Companies are increasingly accepting Bitcoin as an investment and have recognized the potential of cryptocurrency for generating returns. Investors include many prominent names such as Tesla and Grayscale.

The asset manager CoinShares reports that the inflow of funds into the cryptocurrencies (as of January 2021) is still at a record level and 1.3 billion US dollars achieved. It is the big investors who are currently driving the prices and buying coins on a large scale. Anyone interested in company balance sheets and studying the asset side will increasingly find large positions in cryptocurrencies there.

Little has changed for investors in the current environment. Interest rates are low and the central banks provide a lot of liquidity. Large funds have struggled for years to accommodate the vast amounts of money they manage in suitable assets. These large investors in particular are therefore looking intensively for suitable new investment opportunities – and they are always found in cryptocurrencies.

Elon Musk, CEO of Tesla, made headlines with his investment in Bitcoin. (Photo: dpa)

Tesla’s investment caused a stir. The purchase of Bitcoins by Elon Musk, worth 1.5 billion dollars, caused a strong price surge, also because the commitment was seen as an important signal for the entire market. The cryptocurrencies are now recognized as a serious investment that belongs in the mix with real estate, stocks and precious metals.

The well-known business analytics platform MicroStrategy uses the popular cryptocurrency to build reserves and already invested over $ 3 billion in February. This investment is particularly interesting because the CEO of MicroStrategy, Michael Saylor, said in 2013 that the days of the famous cryptocurrency were numbered. Today he is one of the hundred largest owners himself.

There are new perspectives for Bitcoin owners

Companies like Tesla have long gone a step further and want to support the important cryptocurrency and the underlying blockchain technology not only as investors. The carmaker has announced that it will accept the coins as a means of payment for its electric vehicles in the future. By the way, it was after this announcement that the value of the coin first reached the $ 48,000 mark. The company is said to have already achieved a profit of 500 million dollars with its investment.

Anyone who is currently talking about cash inflows into the coveted cryptocurrency will also come across Grayscale Investments don’t stop there. The New York-based asset manager manages funds that specialize in cryptocurrencies and is one of the big names in the valuable coins business. The trust set up specifically for this purpose now holds coins worth $ 30 billion. This is currently the largest portfolio.

Many other big names from the corporate world and the world of hedge funds have long since announced that they too Buy coins. This includes, for example, the Twitter CEO Jack Dorsey. He started the purchase in 2019 and is today building up further reserves for Twitter with the help of cryptocurrencies.

Grayscale Investments holds meanwhile About $ 30 billion worth of cryptocurrencies. (Photo: Ascannio / shutterstock)

Some companies use the diversification argument to justify their decision. With the crypto currencies, you get another opportunity to spread your money and invest it as securely as possible. For example, the cryptocurrencies could compensate for failures in other assets such as classic securities or gold. In addition, well-performing companies are faced with the challenge of how to invest their excess cash in the most profitable way possible. Here the crypto currencies offer you good opportunities.

How do companies deal with volatility?

The strong fluctuations in the price of cryptocurrencies are one of the problems that all investors in coins have to deal with. This question is particularly critical for companies. While the private investor does not necessarily have to worry about the temporary dip in prices, it looks different with an accounting. Most of the large investors come from the USA, and the US GAAP accounting rules currently in force there stipulate that cryptocurrencies are to be treated like intangible assets. And that has concrete effects on the valuation.

It is not so easy to reflect price increases in the balance sheet. The intangible assets do not increase in the balance sheet when the price of the coins increases. The situation is different in the case of losses, however: If the price of the coins falls, the companies are forced to carry out an impairment test and, if necessary, to reduce their value on the balance sheet. This creates a serious balance sheet risk for companies. Even if profits can potentially be made in resale, this is not immediately apparent from the balance sheet.

On the other hand, a decline in the price of cryptocurrencies can be too strong Charges due to high depreciation. That could be a problem if the positions in question, for example at Tesla, have a high proportion of the balance sheet total. Companies must therefore act with foresight and, if necessary, cautious.

What about the tax situation?

The question of taxation only arises with the resale of the cryptocurrencies. As long as the company only holds the coins, there is no taxation. There is also taxation if the company exchanges the coins for a fiat currency. So it depends on what goals a company is pursuing with the coins. Since very high profits can potentially be achieved with crypto currencies within a short period of time, taxation issues are of corresponding importance.

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