Authors: Chi Anh, Ryan Yoon, and Yoon Lee, Tiger Research
Translated by: Luffy, Foresight News
Summary
The decentralized and anti-inflation characteristics of Bitcoin make it a versatile tool for institutions to hedge against economic uncertainty and maintain long-term value.
Institutional purchases of Bitcoin often signify confidence and innovation, while sales are typically aimed at profit-taking or cash flow management.
The Asia region is increasingly adopting Bitcoin as an investment asset, while governments in countries like El Salvador and the United States are implementing measures to recognize Bitcoin as a strategic asset. These developments underscore the growing influence of Bitcoin in global economic strategy formulation.
1. Introduction
As an investment asset, Bitcoin has garnered attention for its characteristics that differ from traditional assets like gold. The decentralized and anti-inflation properties of Bitcoin present new possibilities for institutional asset management strategies.
MicroStrategy is a renowned institutional example of strategically leveraging the advantages of Bitcoin. The company effectively uses Bitcoin to address inflation risks and strengthen its financial position. This success story has prompted numerous companies and financial institutions worldwide to reevaluate their investment strategies.
However, Bitcoin investment may not be suitable for all institutions. Although Bitcoin purchases often attract public attention, many companies have cautiously sold their held Bitcoin. This report aims to analyze the reasons behind institutional investment in Bitcoin, explore the key factors influencing different institutions' buying and selling decisions, and examine institutional strategies under similar market conditions. As Bitcoin's status as a corporate investment asset continues to rise, this report will also analyze perspectives and corresponding strategies in the Asian market.
2. Bitcoin as an Investment Asset
Institutions have traditionally favored investment assets like bonds, gold, and foreign currencies due to their risk-hedging capabilities and sometimes their ability to preserve value during economic uncertainty. Bitcoin has emerged as a strategic investment asset, providing institutions with an effective, anti-inflation, and profitable alternative to traditional assets like bonds and gold. The total supply of Bitcoin is fixed at 21 million, ensuring its scarcity and making it a highly attractive long-term value preservation option.
2.1. The Role of Bitcoin as an Inflation Hedge
Rodriguez and Colombo conducted a study in 2024 (Is Bitcoin an Inflation Hedge?) using key economic indicators such as the U.S. Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) data over the past decade to analyze Bitcoin's response to inflationary pressures. The findings indicate that Bitcoin's return rates significantly increase following positive inflation shocks. However, this effect is more pronounced for price indices sensitive to CPI shocks and is particularly notable in the early stages before Bitcoin is widely adopted by institutions. This suggests that Bitcoin's ability to hedge against inflation is context-dependent and may weaken as its adoption broadens.
2.2. Profitability of Bitcoin as an Investment Asset
Source: TradingView
In 2024, Bitcoin's return rate was approximately 127%, significantly surpassing the 27% rise in gold and about 24% increase in the S&P 500 index during the same period.
However, the value of Bitcoin as an institutional investment asset lies not only in its investment returns; traditional investment assets have limited trading times and complex trading processes, making rapid responses to interest rate changes or market shocks challenging.
In contrast, Bitcoin offers global liquidity, unrestricted by borders or time zones, allowing for 24/7 real-time trading. High liquidity enables Bitcoin to be quickly converted to cash in any country or region, distinguishing it from traditional financial assets. These characteristics allow institutions to effectively manage assets and respond to market conditions.
With high profitability and practicality, Bitcoin is poised to become an increasingly important investment asset in institutional portfolios.
2.3. The Role of Bitcoin as a Lever in the Attention Economy
With over 3,300 companies listed on NASDAQ, the number of publicly traded companies globally has grown to a very large scale. Therefore, attracting investor attention solely through strong fundamentals has become increasingly difficult. To enhance market visibility, companies are now increasing investments in marketing.
In such a market environment, Bitcoin creates additional publicity effects. With only a few listed companies holding Bitcoin, merely announcing the purchase of Bitcoin as part of a portfolio diversification strategy can generate significant media exposure.
Such media coverage brings numerous positive outcomes for companies, enhancing brand value, attracting retail investor interest, and strengthening their innovative and forward-looking image. In addition to increasing asset value, Bitcoin also plays a role in enhancing corporate value.
3. Institutional Buying and Selling Behavior
As Bitcoin becomes an essential part of institutional portfolios, a unique trading pattern has emerged. Institutions typically announce Bitcoin purchases publicly, sending a strong signal to the market. This strategy helps highlight the company's innovative stance and boosts market confidence. In contrast, the selling of Bitcoin is conducted cautiously, usually occurring when profits are realized and funds are reinvested to strengthen core business operations.
3.1. Institutional Buying Behavior: MicroStrategy
MicroStrategy's Bitcoin purchase records, source: saylortracker.com
MicroStrategy is a leading example of utilizing Bitcoin as an investment asset. By holding over 446,400 BTC, the company has gained widespread attention in the market. The strategy aims to achieve two key objectives: to combat inflation and enhance financial stability.
Source: Michael Saylor's X account
CEO Michael Saylor attracted market attention by fundamentally changing the perception of Bitcoin. He transformed from a former skeptic into an enthusiastic advocate, emphasizing that 'cash, low-yield bonds, and overvalued tech stocks are vulnerable to inflation and should be avoided.' In the current market environment, Saylor proposes that stock buybacks and Bitcoin are the best uses of a company's surplus funds, choosing Bitcoin as a long-term hedge against unlimited quantitative easing.
Contrary to early concerns, MicroStrategy's Bitcoin investment strategy has received widespread support from many companies. In addition to serving as an inflation hedge, Bitcoin is now viewed as 'digital gold', reshaping the way enterprises manage their assets. This innovative initiative to diversify reserves with Bitcoin points to a new direction for global corporate financial strategies beyond traditional assets.
Boyaa Interactive Announcement
MicroStrategy's success story is also influencing the Asian market. Boyaa Interactive has converted its Ethereum holdings into Bitcoin, while MetaPlanet has actively purchased Bitcoin in 2024. These moves reflect an increasing recognition in the Asian market of Bitcoin's utility in volatility management and long-term value preservation.
3.2. Institutional Selling Behavior: Tesla
Tesla is one of the most prominent companies adopting Bitcoin, providing a case that is distinctly different from companies like MicroStrategy. The company sold 75% of its Bitcoin holdings in 2022, attributing the decision to liquidity needs amid uncertain economic conditions. Recently, in October 2024, Tesla transferred $760 million worth of Bitcoin to an unknown wallet, sparking speculation about further sales.
Tesla's Bitcoin investment has been strategically used to support its operational and expansion needs, including building new factories in Austin, Texas, and Berlin. Tesla's CFO Zachary Kirkhorn stated that investing in Bitcoin provides liquidity and a certain degree of returns, demonstrating its flexibility as a financial tool for a capital-intensive company.
Similarly, when Bitcoin reached $100,000, Meitu gained substantial profits from its sale. Compared to Tesla's strategic profit-taking, Meitu's decision appears to be a deliberate act of selling at market peaks. Unlike Tesla's discreet actions, Meitu publicly explained that this sale was a step to strengthen its financial position amid challenges in its core business. This starkly contrasts with Tesla's secretive sales and indicates that public disclosure helps reduce market uncertainty caused by institutional selling.
The strategic reasons for institutions buying and selling Bitcoin are directly related to their financial goals and operational needs. Companies often sell Bitcoin to profit during market peaks, as Tesla did in 2022, or to convert held cryptocurrencies into operating capital for reinvestment in core business. The primary reasons behind selling can typically be categorized as: 1) profiting under favorable market conditions to expand and improve business operations; or 2) needing funds to address cash flow challenges. This raises the question of whether any future sales are driven by strategic financial planning or are a stopgap measure to resolve cash flow issues. Moreover, if the motivation for selling is profit-taking, it raises questions about how those profits will be utilized. Will they be reinvested to enhance the business or primarily benefit stakeholders? In any case, such actions may lead to missed opportunities for further appreciation and weaken the long-term advantages of holding Bitcoin as an investment asset.
4. Asian Institutional Bitcoin Trading Behavior
MetaPlanet is a prime example of active Bitcoin adoption in Asia. As its nickname 'Asian MicroStrategy' suggests, the company purchased 1,018 Bitcoins in 2024, demonstrating its firm commitment to long-term Bitcoin investment.
The case of MetaPlanet highlights a successful transformation of 'zombie companies.' Zombie companies generate profits sufficient only to cover operating costs and repay debts, lacking the capital to drive growth. Despite having large cash reserves, MetaPlanet failed to attract attention from the stock market. By benchmarking MicroStrategy's strategy, the company successfully turned profitable.
In addition to Bitcoin investments, MetaPlanet has also announced plans to expand into new business areas. The company's strategy includes using various financial instruments such as loans, stocks, and convertible bonds to acquire Bitcoin, while also generating profits through put options. This approach is regarded as a proactive profit model that goes beyond simple asset holding.
However, this strategy is not suitable for all zombie companies; success depends on whether companies that have already established themselves in their respective stock markets can implement differentiated strategies. Latecomers blindly mimicking could exacerbate risks and should do so cautiously, considering factors such as corporate cash reserves, market conditions, and risk management capabilities.
5. Conclusion
In summary, the evolution of Bitcoin as an investment asset marks a significant shift in the institutional financial landscape. The decentralized nature of Bitcoin, its anti-inflation properties, and its unparalleled liquidity make it an attractive option for achieving asset diversification and long-term value preservation.
Some governments are also exploring the potential of Bitcoin. El Salvador's adoption of Bitcoin as legal tender is one example, highlighting the asset's role in national strategies for economic growth and financial inclusion. Recently, Trump announced that the U.S. will recognize Bitcoin as an investment asset, or as he put it, 'a permanent national asset that benefits all Americans.' These government initiatives indicate that the growing significance of Bitcoin is not only relevant to businesses but also crucial for policymakers aiming to modernize the financial system.
It has been proven that buying and selling Bitcoin benefits companies, especially during market uptrends. Buying indicates confidence in Bitcoin's growth potential, while selling allows companies to realize profits and reinvest in core business. However, in a downtrend, these actions may have negative effects. Buying may raise concerns about whether corporate funds are being used for speculative investments, while selling may prompt questions about whether a company is cutting losses or liquidating assets to cover operational costs.
For decision-makers, the implications are clear: Bitcoin holds immense potential as an investment asset, but it must be integrated into corporate strategies cautiously. Companies must weigh the financial benefits of holding Bitcoin (such as liquidity and anti-inflation capacity) against operational risks and associated market volatility. Whether for long-term reserves or short-term liquidity needs, effectively utilizing Bitcoin requires careful alignment with corporate objectives and market conditions.
