Cash & Liquidity ManagementCash ManagementCorporate Bitcoin Holdings Surge 587% Since 2020

Corporate Bitcoin Holdings Surge 587% Since 2020

Businesses now hold over 3% of all Bitcoin in circulation, according to a comprehensive report by River Financial. This represents a staggering 587% increase in corporate Bitcoin holdings since June 2020, signaling a potential paradigm shift in treasury management strategies.

The report, which analyzes the state of business Bitcoin adoption in 2024, reveals that companies now hold approximately 683,332 BTC, equivalent to 3.3% of Bitcoin’s total supply. This surge in adoption comes as businesses increasingly view Bitcoin as a potential hedge against inflation and a means to diversify their treasury assets.

Delving deeper into the statistics, the report shows that U.S.-domiciled companies account for 49.3% of business Bitcoin holdings, totalling approximately $19.7 billion. Interestingly, private companies hold roughly 23,000 more BTC than public companies, according to publicly available information.

The concentration of holdings is notable, with five companies—MicroStrategy, Block.one, Tether, BitMEX, and Xapo—holding a total of 559,000 Bitcoin, accounting for 82% of all corporate holdings.

Traditionally, corporate treasuries have prioritized cash and highly liquid assets, often resulting in value erosion over time due to inflation. The report cites Apple as a notable example, showing how its large cash reserves lost over $15 billion in real terms over the past decade. In contrast, Bitcoin’s fixed supply of 21 million coins positions it as a potential store of value that could outpace inflation.

One of the key drivers for Bitcoin adoption is its 24/7 liquidity. Unlike traditional banking hours, Bitcoin transactions can be made at any time, providing businesses with immediate access to their funds. This feature proved particularly valuable during the Silicon Valley Bank collapse in March 2023, where some companies faced liquidity constraints.

The report highlights various Bitcoin allocation strategies employed by businesses. These range from percentage-based allocations to cash flow-based strategies. For instance, Tahini’s, a rapidly growing franchise of Middle Eastern restaurants, keeps six months of cash on hand for operations, with the rest held in Bitcoin. Similarly, Block (formerly Square) has announced plans to regularly invest 10% of its gross profit from Bitcoin products into Bitcoin.

Learning from the market

MicroStrategy’s approach stands out as a case study in aggressive Bitcoin adoption. Since its first Bitcoin purchase in August 2020, the company has used a strategy of tapping into U.S. capital markets to expand its holdings, resulting in a 900% increase in its share price. Bitcoin now makes up 80% of MicroStrategy’s balance sheet assets.

However, adopting Bitcoin as a treasury asset is not without challenges. Price volatility remains a significant concern, potentially impacting financial statements. Legal and regulatory compliance, particularly with Money Transmission Laws (MTL) and Anti-Money Laundering (AML) regulations, also pose challenges for businesses venturing into Bitcoin.

The custody of Bitcoin presents another critical consideration. The report outlines various options, including institutional custody, self-custody, and collaborative custody, each with its own trade-offs between ease of use and counterparty risk. For instance, Block takes a self-custody approach to its Bitcoin holdings and maintains insurance policies to protect against theft.

What’s the best approach?

A survey among River’s business clients provides further insights into Bitcoin strategies. Since August 2023, the number of businesses River serves has grown by 68%. Notably, 70% of River’s business clients have never sold Bitcoin, indicating a long-term holding strategy. The most cited concern before buying Bitcoin was its accounting and tax treatment, an issue that recent regulatory changes are beginning to address.

Beyond its role as a treasury asset, Bitcoin is showing promise in specific payment scenarios. The report identifies three main areas where Bitcoin can serve as a payments solution for businesses: cross-border payments, wages, and commerce.

Students For Liberty, a nonprofit organization, processes over $60,000 in Bitcoin payments monthly, finding it a cheaper and faster way to pay international staff and students. As of June 2024, over 40% of their international staff receive their monthly pay via Bitcoin.

Similarly, Atoms, a footwear brand, discovered that accepting Bitcoin payments could boost revenue, with the average order value for Bitcoin purchases being more than twice that of dollar-denominated orders. The company has also retained its Bitcoin-denominated revenues for long-term investment.

Peony Lane Vineyards, a small winemaker, provides another interesting case study. After noticing interest from customers asking if they could buy wine with Bitcoin, the company began accepting Bitcoin payments and shifted to an online presence. Today, online sales account for 75% of Peony Lane’s revenue, up from 50% in 2023, with most of these customers being Bitcoiners.

The report also touches on the adoption of Bitcoin by sports organizations. Real Bedford F.C., an English football club, has embraced Bitcoin as its primary reserve asset and a central part of its brand identity. This strategy has driven record-breaking attendance at games, with average attendance for the men’s team increasing by over 500% between 2021 and 2023.

Looking ahead, the report estimates that business Bitcoin holdings will grow at a rate of between 204 and 519 BTC per day until 2026. This projection, coupled with recent improvements in accounting standards, suggests that Bitcoin’s role in corporate finance may continue to expand.

Regulatory landscape

In December 2023, the Financial Accounting Standards Board (FASB) issued an update allowing companies to recognize Bitcoin holdings at fair value, effective from December 2024. This change is expected to simplify accounting procedures and better reflect the economics of holding Bitcoin, potentially encouraging more businesses to consider Bitcoin as a treasury asset.

The surge in corporate Bitcoin holdings since 2020 marks a significant shift in how businesses approach treasury management. From small family-owned enterprises like SummerPlace Homes to tech giants like Block, companies are finding unique ways to incorporate Bitcoin into their business models and financial strategies.

As businesses navigate the evolving financial landscape, Bitcoin presents both opportunities and challenges. While it offers potential solutions to traditional treasury management issues, such as inflation protection and 24/7 liquidity, it also requires careful consideration of risks and strategic alignment.

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