To investors,

The public markets are starting to embrace bitcoin globally. MicroStrategy started the game with their announcement of a bitcoin treasury strategy. MicroStrategy owns 214,400 bitcoins as of May 1, 2024. The company claims the average purchase price of these bitcoin is $35,158 per bitcoin with a total cost of $7.5 billion.

Next we saw Tesla and Square (now known as Block) get in the game. Tesla has sold some of their bitcoin, but still holds approximately 9,720 for a total value of more than $670 million. Block is still holding more than 8,000 bitcoin themselves.

These three companies were the lone bitcoin trio for awhile. I don’t count the bitcoin miners and other crypto-native companies in this analysis. What made MicroStrategy/Tesla/Block special was the fact they had nothing to do with bitcoin/crypto, yet were choosing to embrace the asset as a reserve currency.

We no longer have a special trio though. The flood gates have opened in the last 6 months.

We have seen DeFi Technologies in Canada, Metaplanet in Japan, and Semler Scientific in the US announce a bitcoin treasury strategy. Each company saw their stock increase in value shortly after the announcements.

Game theory is going to take over now.

If a company sees an increase in their stock price in the short-term, and an increase in their balance sheet value over the long-term, then we should anticipate many companies to adopt bitcoin as a reserve asset in the future. Economic incentives are a powerful drug.

This does not mean a public company is going to move 100% of their assets into bitcoin. It means that a portion of the balance sheet will be converted to bitcoin and held for the long-term. Bitcoin doesn’t have to be the only reserve asset, it just has to be one of a few held by companies.

Something about this is counter-intuitive. Many people on Wall Street would point to a bitcoin treasury strategy as a gimmick. They will claim people are merely trying to increase their share price or grab headlines. While that could be true to a degree, these companies are actually pursuing a sound financial strategy built on timeless investing principles — they are putting their economic value in a long-term oriented asset.

Wall Street is full of short-termism. Everyone wants to know what you’re going to do in the next 90 days or what you did in the last quarter. Bitcoin may slowly change some of that thinking.

It is a competitive advantage to think long-term in a world full of people who don’t. As we continue to watch the US government, and many governments around the world, debase their currency bitcoin will likely become a more attractive asset.

Historically, US treasuries were considered a safe investment, but we can see how horrendous this strategy has been over the medium-term recently. Use the Vanguard Long-Term Treasury Index Fund ETF as an example — holders of these treasuries are down more than 25% over the last 5 years.

This doesn’t include the real loss, which could be double as bad.

What happens in a world where corporations stop using treasuries as a long-term vehicle for balance sheet management? How do things change if bitcoin becomes the default asset for a portion of the balance sheet?

I don’t know those answers, but it feels like we are going to start getting answers in the months and years to come.

Hope you all have a great end to your week. I’ll talk to everyone on Monday.

-Anthony Pompliano

Will Clemente is the Co-Founder of Reflexivity Research.

In this conversation, we talk about Bitcoin, Ethereum, Solana, meme coins, portfolio management, ETFs, regulation, culturally relevant ideas, what you should be paying attention to, and where opportunities exist in the next 18 months.

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