Here's a wild one for you – Amazon might be looking to add Bitcoin to their corporate reserves. Yeah, you read that right. They're considering it as a hedge against inflation and the fact that bonds just aren't cutting it these days. With companies like MicroStrategy already cashing in on Bitcoin, Amazon's got some serious thinking to do. Are they ready to jump into the deep end of this volatile but enticing digital asset pool?
Why Bitcoin Now?
The National Center for Public Policy Research, a global think tank, thinks Amazon should jump on this Bitcoin bandwagon by next year. This isn't the first time this has come up, though. Michael Taylor made a similar proposal to Microsoft a few weeks back. These think tanks are really pushing for more digital currency in the US, and Amazon's sitting on a mountain of cash that needs a better home.
The proposal points out that Amazon's cash and cash equivalents total $88 billion, but let's face it, that isn't going to keep up with inflation when the inflation rate peaked at 9.1% in June 2022. So, they need some assets that can appreciate more than bonds, even if they are a bit more volatile in the short term.
"Amazon should – and perhaps has a fiduciary duty to – consider adding assets to its treasury that appreciate more than bonds, even if those assets are more volatile short-term", said the document that Tim Kotzman shared on X.
MicroStrategy's Example
MicroStrategy set a precedent when they started adding Bitcoin to their financial assets back in 2020. Since then, their stock price has soared by 537%, blowing Amazon's stock performance (up only 54% in the same time frame) out of the water. And now, MicroStrategy's executive chairman, Michael Saylor, is also pitching a Bitcoin reserve strategy to Microsoft. If they go for it, it could change the game for the cryptocurrency in the US.
Risks vs. Benefits
But here's the thing: Bitcoin's notorious for being volatile. If a company like Amazon holds a ton of it and the price crashes, it could be a massive hit, especially if they over-leveraged through things like convertible debt.
And we can't ignore the regulatory challenges. As more companies hop on the Bitcoin train, you know regulators are going to take a closer look.
Also, the crypto-asset world doesn't exactly have the best track record when it comes to risk management and governance. Cyber-attacks and operational failures are not exactly rare, so companies better have a solid risk management plan in place.
On the flip side, Bitcoin's fixed supply and decentralized nature could make it a good hedge against inflation. And hey, there's potential for long-term value appreciation, too.
So what's the bottom line? If Amazon does decide to add Bitcoin to their reserves, it could set a new standard for corporate finance. Other companies might just follow their lead. But whether they'll take the plunge? That's still up in the air.
