Original title: Why tech giants like Amazon may hesitate to adopt Bitcoin
Original author: DANIEL RAMIREZ-ESCUDERO
Compiled by: Lawrence, Mars Finance
Large tech companies have substantial cash flows. Currency depreciation is costing them purchasing power. Is Bitcoin a financial solution to combat inflation? Amazon is next to decide.
Large tech companies like Amazon have a substantial amount of cash on hand (last year it was $87 billion), but with currency depreciation, the purchasing power of that cash is declining.
The Washington, D.C. think tank National Center for Public Policy Research (NCPPR) has submitted a proposal to shareholders to adopt Bitcoin as a solution. However, it remains unclear whether the tech giants will benefit from it.
NCPPR has been advocating this strategy for both Microsoft and Amazon. In both companies, the think tank believes incorporating Bitcoin into their finances will protect cash assets and shareholder value from inflation's impact.
The proposal argues that the Consumer Price Index (CPI) keeps inflation at 4.95%, which is an 'extremely poor indicator' of true currency depreciation, indicating that the actual inflation rate could be double that figure.
Cash reserves of Microsoft and Amazon from 1996 to 2024. Source: Companiesmarketcap
Microsoft has $78 billion in cash, while Amazon has $87 billion. Although Bitcoin can offer potential hedging, is the risk greater than the reward?
Despite the support from orange pill expert and MicroStrategy Chairman Michael Saylor, Microsoft shareholders overwhelmingly voted against the NCPPR's Bitcoin reserve proposal, indicating that its so-called volatility is a negative factor.
Next up is Amazon. Will this vote be different?
Amazon is not a technology company as conservative as Microsoft.
Nick Cowan, CEO of fintech company Valereum, told Cointelegraph that while Microsoft and Amazon may share similarities as tech giants, their styles are quite different.
“Due to Amazon's reputation for innovation and risk tolerance, its shareholder votes may indeed differ from Microsoft's.”
Despite Microsoft's historically more conservative financial and strategic approach, Amazon has a good track record of adopting emerging technologies and exploring new investments.
Cowan said, 'Unlike Microsoft, Amazon's higher willingness to innovate may align with Bitcoin's diversification potential.'
Amazon may vote on the NCPPR's proposal at the annual shareholder meeting in May 2025. The proposal urges the company to allocate a higher percentage of risk assets in its investment portfolio beyond the usual 1-2%.
“Amazon should at least evaluate the benefits of holding a portion (even if only 5%) of Bitcoin assets.”
Cowan believes this ratio is unlikely to be achieved. 'For a company the size of Amazon, a 5% Bitcoin allocation is ambitious and may be unrealistic,' he said. 'While Bitcoin provides diversification, its volatility and lack of tangible returns make it difficult to justify at such levels.' He thinks 'a smaller-scale experimental allocation similar to Tesla's approach may garner more shareholder support.'
Tesla's purchase of Bitcoin in 2021 yielded significant profits for the company. Tesla initially bought $1.5 billion worth of Bitcoin but sold 70% of its initial holdings in 2021.
Nonetheless, according to data from BitcoinTreasuries.NET, Tesla still holds its Bitcoin reserves (9,720 BTC), valued at over $1.3 billion.
Amazon has billions of dollars in cash, so it could easily allocate a similar amount to Tesla.
While NCPPR may genuinely hope that Amazon and Microsoft adopt Bitcoin, Cowan believes the broader strategy is to expand the narrative that Bitcoin can be seen as an inflation hedging tool, creating potential momentum for institutional acceptance of Bitcoin.
NCPPR has not immediately responded to Cointelegraph's request for comment.
Do tech giants need Bitcoin to enrich their wealth?
MicroStrategy has achieved significant results in incorporating Bitcoin into its financial core strategy.
The company began purchasing Bitcoin on August 11, 2020, acquiring 21,454 BTC for $250 million. Since then, its stock price has soared from $14 to $411, and its market cap has risen from $1.3 billion to nearly $100 billion.
Michael Saylor has bet on Bitcoin as a tool for hedging inflation, with returns far exceeding expectations; why don't tech giants emulate Saylor's financial model?
However, MicroStrategy's approach is markedly different, as it uses significant leverage, making its strategy much riskier than Tesla's buy-and-hold strategy.
MicroStrategy's market cap history from 1998 to 2024. Source: Companiesmarketcap
Additionally, the ratio of Bitcoin to its total market cap transforms its stock into a leveraged Bitcoin proxy.
According to the article, Amazon's market cap is $2.4 trillion, and Microsoft's market cap is $3.3 trillion, so its Bitcoin adoption effect would not be similar to MicroStrategy.
Cowan believes Amazon is not in a hurry to adopt Bitcoin, as its 'core business is very strong.' While reallocating some or all of its cash reserves to Bitcoin could hedge against inflation, deviating from its current financial strategy poses risks, and some shareholders may view this as a potential burden on its profitable business model.
“The opportunity cost of holding volatile assets like Bitcoin instead of investing in R&D or acquisitions will have a significant impact on such decisions.”
He said, 'Allocating a significant portion of funds to Bitcoin could impact Amazon's ability to fund key growth areas such as AWS, AI development, and logistics infrastructure.' The shareholder vote needs to 'strike a balance between speculative asset acquisition and key innovation investments that determine Amazon's competitive advantage.'
Bitcoin's environmental issues may hinder shareholders.
Large tech companies must also consider public perception, as mainstream media has a significant impact on their brand and stock prices. While Bitcoin's reputation has improved significantly, it is still associated with speculative trading assets, potential abuses, and environmental issues.
“Negative public relations narratives may obscure potential economic benefits, especially considering Amazon's focus on ESG initiatives and its need to maintain broad appeal to stakeholders.”
Amazon has completely transformed commerce by rapidly delivering goods. However, according to a 2022 report by the environmental organization Oceana, the environmental impact of this model is shocking, generating over 709 million pounds of plastic waste.
The company has committed to achieving net zero carbon emissions by 2040, ten years ahead of the target set by the Paris Agreement.
The high energy consumption of Bitcoin mining has faced severe criticism from environmentalists. However, as mining infrastructure undergoes more thorough scrutiny, this narrative is changing. Despite this shift, the risk of public relations backlash remains.
Amazon shareholders must decide whether the company can achieve positive performance similar to Tesla or MicroStrategy by using Bitcoin to hedge against inflation, or whether to avoid risk and focus on its core business model.
