In August, we published an article about a trend we saw with large investors jumping on the bandwagon of incorporating Bitcoin in their investment strategy. At the time, investors such as hedge fund manager Paul Tudor Jones, who has almost two percent of his assets in bitcoin, and Nasdaq-listed MicroStrategy that had bought 21,454 BTC worth $250M, attracted a lot of media attention (read the full article here).
It turned out to be just the beginning. This trend has since continued in a remarkable way and the list of firms that sought exposure to bitcoin has broadened substantially. Therefore, recent news have prompted us to give an update on this topic.
Less than three weeks ago, Square, the payments company headed by Twitter CEO Jack Dorsey, announced a $50M investment in bitcoin. This represents about 1% of the firm’s total assets. Thanks to the success of its Cash App, Square is growing rapidly which is also reflected by its $82B market capitalization. Dorsey has been a longstanding proponent of Bitcoin, referring to it as “probably the best” native currency of the internet due to bitcoin being “consensus-driven” and “built by everyone.”
Nasdaq-listed business intelligence firm Microstrategy has undeniably been the company that got the ball rolling when investing $425M (after almost doubling their initial investment of $250M)of its cash in bitcoin as a new treasury reserve asset. CEO Michael Saylor said that “Bitcoin is less risky than holding cash”. Notably, he referred to Parker Lewis, COO of Unchained Capital — a Signature Ventures portfolio company — as one of the most valuable sources when studying Bitcoin.
Importantly, among the two publicly-listed companies leading the way, the rationale for holding bitcoin on their balance sheet differs somewhat. While Square has characterized its allocation as a mission-driven investment, viewing Bitcoin as an instrument for economic empowerment, MicroStrategy has referred to it as a dependable store of value in the face of looming inflation and negative real yields. Large private companies are following suit: the list also includes Stone Ridge Holdings Group which has about $10B in AUM. Last week, the company bought bitcoin in the order of $100M stating that it has “long viewed Bitcoin as superior to cash”. The website bitcointreasuries.org provides an overview of companies that hold bitcoin on their balance sheet.
Looking ahead, we think there is clear evidence that bitcoin is transitioning from a retail-driven market to an alternative asset that will play a much bigger role in both institutional portfolios and corporate treasury. As a result, secure custody of bitcoin and digital asset services for professional investors will move center stage. These custody providers are at the heart of the Signature’s portfolio strategy:
Unchained Capital’s custody solution allows individuals and businesses to achieve a level of security for their bitcoin that historically would have been reserved for large institutions. Similarly, Finoa — a qualified custodian to be supervised by the German Federal Financial Supervisory Authority (BaFin) — offers a full range of financial services for digital assets, including custody, staking and trading.