Bitcoin climbs as companies increasingly use tokens to 'hedge against inflation'
Bitcoin (BTC-USD) climbed toward a new high on Tuesday as investors continue to bet on the Trump administration's friendly stance toward the crypto industry and companies increasingly add the token to their balance sheets.
As of 1 pm ET, the token was trading just below $109,000, roughly $3,000 away from touching its all-time intraday high in May.
Greater adoption of the token has been driven in part by dozens of public companies getting on the bitcoin bandwagon.
"Over time, bitcoin has proven itself to be a better hedge against inflation than many other asset classes," said Elliot Johnson, CEO of Bitcoin Treasury Corp., an advisory firm that helps companies acquire and hold bitcoin as part of their balance sheets.
Johnson points out over the past five years, bitcoin is up over 1,000% while gold has returned about 92.5%.
"Meanwhile, the US dollar has lost more than 20% of its value over the last five years due to inflation," said Johnson.
However, the strategy spearheaded by Strategy and copied by dozens of companies, carries risks.
“The main risk in running a leveraged 'bitcoin treasury' strategy is that a rapid drop in the price of bitcoin would lead to a possibility of bankruptcy,” NYU Stern School of Business professor David Yermack told Yahoo Finance in a recent interview.
On Monday, shares of bitcoin juggernaut Strategy (MSTR) jumped more than 4% after the company said it purchased 1,045 more tokens from June 2 to June 8, with total holdings now worth more than $62 billion, according to Bloomberg data.
But “MSTR’s scale is hard to replicate,” Bernstein analyst Gautam Chhugani wrote in a May note. “Not every Bitcoin treasury will be successful simply replicating MSTR’s playbook, in our view.”
Trump Media & Technology Group (DJT) shares fell more than 10% during one session in May after the Trump-backed company announced plans to create what it claims will be one of the largest bitcoin treasuries held by any public company.
GameStop (GME) stock also slid nearly 25% immediately after the company announced in March it would raise $1.3 billion to buy bitcoin.
Around 80 companies have adopted the so-called "bitcoin standard" by adding the token to their balance sheets. Corporates now hold roughly 3.4% of all tokens in circulation, according to Bernstein analysis.
"Bitcoin is great, we love it and still believe $200K is our high-conviction but conservative price forecast this cycle," wrote Bernstein's Chhugan on Monday.
The cryptocurrency is up more than 55% since President Trump, who promised a crypto-friendly framework, was elected last November.
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