Fundstrat’s Tom Lee: Bitcoin is the Last Thing You Want to Put on Your Balance Sheet

Bitcoin bulls are all wondering who the next company will be to put cash reserves into bitcoin.  Last fall, Microstrategy and Square invested millions of their cash reserves into bitcoin. Microstrategy has since bought more, and CEO Michael Saylor said on […]

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TOM LEE | Scott Mlyn, CNBC

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key takeaways

  • Tom Lee warned that holding bitcoin could expose corporates to regulatory risk
  • Holding exchange traded products like GBTC or BITW would be preferable

Bitcoin bulls are all wondering who the next company will be to put cash reserves into bitcoin. 

Last fall, Microstrategy and Square invested millions of their cash reserves into bitcoin. Microstrategy has since bought more, and CEO Michael Saylor said on a company earnings call Thursday that it plans to continue accumulating. He also said holding bitcoin as a primary reserve asset is part of its corporate strategy.

It’s not a great idea for companies though, Fundstrat Global Advisors’ Tom Lee said at a virtual event Thursday. 

“The last thing you want is to put on company’s balance sheet is an asset that companies could one day decide they have to divest because of some regulatory change,” Lee said. “It’s something every board member is going to face liability for, and I don’t think it’s a great policy for a business.”

The big buys by corporates are good for the bitcoin price though, which climbed steadily from August to a new all-time high of almost $42,000 on Jan. 7. In the same period PayPal, Stan Druckenmiller, Guggenheim, MassMutual, Ruffer Investment Company and One River Asset Management have all made bullish calls on bitcoin.

 Companies might as well put the money into a trust though, Lee said.

“I’d rather MicroStrategy put $4 billion into Grayscale or into Bitwise, because that bitcoin never leaves,” said Lee, who is cofounder and head of research at Fundstrat Global Advisors. “If you put $4 billion on MicroStrategy and they suddenly have to divest it, you’ve got $4 billion of bitcoin getting dumped in the market.”

Grayscale Investments and Bitwise Asset Management each have bitcoin and ether trusts that give investors exposure to the digital assets through traditional investment vehicles without the challenges of buying and securely storing it themselves.

When investors redeem their shares they don’t actually sell their holdings, they just list them on the market. They’ll be much better ways to “corporatize America,” Lee said.

“Corporate America usually uses outside managers to manage capital, he added. “Apple allocates their fixed income excess to fixed income hedge funds and fixed income managers – they should allocate it to Bitwise and to Grayscale.”

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