Bitcoin’s Massive Swings Give Pause to CFOs Mulling Reserve Investment: Bloomberg

Bitcoin’s 30% price correction was enough to dull the attraction of that strategy for some.

Jan 17, 2021 at 7:19 p.m. UTC
Updated Sep 14, 2021 at 10:57 a.m. UTC

Wall Street chief financial officers (CFO) are more wary of putting company funds into bitcoin after last week's 30% price plunge, Bloomberg reports.

Publicly traded companies such as bitcoin during 2020. Other firms followed suit including insurance giants Ruffers and MassMutual.

But given the return of bitcoin’s infamous price volatility – which saw the largest cryptocurrency’s price drop thousands below its peak of $41,900 set in January – the attraction of that strategy may have lessened, according to company executives Bloomberg spoke with. Bitcoin has since recovered some of those losses and is now trading hands at $35,700, according to the CoinDesk 20.

Severe fluctuations diminish the attractiveness of the leading cryptocurrency because company cash reserves are mainly rainy day funds for maintaining core business needs during unexpected down turns. 

"It would be a red flag for investors if a corporation bought financial assets for speculation purposes unrelated to their core business," JonesTrading chief market strategist Michael O'Rourke said.

Columbia Business School adjunct professor Robert Willens told Bloomberg investing in bitcoin with those funds poses a risk CFOs might not be willing to stomach after last week’s price action.

"Is it a smart strategy? It could be. But, of course, if it's not, it would become something that could threaten the very existence of a corporation,” Willens said.

The Festival for the Decentralized World
Thursday - Sunday, June 9-12, 2022
Austin, Texas
Save a Seat Now

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Trending

1
Musk Sets New Condition for Twitter, Citi Says Terra’s Fallout Unlikely to Hit Wider Financial System

The most valuable crypto stories for Tuesday, May 17, 2022.

The most valuable crypto stories for Tuesday, May 17, 2022.

2
Market Wrap: Cryptos and Stocks Mixed Amid Bearish Sentiment

BTC is stabilizing around $30K while stock market volatility begins to fade.

BTC is stabilizing around $30K while stock market volatility begins to fade.

3
New Data Shows Underground Bitcoin Mining Thriving in China

The U.S. has also expanded its lead in the global hashrate competition.

The U.S. has also expanded its lead in the global hashrate competition.

4
Bitcoin sube a $30K, con una resistencia en $35K

BTC está en camino de registrar una señal de impulso positivo en el gráfico diario.

BTC está en camino de registrar una señal de impulso positivo en el gráfico diario.