Convert your balance sheet to Bitcoin

Capital allocation has never been a more important issue than it is today. To increase their chances of survival and prosperity in the years to come, Japanese videogame companies will need to diversify their portfolio and invest in high ROI assets. As such, converting their balance sheets into Bitcoin might not be the farfetched idea that it was just couple of years ago. Yes. You heard correctly. Bitcoin.

I am not here to sell you on this asset per se, but I am here to find high ROI avenues (whatever those may be) for my favourite companies to invest in, so that they can stay ahead of the game. And in that sense, I am forced to say that Bitcoin is the best asset a company can hold in their portfolio at the present time.

Bitcoin is the single biggest technology advancement of our lifetime, in very much equal proportions to the internet one could say. What the internet was for information, Bitcoin is for money. It is literally speaking, financial energy. The important part to get right though, is that Bitcoin is not here (as some analysts and economists like to suggest) to take on the dollar or any other fiat currency for that matter. That is the role of stable coins. Instead, it’s here to take the place of gold, which makes it a perfect candidate for the asset category section of the balance sheet of companies worldwide.

Everyone knows that if you want to preserve shareholder value, you must buy scarce assets. Bitcoin is an institutional-grade, safe haven asset. It has all the benefits of gold without any of its downfalls. In 6,000 years of history, we have not seen a completely new store of value quite like this one. Even though it does not have an industrial use like gold and silver do (and it doesn’t need to have one), it is lightyears away as a form of storage of value. In fact, it is the first time in human history since gold, that we have had another layer 1 money type, and the first time we have money that is separated from governments. Friedrich Hayek predicted that, if the world were to witness the birth of a new type of money that cannot be interfered with by government, it would experience a renaissance and global economic boom.

The aggressive monetary expansion accentuated by the COVID-19 lockdowns will soon cause price increases. This means that your company may be doing extremely well, but if your currency is being debased, you’re literally working for something that has less and less value. Don’t forget that “inflation is taxation without legislation” Milton Friedman used to say. Since money is a property right, and many of us have traded our time for money, whenever money gets printed, our time is stolen. Not only that, but since every currency is correlated to the dollar, and if the dollar is weakening, then every currency is de facto also weakening. Conventional treasury strategy is therefore no longer an option.

We have welcomed a new player in the asset category, namely Bitcoin. Japanese companies are often asset-poor and cash-rich, which is a problem in the current economic condition. Keeping cash is now useless, and so is investing in treasuries. Gold and real estate can be reasonable picks but are not growing enough to keep up with inflation. Stocks may still have some inherent value as they represent private, well-functioning companies, and can still have decent growth potential depending on the stock, but their main problem remains their correlation to fiat money, which is decreasing in both real, and perceived value all over the world. Furthermore, share prices haven’t reflected the underlying asset-value for quite a while now, and the stock market, one could say, is now officially uncorrelated to the real economy. Not only that, but if your stock investments do not grow at least 15%/year like money printing does, then you are effectively losing money. The only asset that is growing much more than that is Bitcoin, at approximately 200%/year.

There is a finite number of Bitcoins that will be mined, making this asset rarer and more precious than gold, since gold can be extracted at a rate of about 2.5%/year which would correspond to the inflation rate in a world where gold would be the main means of exchange. Bitcoin however will not depreciate. In fact, it is the first time in economic history that we see an asset increase in appeal the more expensive it becomes. Imagine there is only one river left in the world, and you own 1% of the water in that river. That’s what it’s like to hold 1% of all the Bitcoin.

An even bigger reason for Japanese corporations in particular to consider this move, is the value of the Yen which has for a while now, become absolutely worthless. It has been printed way too much and all the other major currencies are following in its lead. Anti-inflationist, former governor of the BOJ Masaru Hayami (who understood laissez-faire economics) apparently tried to stop this looming disaster but was stopped by the incompetent political class soldiers of the status quo army. Keep in mind that since the dollar stopped being backed by gold in the 1970s, it has lost 90% of its value compared to gold. The Bank of Japan now owns more than half of the Nikkei and is pretty much setting the price. Price discovery is no longer a thing. Other central banks are following suit. Basically, Japan has literally been 10 years ahead of every other nation with respect to monetary policy, in a bad way.

So, if all assets except Bitcoin are bad investments, then one can always buy back shares right? Wrong. Another thing you shouldn’t do with your precious cash is to buy back your own shares. Those days are over. If you generate one billion in cashflow and you buy back your stock with your depreciating currency, you’re a billion closer to insolvency. And if you’re insane enough to borrow to do that, you’re two billion closer to insolvency.

So, for your shareholders, the math is simple. If you convert your balance sheet to Bitcoin as much as you can, you will see massive gains. Tesla for example has made in the span of a few weeks, roughly $1 billion with its Bitcoin investment. To put this in perspective, that’s more than the $721 million in revenue they made last year from selling their vehicles.

If you need help with the actual modus operandi, you’re in luck as Coinbase CEO Brian Armstrong said on Twitter that, if any company wanted to hold cryptocurrency on its balance sheet, Coinbase could help. Ways of investing in Bitcoin are through institutional-grade custodians like Coinbase, there are talks of ETFs very soon, derivatives, and funds backed by Bitcoin like Grayscale for example.

Bitcoin, whether we like it or not, is any libertarian’s dream come true. It hasn’t been hacked in 10 years, is completely decentralized, and seems unstoppable. It has also, relative to any other asset class, the lowest correlation of returns. Meaning that Bitcoin diversifies one’s portfolio in a much more significant way than the more traditional assets do, and as such Bitcoin can be considered a low-risk position, funnily enough. This is now clear as we have 10 years of history that we can look back at. Also, be prepared for an avalanche of institutional money coming in. When institutional players finally wake up and start panicking, it will be too late for other companies and private individuals to purchase Bitcoin at a reasonable price.

Convert your balance sheet from cash to Bitcoin to the benefit of your stakeholders and jump in the boat before it’s too late. Those who are tired of the eternal status quo and have what it takes to make seemingly hard decisions, will lead the way for the next generations. If Japanese game companies do this now, Western and Chinese interactive entertainment companies will no longer be an issue in the years to come.