Microsoft’s Bitcoin dilemma: Ride $5 trillion BTC wave or avoid risk

As a seasoned investor with over two decades of experience in the financial markets, I must say that Michael’s analysis is spot-on. The decision to invest in Bitcoin by large corporations like Microsoft is indeed a significant step and one that requires careful consideration.


The coming week, specifically December 10th, holds significance for both Microsoft and the Bitcoin community, as Microsoft’s shareholders are scheduled to decide whether to include Bitcoin in their company assets.

The findings will indicate if investors prefer the ongoing Bitcoin (BTC) market surge or choose to stay invested in Microsoft’s practical and lucrative strategy for technological advancement.

On October 24th, prior to the U.S. presidential election, Microsoft’s 14a submission to the U.S. Securities and Exchange Commission contained a section titled “Investing in Bitcoin Evaluation.” The document suggests that Microsoft might want to think about adding Bitcoin to its assets as an “outstanding option, if not the most outstanding, for shielding against inflation.

In the “Board Recommendation” section right below the proposal, I found a suggestion from Microsoft’s board of directors to the shareholders to cast their votes against it. The reasoning being that the company’s management has already thoroughly evaluated this matter themselves.

Nate Holiday, the co-founder and CEO of Microsoft-supported Web3 data company Space and Time, informed CryptoMoon that “The board’s initial statement made it evident: They possess an advanced system for managing their treasury, generating exceptional profits for their investors.

Will Saylor’s orange pill be enough to convince Microsoft?

Microsoft asked Michael Saylor, chairman of MicroStrategy, to present an argument for incorporating Bitcoin into their company’s financial reserves, in order to evaluate how such a move might affect their share value.

In a brief presentation spanning three minutes and encompassing 44 slides, Saylor passionately contended that Microsoft has the potential to increase its existing value of approximately $3.19 trillion by an additional $5 trillion. He based his argument on the idea that Microsoft should allocate around $100 billion each year towards purchasing Bitcoin. His reasoning was straightforward: “It is wiser to invest in Bitcoin than to repurchase your own stock or hold bonds.

Solo Ceesay, co-founder and CEO of decentralized social Web3 platform Calaxy, told CryptoMoon that Saylor may have an effect on Microsoft shareholders as his “relentless advocacy paved the way for BlackRock and the rest of ‘orange-pilled’ Wall Street to push Bitcoin nearly past $100,000.”

In a conversation with CryptoMoon, Nick Cowan, CEO of Valereum, noted that merely having Jack Dorsey’s endorsement wouldn’t be enough to sway Microsoft’s board or shareholders. Instead, he suggested that their decision would depend on internal assessments of risk compatibility, strategic alignment, and long-term vision—rather than being influenced by external lobbying efforts.

It’s up for discussion if Saylor’s intervention will prove effective, but the shareholder vote could potentially mark a significant milestone in its adoption.

With Saylor’s leadership, MicroStrategy transformed into a Bitcoin surrogate for investors seeking to acquire the asset via a U.S. stock market instrument.

Recent: US Bitcoin reserve is possible to achieve but not without downsides

Nevertheless, the founder and CEO of trading platform Peanut Trade, Alex Momot, explained to CryptoMoon that Microsoft and MicroStrategy stocks can’t be compared directly, as they are more like two different fruits, such as apples and oranges.

According to Momot, Microsoft’s business thrives on steady income from product sales, thanks to the physical items they sell, while MicroStrategy depends mostly on changes in stock values and virtual financial adjustments. Essentially, Microsoft focuses on selling real products that boost their stock value through genuine sales growth, whereas MicroStrategy functions more like a protective measure for the market.

According to Cowan, Microsoft’s size, risk appetite, and duty to act in the best interest of its stakeholders are significantly distinct from those of MicroStrategy. While MicroStrategy began as a software company, it currently operates more like a Bitcoin investment firm.

The break showcased that MicroStrategy wasn’t primarily a fast-growing software company. Consequently, to stimulate growth, it needed to shift its priorities towards enhancing shareholder profits.

“On the other hand, Microsoft boasts a robust financial status. With consistent growth spanning several decades, they are strategically prepared for the future, leveraging artificial intelligence (AI) and data as key drivers.

According to Momot, if Microsoft were to invest heavily in Bitcoin, it might lead to a major shift in how people view the company, impact the opinions of its shareholders, and necessitate a major change in its overall strategy.

At a crucial juncture, the choice regarding whether to incorporate Bitcoin into your system is significant because it’s approaching a stage where institutional acceptance is widespread, potentially making it only a few months away from being recognized as a U.S. reserve asset.

Microsoft shareholders must evaluate the pros and cons of adopting Bitcoin for their treasury.  

Pros and Cons of Microsoft adopting Bitcoin

Daniel Cawrey, the chief strategy officer at Tonkeeper’s TON wallet, advised CryptoMoon that it could be beneficial for publicly traded companies to invest in some Bitcoin as a way to diversify their assets. This is because the purchasing power of cash can gradually decrease due to inflation over time.

According to Ceesay, Bitcoin is increasingly resembling a contemporary form of a savings account, as more people and organizations are choosing to store their long-term funds in this asset rather than keeping them in U.S. dollars or treasury bonds that now struggle to beat inflation.

Cash loses its ability to buy goods and services due to inflation. To counteract this devaluation, MicroStrategy chose an approach that involved almost entirely investing their cash reserves in Bitcoin. Meanwhile, Cawrey highlighted Microsoft’s consistent large cash reserve as a potential strategy for future investments.

“Microsoft’s cash on hand, according to public reports, is around $75 billion. So they certainly have the ability to convert some of that into Bitcoin if they wanted to.”

In previous years, Microsoft has held more than $100 billion in liquid assets. At present, its cash reserves are approximately $80 billion.

The reduction in Microsoft’s cash reserves is primarily due to substantial expenditures on technological ventures and acquisitions, notably the acquisition of the video game developer Blizzard for approximately $68.7 billion and a significant $10 billion investment in ChatGPT.

Cowan stated that while Microsoft has the capacity to invest, the question lies in whether the possible risks are compatible with its long-term financial and strategic objectives.

According to Cowan, having Bitcoin means that money is being kept tied up which might have been utilized for important activities such as making key purchases, conducting research, developing new projects, or other endeavors that better match Microsoft’s main goals instead.

According to Momot, implementing such a strategy could necessitate a comprehensive transformation of Microsoft’s business model.

He stated that it’s too early to anticipate big businesses to change their strategies like MicroStrategy did. Motom further explained that it’s improbable for large corporations to make such a move in the near future, as it entails a significant shift that doesn’t fit with their current goals.

On the other hand, it’s clear that Bitcoin has several benefits. As Cowan pointed out, its limited supply makes it an attractive choice as a safeguard against inflation.

Holiday stated that “Corporations might want to think about Bitcoin,” considering that more entities are likely to start “exploring digital currencies to broaden their investment portfolios” in the face of rising inflation, excessive spending, and mounting debt.

As an analyst, I’d express it this way: I believe that Bitcoin could serve as a distinctive risk management instrument for businesses seeking protection against fluctuations in traditional (fiat) currencies.

“Incorporating Bitcoin into its holdings could diversify Microsoft’s assets, reducing dependency on fiat currencies and traditional financial instruments.” 

In addition, Cowan stated that making such an investment might demonstrate foresighted leadership, possibly drawing in technologically inclined investors and clients who appreciate decentralization and cutting-edge technology.

Observers noted that there are, of course, some cons Microsoft may take into account.

Cowan highlighted that Bitcoin’s high price fluctuations present a considerable risk because the company values financial reporting and treasury management stability.

shareholders might find these price fluctuations unsettling since “Microsoft is typically perceived as a more cautious technology firm,” according to Daniel Cawrey, the chief strategy officer at TON wallet Tonkeepper, in an interview with CryptoMoon.

An additional concern arises from the fact that “the ever-changing regulatory environment surrounding Bitcoin might put Microsoft at risk of compliance issues and potential legal obligations,” as Cowan pointed out.

Microsoft is known for having a strong and reliable reputation within the tech industry. As stated by Cowan, the public perception of Bitcoin can impact decision-making, potentially hindering Microsoft’s adoption of Bitcoin. Even though Bitcoin is becoming more accepted, its connections to speculative trading, money laundering, and environmental issues could bring about reputational risks.

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According to Cawrey, Microsoft has been putting a great deal of emphasis on AI projects as of late. He suggests that, due to this focus, the board might find a move like this to be overly bold or premature for the company at the moment.

In simpler terms, Cowan suggested that the board might prefer using their cash reserves to invest in key areas like Artificial Intelligence, cloud computing, and acquisitions, where they can see immediate benefits and clear results, as opposed to spending it on something with an unclear future outcome.

According to Cowan, whether Bitcoin can serve as a reliable form of long-term savings is still uncertain and open to discussion, which could conflict with the financial guidelines the company follows.

Cowan found that since MicroStrategy operates on a more limited scope, it permits a higher degree of risk-taking. On the other hand, Microsoft needs to exercise caution with their decisions in order to preserve shareholder trust and prevent unnecessary risks.

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2024-12-03 17:14