Cryptocurrencies: tech companies should follow Tesla’s lead and sell out of bitcoin

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In share phrases, the cryptocurrency crash of 2018 was worse than the winter that’s at present gripping crypto markets. The distinction this time spherical is the quantity of money concerned. In 2018, about $700bn was wiped from the market’s excessive level, in line with price-tracking web site CoinGecko. So far this yr, the crypto market’s worth has fallen by greater than $1.2tn.

To that whole could be added hundreds of thousands of {dollars} stolen by criminals. This week, Solana crypto wallets and start-up Nomad, which runs bridges between blockchains, have been focused by hackers.

For Block, Coinbase, Tesla and the opposite know-how companies that selected to spend money on cryptocurrencies, holding reserves in risky belongings is changing into more and more untenable. Diversification is a poor justification for heavy losses.

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Software maker MicroStrategy illustrates the chance. Its reward for investing in bitcoin was a close to $1bn impairment cost for the second quarter of the yr. As of June, it nonetheless had nearly $2bn invested, comprising the bulk of its reserves.

Bitcoin proponent Michael Saylor has stepped down as MicroStrategy chief government however stays unbowed. His new position as government chair will deal with bitcoin acquisition. Such single-minded focus implies that within the market’s eyes, MicroStrategy’s transformation right into a automobile for crypto funding is nearly full. The worth of its bitcoin holdings is now equal to greater than half of its market capitalisation, up from a 3rd in early 2021.

Those eager to stem losses with out shedding face might follow Tesla’s lead. Boss Elon Musk as soon as boasted that the electrical automobile firm had “diamond hands” — a crypto colloquialism for holding on to digital belongings even when costs fall. But it has chosen to sell most of its $1.5bn bitcoin holding. The firm defined its choice by saying it wanted money amid provide chain issues and has not modified its view on digital belongings. Missing the worst of the crash means it reported an impairment loss of simply $106mn linked to the sale.

The worst of the sell-off could also be over. But so is the speculative fever of 2021. The folly of stashing firm money in unstable digital belongings should not be repeated.

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