Скачать или смотреть How to get started investing into Bitcoin as a company and navigate tax considerations

In the past few months we have seen a new narrative emerge. A narrative of institutions & corporations showing increasing interest for bitcoin and other cryptocurrencies. The recent mega bitcoin purchases by Square ($50m dollars) and MicroStrategy($435m dollars) certainly made global headlines and brought this to the light for everybody. Under the surface however, this trend started much earlier during the frosty bear market of 2018.

Top-tier VC firms like Andreesen Horrowitz (a16z) doubled down on their crypto bet while half the world had lost its interest in crypto and closed two dedicated crypto funds totalling over $815 million dollars of capital commitments. Equally famous is the story of Paradigm, which convinced top institutional investors like Harvard and Stanford to give them $750 million to invest in a market they were too blue-blooded to touch directly. Paradigm then invested the full amount of its initial capital in Bitcoin and Ethereum in 2018 at burst-bubble discount prices.

Needless to say these investments have paid off. Bitcoins and Etherum’s value have more than tripled since Paradigms and a16z’s investments. MicroStrategy’s bitcoin investment is up $100m since the time of purchase a month ago. And the space has won unlikely new allies: billionaire Paul Tudor Jones, announced he was buying Bitcoin as a hedge against inflation in May; major institutions including J.P. Morgan, Mastercard and Visa, all of which announced crypto plans over the summer.

Why should companies invest in crypto?
As a new asset class, Bitcoin took time to build a price history and some sense of the cycles it goes through. Today, crypto’s value proposition is better understood by most sophisticated investors and seen as a welcome asset to expand and diversify their largely fiat-denominated balance sheets. Moreover, given the negative interest rate environment that we’re currently in, holding cash has become expensive for companies. Investing into bitcoin and other cryptocurrencies appears therefore like an increasingly rational choice.

Bitcoin as a store of value ( a.k.a “digital gold”)
One of the primary functions of money is to be a store of value: a mechanism to transfer purchasing power across time and geography.

Gold has been trusted as a store of value for millennia. The primary reason for gold’s status as a store of value is that the supply of gold on Earth is scarce. Confidence in its store of value qualities rests in humanity's understanding of nature: that gold is limited and cannot yet be cost-effectively synthesized.

Well established fiat currencies like the US dollar or the Euro can also be thought of as good stores of value. Confidence in fiat currencies rest on trust in the government (e.g., to wisely manage their monetary policy). There is great efficiency in placing such trust in a single institution, but there is also risk. Fiat currencies can lose credibility and be devalued through the actions of the government, who in times of crisis may face short-term pressures that outweigh concerns for long-term credibility.

Contrasting these two stores of value, we can think of the US Dollar as a centralized monetary asset, which can be devalued by a single actor, and gold as a decentralized monetary asset, which cannot.

Now Bitcoin shares this and many other characteristics with gold. Like gold, Bitcoin has a finite supply. Currently the supply of Bitcoin is close to 19 million. Over the course of its lifetime it will asymptomatically approach 21 million. Achieving scarcity in digital form was Bitcoin's great technical breakthrough (building on decades of computer science research). Arguably, Bitcoin is even more scarce than gold as gold’s total earth supply can only be guessed - not known for certain. New discoveries keep making the news (Elon Musk even wants to mine gold on Mars!).

Moreover, like gold, Bitcoin is hard to mine. In the Bitcoin network miners have to put computing power to use in order to validate transactions. The process is both hardware and energy intensive.

However, unlike gold, bitcoin is digital, portable and censorship-resistant. The fact that it’s digital means that it is cheaper to store and easier to transfer than gold, which is physically cumbersome. These properties are especially useful in times of capital controls or expropriations where Bitcoin can not be seized as the currency is transferred over a peer-to-peer network and held in private bitcoin wallets unattainable by anyone but the owner holding the private keys.

To conclude, Bitcoin bears many similarities with gold but also possesses a number of qualities that physical gold doesn’t have. Qualities that are increasingly valuable in a digital first and globalized world. The difference is mainly that Bitcoin is newer and with a smaller market capitalization, with more explosive upside and downside potential. A so-called asymmetric bet.