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By Wendy Weng
Some companies have acquired cryptocurrencies for their corporate treasuries despite the volatility. MicroStrategy, the public company that hold the most bitcoin on the balance sheet, remain bullish on bitcoin.
- The US companies and companies from information technology sector hold the most bitcoin
- MicroStrategy intends to boost its bitcoin holdings through the sale of high yield bonds
- Tesla will resume Bitcoin transactions once half of bitcoin can be mined using clean energy
The interest in cryptocurrencies among institutional investors surged and more corporate treasuries allocated reserves to cryptocurrencies, especially in the months before cryptocurrency price plummeted in May 2021. Thirty-three public companies collectively hold over 200,000 bitcoins, according to data from CryptoTreasuries. Together, these represent 1.07% of the total supply of bitcoins in circulation and are equivalent to $8.1 billion based on the price on 15 June 2021.
In addition to blockchain and bitcoin mining companies, some other companies that do not conduct businesses related to digital assets such as the business intelligence software company MicroStrategy and electric-automobile manufacturer Tesla also hold large amounts of bitcoin on the balance sheet, as bitcoin is seen as an inflation hedge.
Top companies with Bitcoin holdings
The 12 companies from the US together hold over 172,000 bitcoins on their balance sheet, accounting for 86% of the aggregate number of bitcoins held by all the 33 public companies, while the share of 12 Canadian companies is much smaller at 9.9%. The top 10 public companies that hold the most bitcoin comprise seven from the US, two from Canada and one from Germany. In addition, those from information technology sector hold the most bitcoin on their balance sheet, with a share of 64.6%, followed by companies from consumer discretionary sector (21.5%) and financials sector (12.6%).
The number of bitcoins owned by the top 10 public companies with the largest bitcoin holdings totalled over 191,000. MicroStrategy is the public company that holds the most bitcoin on the balance sheets, followed by Tesla, Galaxy Digital Holdings, Voyager Digital, Square and Marathon Digital Holdings. MicroStrategy holds 92,079 bitcoins, worth $ 3.7 billion based on price on 15 June 2021. Galaxy Digital Holdings offers trading, asset management and investment banking services for institutional investors, while also making a sizable investment in cryptocurrency with its own money. Currently, the company holds around 16,400 bitcoins.
Payments firm Square purchased approximately 4,709 bitcoins for an aggregate price of $50 million in October 2020 and acquired an additional 3,318 bitcoins for $170 million in February 2021. The average purchase price of all its bitcoin purchases is $27,407 per token. The company announced that it has no plan to purchase more bitcoin in May 2021, while it is looking into creating a hardware bitcoin wallet for users to store their cryptos without Square’s custody.
Marathon Digital Holdings, a US bitcoin mining company, increased its bitcoin holdings to around 5,518 bitcoins as of May 2021. The company purchased approximately 4,813 bitcoins at an average purchase price of $36,857 in January 2021. From January to May 2021, it has produced 580.5 newly minted bitcoins. Hut 8 Mining, another bitcoin mining company based in Canada, holds more self-mined bitcoin than any other bitcoin miner or public company.
MicroStrategy to acquire more Bitcoin
MicroStrategy has allocated a large proportion of its corporate treasuries to bitcoin. Its CEO Michael Saylor has been a leading advocate of bitcoin. The company made its first investment in bitcoin in August 2020 and adopted bitcoin as its primary treasury reserve asset. Acquiring and holding bitcoin has become part of the company’s corporate strategy since February 2021.
MicroStrategy bought 21,454 bitcoins in August 2020, 16,796 bitcoins in September 2020, 32,220 bitcoins in December 2020, 314 bitcoins in January 2021, 19,747 bitcoins in February 2021, 795 bitcoins in March 2021, 253 bitcoins in April 2021 and 500 bitcoins in May 2021. The company disclosed that these bitcoins were bought for a total of 2.251 billion at an average purchase price of approximately $24,450 per token.
The company plans to invest more in bitcoin following cryptocurrency price plunge. On 8 June 2021, it announced to sell $500 million of seven-year senior secured notes with an annual interest rate of 6.125% to fund the purchase of more bitcoin. The company increased the size of the offering from $400 million to $500 million as it received around $1.6 billion in orders. With the proceeds from the sale of the $500 million high yield bonds, MicroStrategy can purchase around 12,400 bitcoins based on current price. Previously, the company had issued $550 million worth of convertible senior notes in December 2020 and another $1.05 billion in February 2021 to add more bitcoin to its balance sheet.
Tesla to resume bitcoin transactions
Tesla bought $1.5 billion worth of bitcoin in January 2021. Elon Musk, Tesla’s CEO, said that the company sold around 10% of its bitcoin holdings in the first quarter of 2021 to demonstrate the liquidity of Bitcoin. The sale generated proceeds of $272 million and the company made $101 million in profits from the sale.
The comments on social media from Elon Musk has exerted a great influence on the price of cryptocurrencies. In March 2021, Tesla started accepting bitcoin as a payment option for its electric vehicles. However, on 12 May, Tesla announced to suspend accepting bitcoin as a form of payment, citing concerns over energy consumption. On 17 May, Elon Musk clarified that Tesla has not sold any bitcoin.
On 13 June, Elon Musk said that Tesla will accept bitcoin payments again once miners of the bitcoin can show they are using roughly 50% clean energy. The bitcoin Mining Council was formally launched on 10 June amid worries over bitcoin’s energy consumption and is open for membership applications. Both Michael Saylor and Elon Musk are facilitators, but its website claims that Elon Musk has no role in the council and Michael Saylor is a key member of the council.
Companies have become more cautious about purchasing cryptocurrencies for their corporate treasuries, mainly due to the fluctuations in the price of the cryptocurrencies. The accounting for cryptocurrencies also remains an issue. The US public companies holding bitcoin in their treasuries will need to write down the value of their holdings as an impairment charge if the value of bitcoin falls, except for investment firms or broker-dealers. However, the interest in cryptocurrencies remains strong, which can be shown from the massive excess in demand for MicroStrategy’s high yield bonds.
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by : on 2021-06-18 01:19:00
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