By Shane Neagle
Despite Bitcoin’s appeal, several major investment firms are skeptical about investing in digital assets. However, more innovative ways are now being used to provide indirect exposure to the mainstream cryptocurrency.
Bitcoin has come a long way from simply being a peer-to-peer electronic payment system offered by its pseudonymous founder Satoshi Nakamoto. Recent evidence suggests a growing interest and desire among ordinary individuals to invest in cryptocurrency. This interest stems from the prospects for huge returns the sector is creating compared to investing in stocks that was the norm before digital assets.
Recent data from Grayscale Investment suggests that more and more Americans are gearing up to invest in Bitcoin. About 13% of the US population owns BTC, with 55% investing in 2021. Also, according to reports, Americans are increasingly interested in Bitcoin in their life insurance.
Interestingly, the demand for Bitcoin exposure has reached large corporations. Several well-known companies have accepted the growing importance of BTC and have taken steps to invest in it. However, there is an inherent hesitation in their efforts due to several issues.
Various Constraints Leave Firms Skeptical About Bitcoin Exposure
Despite their growing desire to invest directly in Bitcoin, large corporations are hesitant to do so due to existing issues in the space. The first and most difficult is the issue of government regulation. Recently, SEC Chairman Gary Gensler called the crypto market a wild and wild west due to its volatility.
Moreover, the volatility of price fluctuations poses an unusual challenge for large companies. Just as they can make astronomical gains on their investments, they can face major losses in the blink of an eye. This makes a bitcoin investment risky, hence the cold feet.
Along with the SEC’s efforts to regulate the industry, several politicians, including the Congressional Blockchain Caucus, have been urging Congress to create a regulatory framework for the space. The US Congress, for its part, has taken action with several hearings, but has yet to create laws that fully govern the industry.
Second, there is the problem of hacking, theft and exploitation in the crypto space. According to a report by Chainalysis, the amount of funds stolen from DeFi platforms increased by 1,330% in 2021 compared to 2020.
Third, the procedures involved in investing in Bitcoin are usually not as straightforward as traditional stock investing. The aforementioned risks associated with investing in Bitcoin result in rigorous due diligence processes which may hinder active investments in BTC on behalf of corporations.
Despite these issues, several large companies have developed innovative ways to gain indirect exposure to BTC. Some have taken the more direct approach of buying it and keeping it on their balance sheet. Others have opted for more traditional investment vehicles. Separately, some public companies have a stock that shows very similar price action to Bitcoin, due to the nature of their industry.
In the following sections, we will look at Microstrategy, Coinbase, Grayscale Investments, and Canaan. Inc.—four public companies that have some indirect exposure to Bitcoin to some extent, regardless of existing challenges.
MicroStrategy leads the pack
MicroStrategy is a data analytics platform that provides businesses of all sizes with actionable insights. It allows users to create bespoke real-time dashboards by customizing data representations. It also leverages data connectivity, artificial intelligence, and mobile accessibility to give individuals full control over their discoveries.