As Bitcoin’s price swells and inflation and global conflict weigh on the economy, one company is looking at assets other than the dollar to preserve its wealth.
On Tuesday, med tech stock Semler Scientific revealed that it had used some $40 million of its cash reserves to buy 581 Bitcoin.
“Our Bitcoin treasury strategy and purchase of Bitcoin underscore our belief that Bitcoin is a reliable store of value and a compelling investment,” the firm said in a press release.
“It has unique characteristics as a scarce and finite asset that can serve as a reasonable inflation hedge and safe haven amid global instability.”
Semler’s stock jumped 24% the day of the announcement then rose another 11% the day after. Bitcoin fans also celebrated the investment, and are watching to see if other companies will follow suit.
But Semler’s investment is unusual.
“I would be surprised if this establishes a trend,” a Wall Street healthcare analyst, who declined to be named citing company media policy, told DL News.
“If anybody of size did that, they would get sued for breach of fiduciary duty because that is hardly conservative treasury management for a healthcare company.”
Protecting purchasing power
Only a handful of companies have disclosed investments in Bitcoin or other crypto assets.
MicroStrategy is the biggest corporate Bitcoin holder, with around $15 billion worth of the cryptocurrency on its books.
Tesla holds $725 million worth, while a recent regulatory filing for Reddit said the firm had invested an “immaterial” amount of its excess cash reserves in Bitcoin and Ether.
Besides MicroStrategy, the amount of crypto as a proportion of these companies’ overall wealth pales in comparison to Semler Scientific. Its $40 million Bitcoin investment accounts for almost 18% of its $227 million market capitalisation.
“Fiat currencies are looking less stable,” Juan Leon, a crypto research analyst at Bitwise Asset Management, told DL News. “Companies are beginning to look for alternative assets to currencies and bonds in order to protect their purchasing power.”
For companies with spare cash, US Treasury bonds are usually the go-to asset. That’s because they earn a yield, currently around 5.2% on short-dated bonds, and are widely viewed as the safest investment in the market.
But in recent years, Treasuries have, at points, earned a negative real yield in dollars. That means that the dollar’s inflation outsripped the yield bonds pay out, reducing the purchasing power of dollars invested in bonds.
‘Intrinsically scarce assets’
With a shaky outlook for the dollar, more companies could start looking at alternative investments to avoid losing out.
“I expect a transition from abundant assets to intrinsically scarce assets,” including debt, central bank balance sheets and currencies, Jeroen Blokland, founder of Blokland Smart Multi-Asset Fund, told DL News.
“Anyone seeking to balance the risks will look at assets like gold and Bitcoin.”
But Bitcoin’s volatility raises questions around companies holding large amounts of it on their balance sheets. A sharp decline could spell ruin.
Tim Craig is a DeFi Correspondent at DL News. Got a tip? Email him at tim@dlnews.com.
