proposed adoption of Bitcoin by tech giants like Amazon and Microsoft intriguing. Having navigated through the dot-com bubble and witnessed the rise of blockchain technology, I can’t help but see the parallels between the two eras.
Large tech corporations such as Amazon hold substantial financial reserves, specifically around $87 billion last year. However, the value of this money decreases over time due to changes in the currency’s worth.
In simpler terms, the research organization called The National Center for Public Policy Research, located in Washington DC, has suggested that prominent technology companies should consider adopting Bitcoin (BTC). Yet, it’s uncertain if these firms would experience substantial advantages by doing so.
The NCPPR advocates a particular approach for both Microsoft and Amazon, suggesting they integrate Bitcoin into their financial reserves. The rationale behind this recommendation is that doing so would safeguard their liquid funds and the worth of their shareholders against potential inflation.
The proposal argues that the Consumer Price Index (CPI), which pegs inflation at 4.95%, is a “remarkably poor measure” of true currency debasement and suggests that real inflation may be twice as high.
As a researcher, I find myself pondering over the substantial cash reserves held by tech giants like Microsoft ($78 billion) and Amazon ($87 billion). In this context, I’m intrigued by the idea of Bitcoin as a potential hedge. However, I can’t help but wonder if the risks associated with it exceed its benefits.
Although Michael Saylor, an advocate for ‘orange pill’ ideas and the chairman of MicroStrategy’s business intelligence firm, backed the Bitcoin reserve proposition, Microsoft shareholders largely rejected it in a landslide vote, suggesting that they view the proposed asset’s volatility as a potential drawback.
Amazon is next to decide. Will this vote be different?
Amazon isn’t a conservative tech company like Microsoft
As a researcher delving into the realm of fintech, I’ve observed striking resemblances between tech titans like Microsoft and Amazon. However, upon closer examination, their operational approaches distinctly diverge from one another. In the words of Nick Cowan, CEO of Valereum, these two giants may share a common identity as tech leaders, but their styles are remarkably dissimilar.
“Amazon’s shareholder vote could indeed differ from Microsoft’s due to the company’s reputation for innovation and risk tolerance.”
Historically, Microsoft tends to be cautious with both its financial decisions and strategic moves. On the other hand, Amazon is known for embracing new technologies that are just emerging and making innovative investments.
According to Cowan, while Microsoft may not be as open to innovation, Amazon’s eagerness to innovate could mirror Bitcoin’s capacity for diversifying investments.
At its annual shareholders gathering slated for May 2025, Amazon could potentially make a decision regarding the NCPPR proposition. This suggestion aims at Amazon increasing their usual 1-2% investment in high-risk assets within their business portfolios beyond that amount.
“At minimum, Amazon should evaluate the benefits of holding some, even just 5%, of its assets in Bitcoin.”
Cowan finds it extremely improbable for Amazon to invest 5% in Bitcoin. In his opinion, while Bitcoin provides diversification, its high volatility and lack of stable returns make it difficult to justify such a large investment for a company as massive as Amazon. Instead, he suggests a smaller, experimental investment similar to Tesla’s approach might gain more support from the shareholders.
In 2021, Tesla’s acquisition of Bitcoin brought a substantial return on investment for the company. Originally, Tesla invested about $1.5 billion in Bitcoin, but later in the same year, they sold off approximately 70% of their initial holdings.
Despite this, it’s worth noting that Tesla continues to hold onto its Bitcoin reserves (approximately 9,720 BTC), which are currently valued at over $1.3 billion, as per information from BitcoinTreasuries.NET.
Amazon has billions available in cash, so it could easily allocate a similar amount to Tesla.
Instead of directly urging Amazon and Microsoft to use Bitcoin, Cowan proposes emphasizing the idea that Bitcoin serves as a protective measure against inflation. This emphasis could generate support and potentially accelerate the adoption of Bitcoin by institutions.
The NCPPR did not respond immediately to CryptoMoon’s request for comment.
Do tech giants need Bitcoin for their treasury?
MicroStrategy has demonstrated impressive outcomes by integrating Bitcoin as a key component of its treasury management approach.
Starting August 11, 2020, the company initiated Bitcoin purchases, totaling 21,454 units at a cost of $250 million. Since that time, their stock value has significantly increased from $14 per share to approximately $411, causing their market capitalization to grow from $1.3 billion to almost $100 billion.
As a researcher, I’ve observed that Michael Saylor’s decision to use Bitcoin as a protective measure against inflation has proven to be more successful than initially anticipated. This leads me to ponder: Why shouldn’t other tech titans follow in Saylor’s footsteps and adopt his treasury model?
Furthermore, as a result, the relationship between Bitcoin‘s value and its overall market capitalization made its stocks function like a leveraged version of Bitcoin.
According to the information provided, Amazon’s market capitalization stands at approximately $2.4 trillion, while Microsoft’s is around $3.3 trillion. Consequently, the impact of Bitcoin adoption by these two tech giants wouldn’t mirror that of MicroStrategy, given its smaller market cap.
Cowan argues that Amazon doesn’t necessarily need to adopt Bitcoin immediately, given the robustness of its primary operations. Investing a portion or all of its cash reserves into Bitcoin could serve as a protection against inflation, but there is a risk associated with deviating from its existing treasury strategy. Some shareholders might view this change as a potential threat to Amazon’s successful business model.
“The opportunity cost of holding a volatile asset like Bitcoin instead of investing in R&D or acquisitions would weigh heavily in such a decision.”
He pointed out that allocating a substantial amount towards Bitcoin might affect Amazon’s capacity to finance essential growth sectors such as AWS development, AI technology, and logistics upgrades. The shareholder’s vote should consider striking a balance between investing in speculative assets and critical innovations that set Amazon apart competitively.
Bitcoin environmental concerns may deter shareholders
It’s essential for major tech companies to take into account the general public’s viewpoint, as mainstream media significantly impact their brand image and share values. Similarly, although Bitcoin’s standing has greatly enhanced, it remains linked to risky investments, possible misappropriation, and ecological issues.
“A negative PR narrative might overshadow the potential financial benefits, particularly given Amazon’s focus on ESG initiatives and its need to maintain a broad appeal across stakeholders.”
Amazon significantly transformed shopping experience by swiftly delivering products right to consumers’ homes. Yet, the ecological consequences are substantial, as suggested in a 2022 study by the environmental group Oceana, revealing that over 709 million pounds of plastic waste were produced.
The business plans to reach zero net carbon emissions by 2040, a full ten years before the deadline set in the Paris Agreement.
Bitcoin’s high energy usage in mining has faced heavy criticism from environmentalists. However, the narrative is shifting as the mining infrastructure is more thoroughly examined. Despite this shift, risks of a PR backlash remain.
Shareholders at Amazon need to consider if it would be beneficial for the company to match the success of Tesla or MicroStrategy by protecting against inflation using Bitcoin, or if they should steer clear of such risks and concentrate on their primary business strategy instead.
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2024-12-13 01:52