Why Corporate Treasury and Family Offices Should Consider Bitcoin Multiple reports suggest that firms such as Tesla and Microstrategy amongst others, are building portfolios with investments in Bitcoin and other crypto assets
By Raj Karkara
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Staying ahead of the curveas a business mantra, this mandate is vital for scale and success. It is valid for crypto as well. After the upheavals of the past few years, crypto has emerged strong, drawing both consumer and institutional interest. In the past few years, it has emerged as a serious asset class that is drawing the attention and increasingly seen as a viable option for portfolio diversification and a hedge against inflationary pressures. Crypto adoption is picking up pace both in the case of retail and institutional investors. Multiple reports suggest that firms such as Tesla and Microstrategy amongst others, are building portfolios with investments in Bitcoin and other crypto assets.
WHY IS CRYPTO IN DEMAND?
The significant development in mainstream adoption occurred when the SEC, in January, greenlighted Bitcoin ETFs. Investors and big family firms seek alternative assets for steady yields and large-scale wealth creation and preservation. This has prompted a spike in interest among institutional investors and family offices in the advanced economies. Moreover, the US Lower House passed a crypto-focused bill, proposing a regulatory framework for digital assets, to boost the Web3 ecosystem.
Meanwhile in India, SEBI has put forward a multi-regulator framework proposal, with different regulators handling crypto subgroups indicating a focus on investor protection and market integrity. Reducing the ambiguity is bound to create interest from investors and family offices. Moreover, as family offices seek wealth creation and long-term economic growth, crypto investments will help.
BUILDING A DIVERSE PORTFOLIO
At the basic level, Bitcoin investments can help diversify investment portfolios. This works because crypto often behaves differently from traditional investment options. This means its price movements follow an independent path, thereby reducing risk.
TESTED STORES OF WEALTH
As the crypto market evolves, Bitcoin has emerged as 'digital gold' because its limited supply with halving events keeping a check on its supply. Its features of decentralisation, pseudonymity, and democratic access make it one of the most promising assets ever created.
Besides being a valuable resource, Ethereum is emerging as a key building block of the emerging decentralized finance (DeFi) sector. As new-age tools gain traction, it is bound to be a valuable longterm asset for corporate treasuries and family offices. Moreover, as industries like decentralized finance come to the fore with their promise of decentralized transactions and higher yields, family offices can look at allocating some of their funds to the DeFi basket.
As the crypto market matures, integrating digital assets into corporate treasury and family office strategies becomes less a question of 'if' and more a question of 'when' and 'how much'. The benefits of diversification, the potential to invest in game-changing technologies, and exposure to a new asset class are compelling. By embracing these opportunities early on, businesses and family offices can position themselves at the cusp of financial transformation and growth and help them scale.
