Investment banking company, TD Cowen, published a recent report on MicroStrategy and its adoption of Bitcoin, according to documents obtained by Bitcoin Magazine.
“MicroStrategy represents a new kind of firm, which generates dollar -based cash flow from enterprise software products and cloud intelligence services but then converts its excess cash flow – on an effectively -leveraged basis – into bitcoin,” the report said. “What started as a defensive strategy to protect the value of its assets has evolved rapidly into an opportunistic strategy intended to accelerate the creation of shareholder value…This hybrid corporate strategy represents a paradigm shift, in our view.”
The report details how this forward thinking company strategy is designed to combat the depreciation of purchasing power holding the US dollar. “Unlike fiat money, the total supply of bitcoin is capped at 21 million bitcoins, making it a potentially superior store of value, we think.” TD Cowen explains that this strategy will not be lived short term, but it will be a long term strategic plan predicting that bitcoin will become a superior store of value in comparison to metals and fiat currencies. And that because of MicroStrategy’s large BTC holding, they “see MSTR as an attractive vehicle for investors looking to gain Bitcoin exposure.”
Significant near term catalysts for the price of Bitcoin to rise include the approval of a spot Bitcoin ETF by the SEC, development of the Lightning Network, potential FASB / GAAP accounting changes with respect to Bitcoin holdings, and the upcoming bitcoin halving in less than a year, according to the investment bank.
The report is bullish on the potential approval of a spot Bitcoin, joining many other firms in saying it’s a matter of “when” rather than “whether” one will eventually get approved by the SEC. TD Cowen’s Washington policy expert Jaret Seiberg wrote in a report earlier this month stating “we view approval of a spot Bitcoin ETF as inevitable.”
TD Cowen wrote “Bitcoin could ultimately represent a superior store of value relative to all other forms of money, whether fiat, metal -based, or digital, we believe.” The report describes Bitcoin’s properties of durability, portability, fungibility, verifiable, divisibility, and scarcity, establishing history, and censorship resistance as reasoning for this.
Bitcoin is relatively new, only being around since 2009. Despite this small amount of established history in comparison to gold or the dollar, TD Cowen believes that Bitcoin “has weathered enough trials in the market to suggest a high likelihood it will not vanish as a valued asset any time soon.” They predict that the asset will only grow stronger due to the lindy effect, meaning the longer Bitcoin can stay in existence, the more confidence society will have in it that it will continue to exist.
If Bitcoin is to take over and exceed the $17 trillion gold stocks market, it would put the price of BTC at around $800,000, in 2023 dollar terms of purchasing power, the report says.
As more adoption of Bitcoin happens and demand increases, TD Cowen predicts, in the short term, an upside scenario where the price of BTC appreciates 127% to around just above it's all time high at $70,000. But if regulators continue cracking down on the asset class, they predict a downside scenario of another crash back to $15,000.
Despite what many big firms have negatively reported on Bitcoin mining and its energy consumption, TD Cowen stated that “Bitcoin mining is in our opinion one of the most efficient, cleanest industrial uses of electricity and is improving its energy efficiency at a faster rate than most other industries.” The investment bank detailed that “simple economics – rather than government dictate – are driving bitcoin miners to the lowest -cost sources of energy.”
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