This past week, U.S. fintech giant Square made mainstream media headlines when it deployed $50 million worth of its cash to purchase Bitcoin. This represented approximately one percent of the $90 billion company’s total assets, reported sites like Bloomberg.
While a big move, there were some Bitcoin maximalists that criticized the one percent figure, mentioning that it was too small to make an impact in the increasingly-liquid crypto market. But as analysts later noted, if all companies followed Square’s lead, a massive wave of capital would enter the Bitcoin space, easily pushing it to all-time highs.
What if everyone followed Square in purchasing Bitcoin?
According to crypto venture investor and analyst Ian Lee, U.S. businesses have a total of $25 trillion in assets at the moment.
Following Square & MicroStrategy:
U.S. corporate businesses have a total of $25T in assets. If 0.1% of that were put into BTC as a hedge against inflation, we’d have $25B of inflows.
And that excludes financial companies, institutional investors, governments & retail—globally.
— Ian Lee ?? (@ianjohnlee) October 10, 2020
This means that if each of these businesses followed Square’s lead and deployed exactly one percent of their assets into Bitcoin, $250 billion worth of inflows will enter BTC. Of note, this “excludes financial companies, institutional investors, governments & retail—globally.”
You may think that $250 billion isn’t a lot. Bitcoin, after all, currently has a market capitalization of just around $200 billion.
But, it’s worth taking the “fiat amplifier/multiplier” effect into account. The effect suggests that for every fiat dollar invested in Bitcoin, the market capitalization of BTC increases by more than that dollar.
Chris Burniske, a partner at Placeholder Capital, once mentioned that his firm uses the range of 2-25x. Taking a low-end estimate of five times, the $250 billion that could enter the space if corporate entities followed Square would result in a growth of over $1.2 trillion for BTC’s market cap, meaning prices would shoot past $50,000.
Making it easy for investors to enter
Although what Lee said was theoretical, Square is attempting to make it easy for its corporate peers to adopt Bitcoin.
In fact, it, alongside the other corporate adopter of Bitcoin MicroStrategy, released their respective resources and webpages to teach other companies and their CFOs how to invest in and store large sums of BTC.
Both companies also explained why Bitcoin makes sense in the current macroeconomic environment. Jack Dorsey, CEO of Twitter and Square, for one, called it the native currency of the internet.
As reported by CryptoSlate, many think that the “backdrop for institutional adoption of Bitcoin” is stronger than ever before.
Andrew Kang, founder of Mechanism Capital, gave the following reasons why buying Bitcoin now makes sense: volatility has declined massively, inflationary trends are looming, yields in other markets are low, the stock market and other legacy markets have high valuations, and this space is getting validated by Wall Street.
The backdrop for institutional adoption of Bitcoin is the strongest it’s ever been:
– Low volatility
– Looming inflation
– Low yields
– High valuations in other asset classes
– Price 50% off highs 3 years ago
– Validation from TradFi elite (PTJ)
– Established custody solutions
— Andrew Kang (@Rewkang) October 9, 2020
Bitcoin
11 Oct at 4:33 pm UTC$11,419.30
0.73%Bitcoin, currently ranked #1 by market cap, is up 0.73% over the past 24 hours. BTC has a market cap of $211.42B with a 24 hour volume of $21.26B.
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