Leo Polovets of Susaventures mentioned in a curious tweet today that he increasingly feels that startups would benefit from copying Tesla and MicroStrategy by putting a fraction of their cash into Bitcoin, he noted,
“Worst case you lose a few percent of your bank balance, best case you might extend your runway by 25+%. Asymmetric upside.”
So how will this work out? Michael Saylor has been calling out institutions to use cash from their balance sheet to buy Bitcoin for a long time now. Following in the footsteps of the two companies making the most noise on Crypto Twitter may be riddled with risk, however, it comes with a payoff.
Startups can spare between 5-10% of cash from their balance sheet and can buy bitcoin with a time frame in mind. Selling in tranches may be beneficial for those who are looking to get rid of the risk soon enough. The length of the process offers time for the market cycle to share the gains from Bitcoin with their investors or shareholders. So what can possibly go wrong?
Just as dollar averaging is not the best strategy in a bull market, this may go wrong if there is a massive drop in Bitcoin’s price, and if the entry or exit isn’t timed right. Startups that raise funds are working towards attaining goals on their roadmap and this may end up distorting incentives and profits from their business and Bitcoin. An appropriate metric here is moving PNL. Based on the moving PNL chart from whale maps, if the timing of entry and exit is planned based on Bitcoin’s price chart, and spaced at least 12 months or more apart, there is a higher probability of making unrealized profits rather than losses.
The chart shows that back in March, losses exceeded profits, by nearly 4 times and this has emerged as a pattern on the chart in the past 2 years.
In conclusion, this is possible and a lucrative approach for startups looking to invest. However, based on the intricacies it may be more lucrative and profitable to use 5 to 10% cash from your balance sheet and allocate it to top DeFi/ Altcoin projects and Bitcoin, to enable withdrawals sooner than 12 months, with wider profit booking windows.