Japan's Gaming Giant Nexon Recently Bought Bitcoin Worth $100 Million
Nexon, a leading Japanese gaming company, recently purchased 1,717 bitcoins for 11 billion yen ($100 million). At the time, the average price of one Bitcoin was about $58,226, including fees and expenses. Nexon has stated that this project has taken up less than 2% of its reserves.
Nexon's CEO, Owen Mahoney, said that his company is confident in Bitcoin's ability to provide "long-term stability and liquidity while preserving the value of our cash for future investments."
Following an abrupt drop of nearly 15% last week, the price of Bitcoin has seen a significant rebound. Since it reached a new milestone in December 2020, increasing institutional acceptance of Bitcoin has helped it sustain price stability. Investing in this high-yielding alternative allows companies to diversify their portfolio. Bitcoin Compass UK offers a great platform to buy and sell bitcoin.
Nexon is known around the world for its addictive multiplayer video games. It was established in 1994 and now has more than ten franchise locations. This Tokyo-based company currently has 60 live games in service, which have been distributed to over 190 countries. Maplestory and Dungeon Fighter are two classic games that you might be familiar with.
The new announcement from Meitu, a Chinese app maker, prompted this Japanese company to make such a large investment. Meitu has invested approximately $100 million in various cryptocurrency assets, including Bitcoin and Ethereum, in order to build a diverse portfolio. Meitu revealed on the 17th of March 2021 that it had invested nearly $40 million in 16,000 Ethereums and 386 Bitcoins.
Not only Nexon but also Tesla, PayPal, Square, MicroStrategy, and Meitu, among others, have expressed their support for bitcoin. They want to establish this cryptocurrency as a viable investment choice for people to consider.
Why are the big companies suddenly investing in Bitcoin?
1) Bitcoin as a Macro Hedge
Microstrategy Inc., a Nasdaq-listed firm, spent $1.2 billion in Bitcoin in 2020, contributing to the company's key reserve asset. It has about 70,400 Bitcoins in its possession. This business creates mobile apps and offers cloud-based services. You may recall it from the dot-com boom.
When the stock fell below $150, the management formulated a new capital allocation plan. The company's shares soared to $500 after the company's CEO, Michael Saylor, agreed to invest in this cryptocurrency.
Why did MicroStrategy put its future in such a risky investment option, one may wonder?
The pandemic of 2020 had triggered an economic crisis, bringing the world to a halt. Printing new money was the only way to keep it alive. The United States government and the Federal Reserve decided to inject new dollars into the economy as a group. Quantitative easing allowed the extra dollars to flow through banks. The government decided to allow people to spend their money by making loans more affordable and lowering savings account interest rates. They also gave the money to the people in the form of stimulus checks. When more dollars entered the market, the economy began to experience inflation, and the value of a dollar fell.
To put this in perspective, note that in 2020, 22 percent of all money ever printed was printed. It is a well-established hypothesis that Bitcoin can be used as a rational inflation hedge. Saylor didn't want to miss out on this chance. He was persuaded that Bitcoin offered a better chance of making a profit than any other investment alternative.
How did MicroStrategy manage to acquire so many Bitcoins? The business reportedly had a large amount of cash on hand in July, estimated to be about $500 million. Storing that much money at a time when the economy was experiencing inflation would have been a bad idea. Bitcoin seemed to be a more secure choice, with the potential to maintain its value even in the face of inflation.
2) Bitcoin as an Individual Hedge
The crypto craze isn't limited to businesses; high-profile investors are also investing billions in the cryptocurrency. Even when Bitcoin suffered its worst crash in seven years in May 2020, billionaire hedge fund manager Paul Tudor Jones maintained a bullish outlook. His global fund is responsible for almost $20 billion in assets under management (AUM).
He said that betting on the fastest horse is the best way to maximize profits. His research into the industry led him to bitcoin. When the price of Bitcoin was hovering around $9000, Jone's Fund decided to invest. This hedge against the dollar investment strategy has already yielded a 270 percent profit.
Another hedge fund founder, Stanley Druckenmiller, saw Bitcoin's potential as a great store of value. He was so secure in Bitcoin that he did not think twice about betting it against gold as an inflation hedge. He claimed that since bitcoin is lighter and more liquid than gold, it has the potential to perform better. Bitcoin is much easier to store in a digital wallet and to sell instantly through an exchange than gold. When asked about Bitcoin's volatility, he acknowledged that it is a risky field, but he also pointed out that the Bitcoin market is just a fraction of the size of the gold market.
This cryptocurrency has strong expectations from value investors. Since 2014, Bill Miller, the founder of Miller Value Funds, has been researching the cryptocurrency industry. He predicts that the Federal Reserve's decisions would have a positive effect on Bitcoin. As the central bank's policies impact the valuation of currency, the assets that hold their value see a price increase.
3) Medium of Exchange
Do you recall how excited Bitcoin supporters were when Twitter introduced the Bitcoin emoji in February 2020? This gesture made it clear that Twitter wanted to be associated with Bitcoin. Jack Dorsey, the CEO of this social media website, has always been a Bitcoin bull. He has never been shy about stating publicly that he is a Bitcoin investor. He actually buys $10,000 worth of bitcoins per week. The Cash App cap has been reached.
Square reported a $50 million investment in 4,709 bitcoins in October 2020, just as MicroStrategy was making its second purchase. Just 1% of the company's total assets were used to invest in cryptocurrencies. Square is the parent company of both Twitter and Cash App, in case you didn't remember.
Bitcoin's origins as a money substitute can be found in square roots. Dorsey is unwavering in his conviction that Bitcoin can become the internet's native currency.
Square's approach to Bitcoin is somewhat different from MicroStrategy's. The latter intended the investment as an inflation hedge, while the former believes it would be used as a currency. The goal was to use Bitcoin as a form of payment in the Cash App.
4) Store of Value
People often think of Bitcoin in one of two ways: as a store of value or as a medium of exchange. It's only in a few cases that it's considered a pure investment option. The use of grayscale is a great example of this. A Bitcoin Trust Fund (GBTC) managed by Grayscale Investments monitors the price of bitcoin. The Financial Industry Regulatory Authority (FINRA) has given it official approval to trade on an over-the-counter basis publicly.
The Asset Management Company (AMC) manages ten cryptocurrency funds, as well as individual coin-based funds, with success.
Grayscale's AUM was $19 billion at the end of 2020, a significant increase from $2.6 billion at the end of 2019. Of course, the rise in Bitcoin's price was a major factor, but it was also because people began to consider it as a viable investment option.
The company has purchased an average of 2,500 Bitcoins per week due to the size of the benefit. They also raised this average after Bitcoin experienced its third halving in May 2020 and again in December 2020, when it hit a new all-time high.
Grayscale had to briefly halt accepting payments due to an unanticipated price increase. People had put more offers than the company could supply Bitcoin, much to their surprise. The company's stock is directly linked to the price of bitcoin. Each share is approximately equivalent to 0.001 BTC in value. This makes it clear that if the company runs out of Bitcoin, there will be no way for the public to buy new shares.
Not every daily investor can afford the luxury of submitting to the cryptocurrency's ferocious instability. Years of negative returns will be needed before this decentralized financial system pays off. It will take a long time and a lot of development to replace gold as the ultimate asset. Financial advisors will advise you to choose a more stable strategy. If you really want to get on board, you can spend a small portion of your portfolio.