Guest Blog Written By: ICONOMI
Bitcoin may not be the first thing you associate with your business; however in this guest blog from our partners, ICONOMI, they explain the benefits that Bitcoin could bring to your business, including why businesses are embracing Bitcoin, how digital assets can protect your purchasing power, and who can benefit from a digital asset strategy.
The Benefits Of A Bitcoin Strategy
In 2020, MicroStrategy made headlines when its Chairman and Co-founder, Michael Saylor, took a bold step: he bought Bitcoin as a hedge against inflation and an alternative to cash reserves on the company’s balance sheet. This marked the start of the company’s digital asset strategy, setting a precedent for other businesses.
Today, MicroStrategy owns over 250,000 Bitcoins, making it one of the most prominent corporate investors in the cryptocurrency space. With Bitcoin recently trading around $60,000, the company is sitting on an unrealised profit of over $5.39 billion. While MicroStrategy’s scale is exceptional, its approach to integrating digital assets can be effective even for small and medium-sized enterprises (SMEs).
The landscape for corporate Bitcoin adoption has seen rapid growth. Since June 2020, the number of businesses holding Bitcoin in their treasury has surged by 587%, and in the last year alone, adoption among publicly traded companies increased by 40%. But why are more businesses, big and small, turning to digital assets like Bitcoin? Let’s dive into the key reasons.
Why Businesses Are Embracing Digital Assets
1. Why Bitcoin Can Be A Hedge Against Inflation
One of the most compelling reasons for companies to adopt a digital asset strategy is inflation protection. Cash sitting in reserve is vulnerable to devaluation as central banks print more fiat currency, increasing supply and eroding purchasing power. For instance, while fiat currencies like the GBP, USD, and EUR can be printed indefinitely, Bitcoin’s supply is fixed at 21 million. This scarcity, combined with growing demand, has historically driven Bitcoin’s purchasing power upward.
(Source Bank of England)
Consider this: since 2009, the value of Bitcoin has risen from zero to over $70,000, while the purchasing power of the GBP has decreased by more than 50% over the same period. Goods and services that cost £10,000 in 2009 would now cost £15,000—a 50% increase in price due to fiat currency devaluation. Holding a portion of your business’s reserves in Bitcoin could help hedge against this inevitable loss of value.
2. Protection from Fiat Currency Fluctuations
If your business imports goods or services from other countries, you’re no stranger to the volatility of exchange rates. When the value of your local currency declines against the currency of the country you’re importing from, your costs go up, squeezing your margins. On the flip side, if you export, a stronger domestic currency could make your goods more expensive for overseas customers, potentially reducing sales.
Stablecoins like USDT and USDC offer businesses a way to sidestep these fluctuations. Unlike fiat currencies, stablecoins are pegged to the value of assets like the US dollar, offering a more stable store of value. Bitcoin, though more volatile than stablecoins, can also play a role in diversifying currency risk, providing upside potential along with inflation hedging.
3. Mitigating Central Bank Policies
Central banks control interest rates, which directly impact industries like real estate, where borrowing plays a central role. As interest rates rise, borrowing costs increase, cooling down markets and making financing less attractive for investors and buyers. This can hurt businesses in sectors reliant on credit, such as real estate developers and agents.
Some companies in these sectors have started to invest in digital assets as a way to diversify their risk. If traditional markets cool, Bitcoin and other cryptocurrencies offer an alternative with growth potential, given Bitcoin’s annualized return of 145% over the last decade. By incorporating Bitcoin into their portfolio, businesses can hedge against downturns in more traditional investments, like real estate.
How Bitcoin Protects Your Businesses Purchasing Power Over Time
To understand why Bitcoin is effective as a hedge against inflation, let’s compare it directly to fiat currency. The GBP has lost significant value in the last decade, while Bitcoin has done the opposite. Since its inception in 2009, Bitcoin’s price has grown from $0 to over $70,000, increasing its purchasing power dramatically. In contrast, the GBP has steadily lost value, with inflation driving up the cost of goods and services by 50% in the same period.
While fiat currencies are subject to the whims of government monetary policy, Bitcoin operates independently. Its decentralized nature and fixed supply ensure that no central authority can devalue it through overproduction. This makes Bitcoin a strong contender as a long-term store of value.
Which Businesses Can Benefit From A Bitcoin Strategy?
There’s a misconception that only companies directly involved in the cryptocurrency space should consider holding digital assets. In reality, businesses across various industries—property, finance, hospitality, retail, import/export, and technology—are adopting this strategy.
Whether your business is looking to hedge against inflation, protect against currency fluctuations, or diversify its portfolio, a digital asset strategy can offer a compelling solution. With platforms like ICONOMI, implementing this strategy is becoming more accessible and tailored to the needs of modern businesses.
Conclusion: A Strategy for the Future
In an increasingly volatile economic environment, forward-thinking businesses are seeking out ways to protect their assets and future-proof their strategies. Bitcoin and other digital assets offer a powerful tool for managing inflation, mitigating currency risks, and shielding against economic uncertainty. By integrating digital assets into your business strategy, you can unlock new growth opportunities and enhance your financial resilience for the years ahead.
Explore how ICONOMI can help your business implement a digital asset strategy today.
Disclaimer: The content of this article has been provided by ICONOMI and reflects their views and insights. Nordens Chartered Accountants does not provide financial or investment advice, and this article should not be interpreted as such. We are not endorsing or recommending any specific actions or decisions based on the information provided. For personalised advice or to assess the suitability of any financial or investment strategy, we recommend consulting with a qualified financial professional.
