3 Steps to Adopt Bitcoin as a Treasury Reserve Asset

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This article is not investment advice but the personal opinion of the author. The capital value of any discussed investment can fluctuate, and the price can go down as well as up and is not guaranteed.

Bitcoin vs USD

Step 1: Use Bitcoin as Your Personal Treasury Reserve Asset?

As a response to the stock market crisis 2008 and the COVID-19 crisis 2020-2021, central banks all over the world print massive amounts of money — “fiat currency” — and flood the market with money. The total assets on the balance sheet of the Federal Reserve grew from $0.87T in 2007 to $8T in 2021. This is a factor 10x increase in monetary supply!

For every 2007-dollar, there are now ten 2021-dollars.

Due to the debasement of the Dollar, Euro, and other so-called fiat currencies, more and more companies use Bitcoin as their treasury reserve asset.

πŸ”— Bitcoin whitepaper download (PDF)

  • The definition of debasement is “the action or process of reducing the quality or value of something.”
  • The definition of treasury reserve asset is “the asset used to store excess monetary energy across time.”

Should you apply the same strategy of holding Bitcoin instead of cash?

Michael Saylor, CEO of the SaaS company MicroStrategy, was one of the first business owners who moved his money out of Fiat currencies and into Bitcoin. His goal was to protect his company’s reserves against a 5-10% reduction of value every year and benefit from the increase of adoption and deflation of Bitcoin.

He bought $500 million worth of Bitcoin (his investment idea: HODL – hold on for dear life) and tripled his Bitcoin treasury reserve in less than a year.

You can watch this excellent interview where he explains his strategy:

Bitcoin Macro Strategy

Are you ready to move 10%, 20%, or even 50% of your own assets into Bitcoin? Read on!

Step 2: Create an Account

There are many ways to buy crypto-assets such as Bitcoin. What is the exchange that offers maximum protection with minimal fees? I don’t recommend any particular exchange — choose a big exchange, any one of them will work because you should pull the Bitcoin from the exchange right after the purchase anyway.

For most large exchanges, trading fees are in the sub-percentage range of your asset purchases. If you own more assets, the fees reduce even more.

And holding Bitcoin and other assets is completely free! Compare this to buying stocks where the spread alone is often many percentage points. And if you bought an investment fund, you’d have to pay yearly management fees as well.

I definitely love how cheap crypto-assets like Bitcoin are if you just HODL them!

Step 3: Transfer Your Excess Cash to the Cyberbank

Now you can use Bitcoin as a treasury asset. Measure your wealth in Bitcoin rather than Dollars!

The more money gets printed, the scarcer Bitcoin will become relative to the inflating asset (Dollar, Euro, Lira, RMB). More and more companies and individuals use Bitcoin as their treasury reserve asset, so demand grows by almost 100% per year during the last few years!

Bitcoin is a deflationary asset, i.e., the total supply is capped by 21 million. As Bitcoins get lost over time, the supply is even shrinking. If an inflationary asset meets a deflationary asset, the deflationary asset will grow in terms of the inflationary asset. This is textbook economics. And Bitcoin is the most scarce digital asset. It is digital gold.

As shown in the popular Stock-to-Flow article, the relative scarcity of Bitcoin is rapidly approaching that of gold—and many Bitcoiners believe that it is only a matter of time until Bitcoin replaces gold much like digital companies such as Facebook, Google, and Amazon replaced physical companies.

The world goes digital and money is no exception.

Figure: The higher the stock/flow ratio, the higher the market value of the asset tends to be. (Source)

As the production of Bitcoin reduces regularly (in so-called halvings), Bitcoin becomes more and more scarce. Time is the friend of the Bitcoin holder, not the enemy!

The unique idea of Bitcoin was to prevent excess production of new Bitcoins (e.g., through copy&pasting) by using a scientifically sound concept based on proof-of-work. Soon, the relative production of gold will be higher than the relative production of Bitcoin and many participants expect the Bitcoin price to rise to a level of $200,000 and above.

This means that there’s a strong incentive for people and companies to start acquiring Bitcoin before everybody else which further fuels the growth of adoption.

This is at least the strategy millions of people are already pursuing today and more and more people join them every day. Binance has 38 million weekly visits! Many of them will have a portion of their portfolio invested in Bitcoin.

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