As inflation continues to impact the global economy, the idea of holding Bitcoin as a treasury asset has gained traction in corporate discussions. Tech companies like Amazon, with billions in cash reserves, are now being urged to consider Bitcoin as a hedge against inflation. But is Bitcoin a practical solution for Big Tech?
The Proposal: Bitcoin as an Inflation Hedge
Amazon, with $87 billion in cash reserves last year, is at the center of a debate sparked by the Washington-based think tank National Center for Public Policy Research (NCPPR). The organization has submitted proposals encouraging companies like Amazon and Microsoft to incorporate Bitcoin into their treasuries.
The argument hinges on Bitcoin’s potential to protect cash assets and shareholder value from inflation. NCPPR claims that traditional measures like the Consumer Price Index (CPI) underestimate inflation, pegging it at 4.95%, while real currency debasement could be much higher.
However, the question remains: Can the benefits of Bitcoin as a hedge against inflation outweigh its risks?
Mixed Responses: Microsoft Rejects, Amazon Could Be Next
At Microsoft’s recent shareholder meeting, the proposal to adopt Bitcoin was overwhelmingly rejected. Critics pointed to Bitcoin’s volatility as a major deterrent.
Amazon, however, has a reputation for innovation and a higher risk tolerance compared to Microsoft. Nick Cowan, CEO of fintech firm Valereum, believes Amazon’s approach to emerging technologies could lead to a different outcome.
“Unlike Microsoft, Amazon’s willingness to innovate might align with Bitcoin’s potential for diversification,” Cowan explained.
Amazon shareholders will vote on the NCPPR proposal at the company’s annual meeting in May 2025. While the proposal suggests holding 5% of Amazon’s cash reserves in Bitcoin, Cowan considers this percentage unrealistic, proposing instead a smaller experimental allocation similar to Tesla’s strategy.
Tesla’s Example: A Blueprint for Amazon?
Tesla’s foray into Bitcoin in 2021 offers a case study for tech giants considering crypto investments. The company initially purchased $1.5 billion worth of Bitcoin and later sold 70% of its holdings, locking in significant profits. As of now, Tesla still holds 9,720 BTC, valued at over $1.3 billion.
Amazon’s substantial cash reserves make it financially capable of following a similar path, but the risks of Bitcoin’s price volatility and lack of yield might deter such a move.
Barriers to Bitcoin Adoption by Big Tech
- Volatility: Bitcoin’s price swings remain a concern for shareholders, especially when compared to stable traditional assets.
- Lack of Tangible Yield: Unlike bonds or other investments, Bitcoin doesn’t provide a steady return, making it a less attractive option for cash-heavy companies.
- Shareholder Reluctance: As seen with Microsoft’s rejection of the Bitcoin proposal, shareholder sentiment is critical and often leans conservative regarding risky assets.
