Companies Hoarding Trillions in Cash While Others Invest in BTC And Are ‘Rewarded by the Public Markets’
The US Dollar index has been on a decline ever since March, currently down at multi-year lows. Despite this, US companies have accumulated the largest pile of cash ever.
At the end of June, the cash holdings of non-financial companies had grown to a record $2.1 trillion, an increase of 30% from last year. This is also higher than the previous peak of almost $2 trillion in 2017.
Among the biggest hoarders were AT&T and Delta Air Lines, with each holding over $15 billion at the time. Interestingly, back in 2019, AT&T announced support for Bitcoin for mobile bill payment through the third-party service provider BitPay.
S&P 500 companies that aren’t in the financial, utility, and transportation sectors are also expected to have $1.9 trillion in cash, which is the most they have ever held since 1980.
Among the investment-grade borrowers, the ratio of current assets to liabilities has risen to 97% in the US and 86% in Europe, as per BNP Paribas. These liquidity levels were last exceeded since 2000 during mid-2004 in Europe and late 2009-early 2010 in the US.
Cash hoarding soared this year after record-breaking amounts of debt were issued by the companies against the coronavirus pandemic’s disruptions. Amidst this, companies also cut down on dividends, capital expenditures, and buybacks.
US companies also sold over $3 trillion of investment and high-yield bonds as of Nov. 20, the most since 2006. This makes sense in the current environment of extremely low, zero, and sub-zero interest rates.
Analysts expect companies to make use of this cash next year, but not to “pay down debt in this interest-rate climate.”
One could easily argue that the best way to utilize all this money that is burning a hole in companies’ pockets is to invest in Bitcoin, which is already proving to be a beneficial investment.
MicroStrategy is one such company that just yesterday added another $50 million of its cash into BTC, adding to its $575 million Bitcoin stash. In total, the company now holds 40,824 BTC, 0.2% of Bitcoin’s total circulating supply.
Since the March sell-off, MSTR shares have increased 228% in value to the price level last seen in July 2000.
As Teddy Fusaro, chief operating officer at Bitwise Asset Management, noted, “many of the public companies that have announced that they've purchased Bitcoin or cryptocurrency have been rewarded by the public markets.”
In 2020, Bitcoin price has made a new all-time high, having surged 166% in value, currently trading around $19,000.
“Soon they won't have a choice. They will have to protect their reserves by buying Bitcoin, said trader Scott Melker.