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Bitcoin and Corporate Balance Sheets: Strategic Reserve Asset or a New Business Model?

In: Advances in Empirical Economic Research

Author

Listed:
  • Ivan Sedliačik

    (Matej Bel University in Banská Bystrica, Faculty of Economics, Department of Finance and Accounting)

  • Michal Ištok

    (Matej Bel University in Banská Bystrica, Faculty of Economics, Department of Finance and Accounting)

Abstract

Bitcoin and other cryptocurrencies entered the balance sheets of pioneering corporations primarily during the COVID-19 period. While most were implementing traditional finance industry business models, there were also companies that declared its Bitcoin holdings as their strategic reserve asset. The goal of this paper is to examine the true purpose of Bitcoin holdings of these latter mentioned companies. Our findings show that Bitcoin does not meet the conditions of a non-risk asset that is used as a reserve asset, but to the contrary, it belongs to risk assets that provide risk premia for undertaking risk. It cannot be used as a reserve asset in any of the three use cases of strategic reserves, when the firm is under financial constraints, accumulates funds for future investment projects or when outside funds become expensive in risk-off shocks. Another finding shows, that selected companies buy and keep disproportionate Bitcoin holdings compared to their core business balance sheet or revenues. Purchases are often financed by loans or corporate bond issuance, so we argue these companies deploy a new business model which could be called “Bitcoin investment bank”. In our qualitative research, we apply the praxeological approach of the Austrian school of economics with a priori approach, axiom, and deductive logic.

Suggested Citation

  • Ivan Sedliačik & Michal Ištok, 2023. "Bitcoin and Corporate Balance Sheets: Strategic Reserve Asset or a New Business Model?," Springer Proceedings in Business and Economics, in: Nicholas Tsounis & Aspasia Vlachvei (ed.), Advances in Empirical Economic Research, chapter 0, pages 375-383, Springer.
    • Handle: RePEc:spr:prbchp:978-3-031-22749-3_23
    DOI: 10.1007/978-3-031-22749-3_23
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