We are constantly looking for ways to diversify portfolios—non-correlated investment strategies or investments that move differently from stocks, etc.
It is a constant battle.
While diversification has not been needed in the last several years—in fact, it has been punitive—there are times where it sure comes in handy. 2008-2009 comes to mind …
It is not often that an asset comes onto the scene that not only offers diversification but also provides the chance for fantastic growth. What—pray to tell—could offer such wild and fanciful benefits?
The answer: Bitcoin.
Bitcoin is an interesting cross-section between technology, currency, and a store of value. Most believe it is one of those three things. Some believe it is a “category killer” for all three. Personally, I believe the book is open on that score.
Bitcoin—and other digital tokens/coins/currencies— continues to grow in popularity in the investment world. There have been ETF’s created to own them, and there are blockchain projects being built on top of them to disrupt a growing number of industries.
It seems as though the allure of Bitcoin has finally reached Corporate America.
In a stunning announcement (at least to me) Microstrategy (symbol: MSTR), a provider of business intelligence, mobile software, and cloud-based services, allocated $250 million of their corporate balance sheet to Bitcoin.
That is NOT a small investment.
Rather than listen to what I have to say, let’s see how Michael J. Saylor, CEO of Microstrategy, explained the move (his comments are a little long but well worth the read):
“Our investment in Bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our shareholders,” said Michael J. Saylor, CEO, MicroStrategy Incorporated. “This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. Since its inception over a decade ago, Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions. 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.”
Mr. Saylor continued, “MicroStrategy spent months deliberating to determine our capital allocation strategy. Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program ― risks that should be addressed proactively. Those macro factors include, among other things, the economic and public health crisis precipitated by COVID-19, unprecedented government financial stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty. We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.”
In considering various asset classes for potential investment, MicroStrategy observed distinctive properties of Bitcoin that led it to believe investing in the cryptocurrency would provide not only a reasonable hedge against inflation, but also the prospect of earning a higher return than other investments. Mr. Saylor articulated the opinion, “We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility, and community ethos of Bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value. Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it. We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fueled the rise of so many category killers in the modern era.”
Mr. Saylor touched on a couple of key elements when talking about the opportunity to buy Bitcoin. He spoke of the risk to fiat currencies through inflation, the potential for higher returns in a zero-rate world, and prospects as a store of value.
To me, this move by Microstrategy is a potential sea change for how companies might consider allocating capital on their balance sheet.
Like, Mr. Saylor, we believe the future is bright for Bitcoin.
Our New Power model is always looking for “game changers” to invest in, and Bitcoin certainly falls into that camp. We have (and continue to own) several cryptocurrency-related ETF’s as part of that portfolio. You can find a full description for New Power on our website under Impact Investing https://allseasonfunds.com/impact-investing/
If you are interested in learning more about our New Power strategy, which is having an excellent year—or our broader wealth management offering— please feel free to reach out to us at (303) 837-1187 or at kris@allseasonfunds.com.
Have a great rest of your summer!
