Why might tech giants like Amazon be unwilling to purchase BTC with cash?

Original Title: Why tech giants like Amazon may hesitate to adopt Bitcoin

ORIGINAL AUTHOR: DANIEL RAMIREZ-ESCUDERO

Compiled by: Lawrence, Mars Financial

Large tech companies have a large amount of cash on hand. Currency depreciation has eroded their purchasing power. Is Bitcoin a financial solution to combat inflation? Amazon is the next one to decide.

Large technology companies like Amazon have a large amount of cash on hand (870 billion US dollars last year), but as the currency depreciates, the purchasing power of this cash is declining.

The National Center for Public Policy Research (NCPPR) in Washington, D.C. has submitted a proposal to shareholders to use Bitcoin as a solution. However, it is not yet clear whether the tech giants will benefit from this.

NCPPR has been pursuing this strategy at Microsoft and Amazon. In both companies, the think tank believes that incorporating Bitcoin into its funds will protect cash assets and shareholder value from inflation.

The proposal argues that the Consumer Price Index (CPI) will control the inflation rate at 4.95%, which is an ‘extremely bad indicator’ for measuring true currency depreciation, and indicates that the actual inflation rate may be twice this figure.

Microsoft and Amazon’s cash reserves from 1996 to 2024. Source: Companiesmarketcap

Microsoft has $78 billion in cash on hand, while Amazon has $87 billion. Although Bitcoin can provide potential hedging, is the risk greater than the return?

Despite the support of Orange Pill experts and Michael Saylor, Chairman of the business intelligence company MicroStrategy, Microsoft shareholders overwhelmingly voted against NCPPR’s Bitcoin reserve proposal, indicating that its so-called volatility is a negative factor.

Next up is Amazon. Will this vote be different?

Amazon is not a conservative technology company like Microsoft.

Nick Cowan, CEO of fintech firm Valereum, told Cointelegraph that Microsoft and Amazon may have similarities as tech giants, but their styles are very different.

Due to Amazon’s reputation for innovation and risk-taking, its shareholders’ votes may indeed differ from Microsoft’s.

Despite Microsoft being traditionally more conservative in financial and strategic policies, Amazon has a good track record of adopting emerging technologies and exploring new investments.

Koen said: “Unlike Microsoft, Amazon’s higher willingness to innovate may be consistent with the diverse potential of Bitcoin.”

Amazon is likely to vote on NCPPR’s proposal at its annual shareholder meeting in May 2025. The proposal urges the company to allocate risky assets to the company’s portfolio more than the usual 1-2%.

“Amazon should at least evaluate the benefits of holding some (even if only 5%) bitcoin assets.”

Cowan believes that this proportion is unlikely to be realized. ‘For a company of Amazon’s scale, a 5% allocation in Bitcoin is ambitious and may be impractical,’ he said. ‘Although Bitcoin provides diversification, its volatility and lack of tangible returns make it difficult to justify at this level.’ He believes that ‘smaller experimental allocations, similar to the Tesla approach, may garner more shareholder support.’

Tesla’s purchase of Bitcoin in 2021 brought significant profits to the company. Tesla initially bought $1.5 billion worth of Bitcoin, but sold 70% of its initial position in 2021.

Nevertheless, according to data from BitcoinTreasuries.NET, Tesla still holds its Bitcoin reserve (9,720 BTC), which is worth over $1.3 billion.

Amazon has billions of dollars in cash, so it could easily allocate a similar amount of money to Tesla.

While NCPPR may sincerely hope that Amazon and Microsoft will adopt Bitcoin, Kaerne believes that a more extensive strategy is to expand the information that Bitcoin can be seen as an inflation hedge tool, and to “create potential motivation for institutional acceptance of Bitcoin”.

NCPPR did not immediately respond to Cointelegraph’s request for comment.

Do tech giants need Bitcoin to enrich their wealth?

MicroStrategy has achieved significant success in incorporating Bitcoin into its financial core strategy.

The company began buying Bitcoin on August 11, 2020, acquiring 21,454 BTC for $250 million. Since then, its stock price has surged from $14 to $411, and its market value has increased from $1.3 billion to nearly $100 billion.

Michael Saylor bet on Bitcoin as a hedge against inflation, and its returns far exceeded expectations. So why don’t tech giants emulate Saylor’s financial model?

However, MicroStrategy’s approach is markedly different, it uses a lot of leverage, so its strategy is much riskier than Tesla’s buy-and-hold strategy.

MicroStrategy market value history from 1998 to 2024. Source: Companiesmarketcap

In addition, the ratio of Bitcoin to its total market value transforms its stock into leveraged Bitcoin proxies.

According to the article, Amazon’s market value is 2.4 trillion U.S. dollars, and Microsoft’s market value is 3.3 trillion U.S. dollars, so its bitcoin adoption effect will not be similar to MicroStrategy’s.

Cohen believes that Amazon is not in a hurry to adopt Bitcoin because its ‘core business is very strong.’ Although reallocating part or all of its cash reserves to Bitcoin can hedge against inflation, deviating from the current financial strategy carries risks, and some shareholders may see this as a potential burden on its profit business model.

The opportunity cost of holding volatile assets such as Bitcoin instead of investing in research and development or acquisitions will have a significant impact on such decisions.

He said, “Using most of the funds for Bitcoin may affect Amazon’s ability to provide funds for key growth areas such as AWS, artificial intelligence development, and logistics infrastructure.” Shareholders’ vote determines the need to “strike a balance between speculative asset acquisitions and crucial innovative investments that determine Amazon’s competitive advantage.”

Bitcoin environmental issues may hinder shareholders

Large technology companies must also consider public opinion, as mainstream media has a great influence on their brand and stock prices. Although the reputation of Bitcoin has greatly improved, it is still associated with speculative trading assets, potential abuse, and environmental issues.

“Negative PR narratives may obscure potential economic benefits, especially considering Amazon’s focus on ESG initiatives and its need to maintain broad appeal to stakeholders.”

Amazon has revolutionized commerce by delivering items to your door quickly. However, according to a 2022 report by the environmental group Oceana, the environmental impact of this pattern is staggering, generating more than 709 million pounds of plastic waste.

The company has pledged to achieve net zero carbon emissions by 2040, ten years ahead of the goals set in the Paris Agreement.

The high energy consumption of Bitcoin mining has faced severe criticism from environmentalists. However, as mining infrastructure undergoes more thorough scrutiny, this perception is changing. Despite this shift, there are still risks of a public relations backlash.

Amazon shareholders must decide whether the company can achieve positive performance similar to Tesla or MicroStrategy by hedging inflation with Bitcoin, or whether it should avoid risks and focus on its core business model.