Today’s world is an ever-increasing storm of technology disruptions, financial disruptions and literal climate storms battering up against every businesses balance sheet. These disruptions claim the lives of business after business, causing employees to get fired or governments to spend billions bailing them out only for it to happen all over again the next time.
But while many see this as the fault of the business, that’s not entirely where all the blame should lie. In fact, it’s inflation that’s one of the main reasons for this trend and in today’s piece we’re going to look at company Bitcoin Reserves and how they can help counteract this decades old struggle.
The Current Normal
When it comes to businesses and the excess cash (or capital) that they hold, the current mantra is essentially one of two main strategies:
- Return Capital To Shareholders: Never hold any significant excess cash reserves and instead use it to pay out dividends or do a share buy back
- Hold Capital: Hold the excess cash in either cash or bonds and have it be inflated away
If the business chooses to keep the cash on hand or in bonds, it gets eaten away by inflation year after year, costing millions or even billions. If the business chooses to give the cash back to its investors, then it operates without any type of safety buffer or rainy day fund. This then leaves it open to the ever increasing volatility of the world.
Maybe it’s another huge COVID-19 shock. Maybe it’s a critical world wide IT outage or hack. Maybe it’s a massive hit just to the businesses specific industry or product. For example, how will taxi or other transport companies deal when Telsa turns on their huge, millions strong robotaxi network?
Whatever the reasons, having a savings buffer, whether you’re an individual or a multi national business is critical to withstanding shocks that occur throughout everyday life. It’s only a matter of time before the individual or business will encounter a scenario where it’s bottom line is hit too hard and without any savings, it goes bankrupt or is bought out by another business.
This is the current “normal” for millions of businesses around the world due to the never ending debasement of global fiat currencies. They cannot hold a cash reserve balance long term without bleeding money and if they return it to shareholders, they risk destroying the business entirely.
This has direct impacts for everyday people because when these companies fail due to not having any savings buffer, it’s often the government that is forced to bail them out. The money they give or loan them is either taken from our taxes or needs to be paid back by future tax revenue. Even if no bail out is given and the company simply collapses, this causes huge disruptions.
What they need, is a Plan B.
Embracing A New Normal
The simple change we suggest companies make is to hold some or all of this excess capital in Bitcoin as a reserve asset. This would become what’s called a Company Bitcoin Reserve.
Before Satoshi discovered Bitcoin the above “normal” was all that was available. Now companies have a choice, and the choice isn’t necessarily as radical or reckless as some might originally think.
To start with we’d like to make it clear that every company is different, with different profits, different board members, different personalities, countries, regulations and more. As such, it’d be useless to suggest some hard core, triple maxi strategy that no one is ever going to embrace.
Luckily Bitcoin can be adopted and brought into the fold literally one dollar at a time. As slow or as fast as the company deems. Maybe they start by keeping just 1% of their reserve capital as Bitcoin. Maybe it’s only 0.1%! Whatever amount they’re comfortable with, they can focus on getting board approvals and setting up an appropriate, institutional grade Bitcoin Multisig Wallet.
This is similar to what we recommend individuals do too, as it enables them to get setup and experience Bitcoin and all its differences without putting too much wealth at risk.
Once confidence and understanding increases, then the business can slowly convert some or all of their existing cash holdings into Bitcoin, or if they don’t have any cash reserves, start converting excess revenue that is earned into Bitcoin.
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