Thread by @thibm_

1. Is bitcoin the world’s safest reserve asset?

Having bought $250M of bitcoin, NASDAQ-listed MicroStrategy’s opening gambit says so.

Let’s analyze what it means for Wall Street, corporate treasuries and Bitcoin.

Thread! ✍️

blog.knoxcustody.com/bitcoin-safest…

2. @MicroStrategy’s 21,454 BTC buy snapped up 0.1% of Bitcoin’s fixed supply of 21 million. That's 50% of their excess cash—a novel capital allocation strategy.

Only 978 companies can do the same, before supply technically “runs out”, though in practice most of it isn't for sale

3. During their second quarter earnings call in late July 2020, @MichaelSaylor, CEO of @MicroStrategy, announced his intention to explore purchasing bitcoin, gold or other alternative assets, with $500 million of cash reserves, and only $50 million needed for OPEX.

4. While initially hinting at a broader portfolio of alternative assets, @MicroStrategy only bought one: all-in bitcoin.

Argument was built around the potential for the deterioration of real value in fiat currencies, and a belief that Bitcoin represents a safer store of value.

5. Is capital allocation into bitcoin signalling the emergence of a novel trend in corporate treasury programs?

Should CFOs of other firms reconsider their allocation plans?

What does bitcoin as a corporate reserve asset mean for Wall Street’s balance sheets modelling?

6. A glut of cash is being hoarded.

Amid the recent downturn, NASDAQ 100 co's are piling cash, driven by globalized uncertainty, lockdowns & supply chain disruptions

Nearly $1 trillion in cash w/ US tech moguls like @Microsoft, @Google and @Apple stocking more cash than ever.

7. But global stimulus is hurting cash.

Near-zero interest rates led to an $840M surge in corporate debt in the first half of 2020.

As business ops sell assets and cut costs to manage the slowdown they end up raising cash reserves, but must also battled value loss due to QE.

8. Led by the Fed, global QE in 2020 alone is set to hit a staggering $6 trillion, while the Fed now holds almost $7 trillion of assets on its balance sheet, an astounding rise of around 72% in less than 3 months.

9. Massive monetary expansion leads large public companies to reconsider the long-term real value of cash.

The dollar may not see inflation right away but responsible firms such as @MicroStrategy are taking preventive measures to protect their balance sheets and shareholders.

10. Bitcoinization of corporate treasury is happening.

A good and reliable holding in a reserve asset should be dependable over the long term whether it be for price stability, liquidity or long term value creation for shareholders.

11. “@MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.”

12. Fiduciaries need Bitcoin.

CFOs managing corporate treasury programs may be in breach of their fiduciary duty if due diligence and adequate capital allocation strategies are not developed for bitcoin.

Plus, the career risk is now removed as @ahkyee pointed out.

13. Bitcoin is now part of the institutional equation.

MicroStrategy's ownership structure is mostly institutional, which accounts for 466 firms representing 97% of total shares. @BlackRock and @Vanguard, two leading institutional fund and wealth managers own more than 25%.

14. Bitcoin is no one else’s liability

What happens if MicroStrategy’s bitcoin holdings appreciate substantially in the coming years? How does management handle this exposure and decide to rebalance their risk?

15. With Bitcoin’s NgU, MicroStrategy’s future capital deployments could get a strong lever when it comes to entering others markets, launching new products or even acquiring competitors.

Just getting started for other firms! Competition will be rude.

16. More than an inflation hedge, Bitcoin is hard capital.

Holding $BTC may be a capital-efficient way to strengthen corporate balance sheets in times of financial turmoil.

While nocoiner competitors suffer from bad economic conditions, bitcoin holders may thrive.

17. The massive rise in US corporate debt from $3.3 trillion to $6.5 trillion, combined with the most brutal decline in consumer spending ever experienced in the US will prove very profitable for companies holding bitcoin.

Competitive landscape may be completely reshaped.

18. MicroStrategy’s BoD acts as fiduciaries for an institutional-centric shareholder base.

They’ve allowed the firm to become an indirect vehicle for public bitcoin price exposure.

At what point does MicroStrategy become a bitcoin ETF, rather than a software firm?

19. Bitcoin will rise as a new numeraire.

As part of an inescapable Monetary Darwinism, CFOs and executive teams will gradually, then suddenly (wink @parkerlewis) add bitcoin to their books in an effort to protect their cash reserves for productive use later on.

20. MicroStrategy’s CEO tweeted back in 2013 that “Bitcoin days are numbered” and today his company moved 50% of its cash treasuries into it.

Eventually, everyone gets it. Oh, and congrats for this act of leadership @michael_saylor.

21. As a de facto hedge against inflation, #Bitcoin is also a high-return asset.

What if companies start to denominate their margins and ROIs using Bitcoin, not dollars?

Holding Bitcoin in corporate treasury may become a standard for Wall Street as it obsoletes all other money

22. As @PrestonPysh stated with @stephanlivera, Bitcoin could become a numeraire—a benchmark item to compare value of similar financial instruments.

Cash flow priced in $BTC is the ultimate monetization point leading to sustained global deflation—the root of an abundant future.

23. Should companies invest 1%, 5% or 50% of their excess cash reserves walking in MicroStrategy’s footsteps?

One thing is certain: this number can no longer be zero.

#GetOffZero @APompliano 👊

24. A slew of additional questions emerge around the custody of Bitcoin for listed companies that are not specialized in managing private keys.

Should they be using custodians such as @knoxcustody or @DigitalAssets or sovereign multisig with @unchainedcapital? Hybrid model?

25. From their SEC filings, it appears that MicroStrategy’s bitcoin holdings are currently held at various custodians, with the absence of insurance clearly presented as an unmitigated risk.

26. Considering how much time we at @knoxcustody spend managing Bitcoin custodial systems with comprehensive insurance coverage, this is our pet peeve.

Also, will auditors and securities regulators demand that NASDAQ-listed companies' bitcoin be fully insured?

27. We believe that fiduciaries, executives and the management teams of listed companies will continue having to think through all risks present in allocating to Bitcoin.

28. #Bitcoin can no longer be ignored.

@Michael_Saylor’s Bitcoin dismissal in 2013 juxtaposed against @MicroStrategy’s attitude today speaks volumes.

28. Overall this news is undeniably bullish for Bitcoin, considering its S2F jumped to over 50 during last May’s halving.

Will CFOs still be able to meet their fiduciary obligations if they don’t hold bitcoin in their corporate treasury within the next 10 years?

29. Once #Bitcoin gets adopted by most companies, a global and sustained deflationary future may await us, allowing responsible capital allocators to invest soundly accumulated capital for truly productive uses.

(wink @jeffbooth)

30/30. Honorable mentions
@stephanlivera
@parkeralewis
@JeffBooth
@MartyBent
@daskalov (thanks for edits)
@matt_odell
@ArthurCSalzer
@FossGregfoss
@_benkaufman
@flip_btcmag
@PrestonPysh
@saifedean

Damn, I meant @parkeralewis... 😬