Disclaimer: Opinions expressed in this article do not constitute investment advice from Bitcoin Reserve.
Amid recession, unconventional fiscal responses from central banks, subsequent inflation, and monetary devaluation, bitcoin prove to be the only standard. As a result, more and more companies are choosing to opt-out of the system altogether by embracing bitcoin. In turn, they intentionally avoid the inevitable cataclysm arising from macro risk. And as bitcoin finds further confirmation, its status as a global reserve currency is slowly forming.
Gradually, Then Suddenly
To date, there are 23 companies worldwide (15 public, 3 private, and 5 ETF-based) holding approximately $10.5 billion worth of BTC—or 3.74% of the total bitcoin supply—between them. For many, this corporate trend is an inflection point for the mass adoption of bitcoin and its first important step on the way to becoming a global reserve currency.
Credited for kicking off the trend is MicroStrategy, a Nasdaq-listed business intelligence firm, which became one of the world's first publicly-traded bitcoin holders after purchasing approximately $425 million worth of bitcoin between August and September. Now, claiming over 38,250 BTC, the business intelligence firm owns approximately 0.182% of all bitcoin.
In its original announcement back in August, MicroStrategy advised investors that it was changing its corporate investment strategy to reflect the economic climate. Instead of the ever-depreciating dollar, the firm opted for bitcoin.
The rhetoric employed by the business intelligence firm's official communique has been nothing short of bullish. In a Q3 earnings call, the company upheld its decision to swap out its primary reserve asset, arguing that bitcoin had "greater return potential" for investors than cash. It even promised to purchase more.
Since its brazen bitcoin venture, MicroStrategy has solidified the pioneering cryptocurrency as a bonafide safe haven, signaling to other corporations and organizations worldwide that the coast is clear to jump in. And so they did.
Following closely in MicroStrategy's footsteps was payments processor Square. Despite being headed by Twitter CEO and bitcoin evangelist Jack Dorsey, Square found itself on the backfoot in adopting bitcoin as a treasury reserve. Nevertheless, the move saw the firm place 1% of its total assets—roughly $50 million—in bitcoin.
"We believe that bitcoin has the potential to be a more ubiquitous currency in the future," said Square CFO Amrita Ahuja echoing Dorsey's own beliefs that bitcoin will one day become the world's reserve currency.
Banks Buying Bitcoin
For many, the entry of MicroStrategy, Square, and others signifies that the banks may not be too far behind. This sentiment was further cemented with PayPal's announcement to integrate bitcoin payments. While the payment giant's crypto foray has its fair share of shortcomings (as discussed in last week's piece), it's an undeniable catalyst for adoption.
Financial institutions will be forced into a position of competition, and not even central bank digital currency (CBDC) will spare them. Eventually, bitcoin will be tendered via banks. In fact, the Office for the Comptroller of the Currency (OCC), a US banking watchdog, recently gave the go-ahead for institutions to offer crypto custody services to customers—almost as if foreshadowing the shift.
In turn, following sluggishly behind the corporate bitcoin bias, central banks will have no choice but to hold bitcoin as a reserve currency themselves. This is especially true as fiat continues to depreciate. Central banks will either atrophy on the sidelines, watching corporations profit, or they'll jump in.
In truth, they're already dipping their toes.
Yesterday, Iran became the first country in the world to utilize bitcoin on a state level. In an apparent attempt to combat US sanctions Iran's central bank plans to use bitcoin to fund international trade—authorizing miners to exchange directly with the bank.
The Global Reset
While the global economy continues to languish, Kristalina Georgieva, the managing director of the International Monetary Fund (IMF) in Washington, DC, has called for a “new Bretton Woods moment."
With a speech published on October 15, Georgieva addressed the pandemic, its impact on the economy, and consequent debt and desperation, essentially arguing for a monetary reset akin to the 1944 Bretton Woods agreement.
The agreement was responsible for controlling the value of money between different countries. It established—and obliged—global monetary policy to keep the exchange rate of currency within a fixed value in relation to gold. It also positioned the dollar as the first global reserve currency.
Some speculate that with the decline of the dollar and uncontrollable sovereign debt, the IMF is hinting toward a new standard. For analyst Raoul Pal, that standard will be underpinned by CBDCs.
The problem is CBDCs tied to the same old monetary policy system will eventually suffer the same fate as physical fiat. Per Pal, the only currencies that can survive long-term are hard, fixed-supply assets such as gold and bitcoin.
Regardless of whether the IMF heed the warning, bitcoin's adoption curve will keep climbing until, eventually, critical mass and the inherent characteristics of bitcoin render it the only viable option for a global reserve currency.