Microsoft's Dilemma with Bitcoin

December 10 is seen as important for both Microsoft and the cryptocurrency market, when the company will decide whether to add Bitcoin to its list of assets.

According to QZ , Microsoft shareholders will vote on adding Bitcoin to its asset class. On October 24, the software company's 14A filing with the US Securities and Exchange Commission (SEC) included a section titled "Review of Investments in Bitcoin," stating that the company may consider diversifying its assets with Bitcoin as "an excellent, if not the best, inflation hedge."

Illustration of Microsoft and Bitcoin. Photo: CoinTelegraph

However, below the proposal, the Recommendations section reads that Microsoft's board of directors is advising shareholders to vote against it after "careful consideration of the matter," suggesting there is an internal struggle over whether to accept or reject Bitcoin, a digital currency currently worth $100,000 per coin.

“The Microsoft board’s pre-vote statement was clear: They have sophisticated financial management and everything is delivering huge returns to investors,” Nate Holiday, co-founder and CEO of Space and Time, a Microsoft-backed decentralized Web3 data company, told CoinTelegraph . “However, things could change when the vote comes.”

Learn MicroStrategy

MicroStrategy was one of the early investors in Bitcoin and reaped the rewards as the cryptocurrency skyrocketed. Microsoft reportedly invited MicroStrategy Chairman Michael Saylor to pitch the idea of ​​adding Bitcoin to its financial holdings.

In a slide posted on YouTube by MicroStrategy, Saylor calculated that Microsoft could reach $5 trillion, while the company's current value is $3.19 trillion. He argued that Microsoft should invest $100 billion annually in Bitcoin because "buying Bitcoin makes more sense than buying back Microsoft's own stock or holding bonds."

Solo Ceesay, co-founder and CEO of decentralized social network Web3 Calaxy, agrees with Saylor. However, Alex Momot, CEO of blockchain company Peanut Trade, said Microsoft's operating model is different from MicroStrategy's. Microsoft has a steady cash flow and revenue from product sales, while MicroStrategy relies heavily on stock re-pricing and phantom balance adjustments.

“MicroStrategy is not a high-growth software company, so to move forward, they need to change their focus to increase shareholder returns,” Momot said. “Microsoft, on the other hand, has a healthy balance sheet. They have demonstrated growth for decades and are well positioned in AI and data.”

Microsoft and MicroStrategy did not immediately respond to requests for comment.

Pros and cons of Microsoft looking to Bitcoin

Daniel Cawrey, chief strategy officer at wallet platform Tonkepeer, said buying some Bitcoin to diversify is a good idea for public companies, as the cryptocurrency is becoming a “modern-day savings account.” Microsoft’s cash position is estimated at $75 billion. Bitcoin’s finite supply makes it an attractive hedge against inflation.

However, Bitcoin's long-term viability as a store of value remains a matter of debate. According to Momot, for Microsoft's board of directors, adopting such a strategy would require changing the company's entire business.

“Bitcoin price volatility poses a significant risk as the company prioritizes stability in its financial reporting and cash management. Not to mention they will face legal risks, as this currency is not officially recognized,” Momot told CoinTelegraph.

Bitcoin Google searches are 10 times higher than USD
El Salvador President 'Delighted' as Bitcoin Price Hits Record High 25
Bitcoin - From Experiment to Trillion Dollar Asset 26