Is Microsoft’s Bitcoin bet inevitable?

ON October 24, Microsoft’s board urged its shareholders to vote against a proposal submitted by the National Center for Public Policy Research (NCPPR), which called for an assessment of Bitcoin as an investment asset.

While the board explained that Bitcoin had been considered in previous evaluations and reaffirmed its commitment to staying informed on cryptocurrency developments, I believe this stance is temporary.

To my mind, Microsoft’s eventual foray into Bitcoin seems inevitable, and waiting for them to officially jump in could mean missing out on significant upside.

One of the most telling indicators is that BlackRock, Microsoft’s second-largest shareholder, has recently ventured into Bitcoin ETFs.

BlackRock’s decision marks a watershed moment in institutional acceptance of Bitcoin. For years, cryptocurrencies were viewed sceptically by the traditional financial world, but this is changing rapidly.

When the world’s largest asset manager (and Microsoft shareholder) makes a significant move into Bitcoin, it is not just a trend - it is a signal of a broader shift in how institutional investors view digital assets. This will likely influence Microsoft to rethink its own position.

The company has always been a pioneer in embracing transformative technologies, and with the rise of Bitcoin’s legitimacy among major financial institutions, it’s surely only a matter of time before they align with these trends.

A key factor driving companies toward Bitcoin is its increasing role as a hedge against inflation. Microsoft's $108.1 billion in cash reserves, as of October 11, face the same inflationary pressures as any other company’s balance sheet.

Corporate bond yields, traditionally considered safe havens for cash, have underperformed due to global inflationary conditions and prolonged low interest rates in recent years. This creates a dilemma for companies with large cash holdings.

Holding fiat currency or bonds in the face of inflation erodes value over time, and alternative assets like Bitcoin are becoming more appealing due to their inherent scarcity. The crypto’s supply is fixed at 21 million coins, making it resistant to inflationary forces that impact fiat currencies.

As more companies seek alternatives to protect their cash reserves, Bitcoin’s appeal as ‘digital gold' continues to rise, and Microsoft will eventually recognize this opportunity.

Another compelling argument for Microsoft to enter the Bitcoin space lies in the remarkable success of companies like MicroStrategy. Over the past four years, MicroStrategy has accumulated a staggering 252,220 BTC, which is currently valued at roughly $17 billion.

More importantly, its Bitcoin strategy has resulted in a 300% increase in its stock price this year.

What’s notable here is that MicroStrategy, with its much smaller business footprint compared to Microsoft, has significantly outpaced Microsoft’s stock performance due to its early Bitcoin investments.

This provides a clear example of how Bitcoin can substantially increase shareholder value when incorporated into a company’s strategy.

Bitcoin’s unique value proposition lies in its decentralised, secure, and limited-supply nature. With growing institutional buy-in, it is becoming increasingly difficult for large corporations to ignore the benefits of allocating part of their reserves to Bitcoin.

While Microsoft’s board may feel that their proactive approach in monitoring Bitcoin developments is sufficient for now, this will not hold indefinitely.

With companies like BlackRock are diving deeper into the Bitcoin market and examples like MicroStrategy proving that Bitcoin can dramatically enhance a company’s stock performance, the case for Microsoft’s eventual entry into Bitcoin becomes even stronger. And if Microsoft does jump into Bitcoin, which I think’s is inevitable, the price can be expected to skyrocket.

The arrival of a tech giant like Microsoft in the Bitcoin market will signal to the entire financial world that cryptocurrencies are not just an emerging asset class, but a core part of the future investment landscape.

Should Microsoft announces a Bitcoin purchase, institutional and retail investors alike will rush to follow suit, driving up demand and, in turn, Bitcoin’s price. The price impact would likely be immediate and substantial, given Microsoft’s sheer scale and the market-moving power it holds.

For those waiting on the sidelines, hoping to jump into Bitcoin when a company like Microsoft officially enters the space, there’s a good chance they’ll miss out.

Nigel Green, deVere Group CEO and founder

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