Investment bank TD Cowen has published a report that provides a bullish view on Bitcoin and the investment strategy by Michael Saylor’s business intelligence firm MicroStrategy to purchase BTC in order to reduce its dependency on U.S. dollar reserves.
The company has been purchasing Bitcoin using cash and stock financing since 2020, citing the need to reduce its cash holdings due to the threat of high inflation on the U.S. dollar.
MicroStrategy currently holds 152,333 Bitcoin, worth over $4 billion at current prices, and is said to be one of the largest corporate holders of the apex cryptocurrency.
MicroStrategy’s Bitcoin Strategy Is Increasing Shareholder Value
In its report, TD Cowen lauds the company’s forward-thinking strategy, which was designed to fight against the depreciating purchasing power of the dollar. The report says MicroStrategy represents “a new kind of firm” that converts excess cash flow generated from its products and services into Bitcoin.
TD Cowen explained that the process which started as a “defensive strategy” to protect the value of company assets soon evolved into an “opportunistic strategy” intended to increase its shareholders’ value.
The report also said that, unlike fiat money, Bitcoin’s total supply is capped at 21 million, making it a “potentially superior store of value… relative to all other forms of money”. TD Cowen deems the “hybrid corporate strategy” utilized by the company as a long-term plan with the expectation of BTC becoming a far superior store of value to precious metals and fiat currency.
The investment management firm sees MicroStrategy as an “attractive vehicle for investors looking to gain Bitcoin exposure”, mainly due to its large Bitcoin holding.
Bitcoin Is A Potentially Superior Store of Value Than All Other Forms of Money
TD Cowen regarded Bitcoin as a far better store of value than fiat, precious metals, or digital assets after analyzing its various properties such as durability, portability, verifiability, scarcity, history, and resistance to censorship. The banking giant believes that the crypto asset has “weathered enough trials in the market” to suggest that it will remain a high-value asset for a long while.
Despite Bitcoin’s minor history compared to gold or the U.S. dollar, TD Cowen predicts the cryptocurrency will only grow stronger with time due to the lindy effect – a phenomenon where the longer an asset can stay in existence, the more confident society grows in its ability to continue to exist.
TD Cowen remains bullish on Bitcoin due to the recent positive developments happening in the crypto industry. The investment bank sees the SEC’s approval of spot Bitcoin ETFs as inevitable, and only a matter of “when” rather than “whether” it will happen.
Developments to Bitcoin’s layer-2 scaling network – the Lightning Network – and its massive adoption on a global scale, potential changes to the Financial Accounting Standards Board’s (FASB) generally accepted accounting principles (GAAP) concerning BTC holdings and the upcoming Bitcoin halving event in early 2024, are seen as key events that could help strengthen Bitcoin’s position as a valuable asset, according to the report.
While financial experts, governments, and environmental activists raise concerns regarding the mining of Bitcoin, saying it consumes more energy per hour than Norway, TD Cowen opinioned that Bitcoin mining is “one of the most efficient and cleanest industrial uses of electricity” and is constantly improving its energy efficiency “at a faster rate than most other industries”.
The bank elaborated that miners are transitioning to low-cost sources of energy due to “simple economics” rather than government mandates forcing them.
TD Cowen Predicts Bitcoin to Surpass Gold Stocks Market
TD Cowen predicts Bitcoin price could appreciate 127% in the short term to get just above its all-time high of $70,000. But wanted that if regulators continue to crack down on the asset class, there is a high probability that Bitcoin could crash back to $15,000.
The report also states that if Bitcoin can take over the $17 trillion gold stocks market – in terms of the dollar’s 2023 purchasing power – it would put BTC at around $800,000.
At the time of writing, Bitcoin (BTC) is trading at $29,403 – up 0.3% in the last 24 hours
