"HODL" is hot! Canadian startup converts 40% of cash reserves into Bitcoin

Bitcoin's inflation-hedging properties seem to be gaining traction as a photo editing platform based in Canada, Snappa, announced that it has converted a significant portion of its cash reserves into Bitcoin due to concerns over inflation and global economic uncertainty.

Why We’re Holding Bitcoin as a Reserve Asset

The co-founder of the company, Christopher Gimmer, announced this news today on his Twitter and shared an article titled "Why We’re Holding Bitcoin as a Reserve Asset". According to information revealed by Gimmer to the media outlet CoinDesk, 40% of the company's reserves are allocated to Bitcoin, but the exact quantity of Bitcoin was not disclosed.

The company operates an online graphic design platform. Although it is unrelated to finance, the founder Gimmer majored in finance in college and has a good understanding of currency concepts and history. The article explaining Bitcoin is almost at the level of a research report, starting with:

Would you rather save in fiat currency with an annual supply that continues to inflate, or would you prefer to save in a currency with a fixed total supply based on cryptography?

Bitcoin's Scarcity Compared to Gold

Gimmer's arguments have been reported before, including the significant acceleration of the depreciation of the US dollar after the abandonment of the gold standard in 1971, with purchasing power continuing to decline. In comparison, the price of an ounce of gold was $20 in 1920 and is now close to $2,000.

Block Reward Halving

Over time, Bitcoin undergoes a halving of block rewards every four years, continuously reducing the issuance of Bitcoin until all 21 million Bitcoins are in circulation (by 2140).

Stock-to-Flow Model

As well as the Stock-to-Flow (S2F) valuation model developed by the renowned Bitcoin analyst PlanB, applicable to Bitcoin. With Bitcoin halving this year, the current Bitcoin S2F is 56, roughly equivalent to gold. However, after the next halving in 2024, Bitcoin's scarcity will be twice that of gold.

The image below shows PlanB's further optimized Stock-to-Flow cross-asset model (S2FX), which can accurately estimate the prices of gold and silver in addition to Bitcoin, hence known as a cross-asset model.

Gimmer created a chart comparing Bitcoin, gold, and fiat currency, believing that Bitcoin's market value is only 1.7% of gold's, but it is not inferior to gold in many aspects. Therefore, he is confident that Bitcoin will outperform gold in the coming years.

Industry Giants' Entry Boosts Confidence

Gimmer also mentioned the Nasdaq-listed company MicroStrategy, which previously invested $250 million in Bitcoin, and the contemporary legendary investor Paul Tudor Jones, who announced his entry into Bitcoin in early May this year. Interestingly, Jones' views on gold and Bitcoin are similar to Gimmer's. Jones pointed out:

Bitcoin scores 66% of gold, but its market value is only 1/60th of it. It seems like there's a mistake somewhere, and I guess it might be Bitcoin's price.

Gimmer's company began using Bitcoin as a savings asset since March this year and has likely accumulated significant profits by now. However, he is not in a rush to sell, stating:

We are still accumulating Bitcoin and have no intention of selling soon. If our anticipated development is correct, the percentage allocated to Bitcoin may be increased in the future (currently at 40%).