Authors: Chi Anh, Ryan Yoon, and Yoon Lee, Tiger Research
Compiled by: Luffy, Foresight News
Summary
The decentralization 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 made for profit-taking or cash flow management.
An increasing number of governments in Asia are recognizing Bitcoin as an investment asset. At the same time, governments in countries like El Salvador and the United States are implementing measures to acknowledge Bitcoin as a strategic asset. These developments highlight the growing influence of Bitcoin in global economic strategy formulation.
1. Introduction
As an investment asset, Bitcoin has attracted attention due to its characteristics that differ from traditional assets like gold. The decentralization and anti-inflation traits of Bitcoin bring new possibilities to institutional asset management strategies.
MicroStrategy is a prominent institutional example of strategically leveraging Bitcoin's advantages. 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 reassess their investment strategies.
However, Bitcoin investment may not be suitable for all institutions. While Bitcoin purchases often attract public attention, many companies have cautiously sold their holdings. This report aims to analyze the reasons behind institutional investments in Bitcoin, explore key factors influencing different institutions' buying and selling decisions, and study 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 Asian markets.
2. Bitcoin as an Investment Asset
Institutions have traditionally favored investment assets like bonds, gold, and foreign currencies for their risk-hedging capabilities, which can also 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 (such as bonds and gold). With a fixed total supply of 21 million coins, Bitcoin ensures scarcity, making it an attractive long-term 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?), utilizing 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 results indicate that Bitcoin's return rate significantly increases after positive inflation shocks. However, this effect is more pronounced for price indices sensitive to shocks (primarily applicable to CPI shocks) and is more significant in the early stages before Bitcoin's widespread institutional adoption. This suggests that Bitcoin's ability to hedge against inflation is situational and may weaken as its adoption expands.
2.2. Profitability of Bitcoin as an Investment Asset
Source: TradingView
In 2024, Bitcoin's return rate was approximately 127%, significantly surpassing the 27% increase in gold and the roughly 24% rise in the S&P 500 index during the same period.
However, the value of Bitcoin as an institutional investment asset lies not just in its investment returns. Traditional investment assets have limited trading hours and complex trading processes, making it difficult to respond quickly to interest rate changes or market shocks.
In contrast, Bitcoin has global liquidity, unrestricted by borders or time zones, allowing for 24/7 real-time trading. High liquidity enables quick conversion of Bitcoin into 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 total number of publicly listed companies worldwide has grown to a substantial scale. Therefore, attracting investor attention solely based on strong fundamentals has become increasingly difficult. To enhance market visibility, companies are now increasing their investments in marketing.
In such a market environment, Bitcoin has created additional publicity effects. As only a few publicly listed companies hold Bitcoin, merely announcing the purchase of Bitcoin as part of a portfolio diversification strategy can generate significant media exposure.
Such media coverage brings many positive outcomes to companies, enhancing brand value, attracting retail investor interest, and strengthening their innovative and forward-looking image. Besides increasing asset value, Bitcoin also plays a role in enhancing corporate value.
3. Institutional Buying and Selling Behavior
As Bitcoin becomes an integral part of institutional portfolios, a unique trading model 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 enhances market confidence. In contrast, Bitcoin sales are 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 leveraging Bitcoin as an investment asset. By acquiring over 446,400 BTC, the company has garnered widespread market attention. This strategy aims to achieve two key objectives: to hedge against 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 to 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 stock buybacks and Bitcoin as the best uses of corporate excess funds, choosing Bitcoin as a long-term hedge against unlimited quantitative easing.
Contrary to early concerns, MicroStrategy's Bitcoin investment strategy has gained wide support from numerous companies. In addition to serving as an inflation hedge, Bitcoin is now seen as 'digital gold,' reshaping the way enterprises manage their assets. This innovative initiative to diversify reserves using Bitcoin provides new directions for global corporate financial strategies.
Boya Interactive Announcement
MicroStrategy's success story is also influencing Asian markets. Boya Interactive has converted its Ethereum holdings into Bitcoin, and MetaPlanet is actively purchasing Bitcoin in 2024. These moves reflect an increasing recognition in the Asian market of Bitcoin's utility in managing volatility and preserving long-term value.
3.2. Institutional Selling Behavior: Tesla
Tesla is one of the most notable companies adopting Bitcoin, providing a case markedly different from that of 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 the investment in Bitcoin provides liquidity and a degree of returns, demonstrating its flexibility as a financial tool for capital-intensive enterprises.
Similarly, when Bitcoin reached $100,000, Meitu made substantial profits from sales. Compared to Tesla's strategic profit-taking, Meitu's decision appears to be a deliberate move to sell at market highs. Unlike the discreet actions of Tesla, Meitu publicly explained that this sale was a step to consolidate its financial position amidst challenges in its core business. This stands in stark contrast to Tesla's secretive selling, indicating that public disclosure helps reduce market uncertainty caused by institutional selling.
The strategic reasons behind institutional buying and selling of Bitcoin are directly related to their financial goals and operational needs. Companies often sell Bitcoin to realize profits during market peaks, as Tesla did in 2022, or convert held cryptocurrencies into operating capital for reinvestment in core business operations. The main reasons behind selling can generally be categorized as: 1) realizing profits 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 solution to cash flow issues. Furthermore, if the motivation for selling is profit-taking, it raises questions about how these profits will be used. Will they be reinvested to enhance the business, or primarily benefit stakeholders? Regardless, such actions may lead to missed opportunities for further appreciation and weaken the long-term advantages of holding Bitcoin as an investment asset.
4. Institutional Bitcoin Buying and Selling Behavior in Asia
MetaPlanet is a prime example of active Bitcoin adoption in Asia. Known as 'Asia's MicroStrategy,' the company purchased 1,018 Bitcoins in 2024 alone, demonstrating its firm commitment to long-term Bitcoin investment.
The case of MetaPlanet highlights the successful transformation of 'zombie companies.' Zombie companies generate profits just enough to cover operating costs and repay debts but lack the capital to drive growth. Despite having substantial cash reserves, MetaPlanet had failed to attract attention from the stock market. By benchmarking against MicroStrategy's strategy, the company successfully turned losses into profits.
In addition to Bitcoin investment, 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 creating profits through put options. This approach is seen as a proactive profit model that goes beyond simple asset holding.
However, this strategy is not applicable to all zombie companies; success depends on whether established companies can implement differentiated strategies. Latecomers blindly mimicking may exacerbate risks, necessitating caution and consideration of factors like 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 decentralization, anti-inflation properties, and unparalleled liquidity of Bitcoin make it an attractive option for achieving asset diversification and long-term preservation of value.
Some governments are also exploring the potential of Bitcoin. El Salvador's adoption of Bitcoin as legal tender is one example, showcasing the asset's role in economic growth and financial inclusion strategies. Recently, Trump announced that the U.S. would recognize Bitcoin as an investment asset, or as he put it, 'a permanent national asset benefiting all Americans.' These governmental measures indicate that the importance of Bitcoin is increasingly relevant not just to businesses but also to policymakers aiming for financial system modernization.
It has been proven that buying and selling Bitcoin can benefit companies, especially during market uptrends. In an upward trend, buying signals confidence in Bitcoin's growth potential, while selling allows companies to realize profits and reinvest in core operations. However, during market downturns, 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 the company is stopping losses or liquidating assets to cover operating expenses.
For decision-makers, the implications are clear: Bitcoin has great potential as an investment asset, but it needs to be cautiously integrated into corporate strategies. Companies must weigh the financial benefits of holding Bitcoin (such as liquidity and anti-inflation capacity) against operational risks and related market volatility. Whether for long-term reserves or short-term liquidity needs, effectively leveraging Bitcoin requires careful alignment with corporate objectives and market conditions.
