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I think the second order effect will be from companies that accumulate too much cryptocurrency - only to see its value vaporize. Impact could be systemic if com

I think the second order effect will be from companies that accumulate too much cryptocurrency - only to see its value vaporize. Impact could be systemic if companies start to essentially gamble with their treasure chests. Example: what happens if other companies followed the likes of Tesla and MicroStrategy? Sure the $1.5B Tesla invested is pittance in the context of their market capitalization, but if Bitcoin price crashes 80% then they've lost $1.2B. Even Microstrategy, with its alleged 85% of its cash reserves in Bitcoin, might well go under if the Bitcoin price drops even 50%. A "run on Bitcoin" could become a real thing and as impacted companies are forced to cut production and expenses to offset the losses, it creates a domino effect across the economy.

TheDurfAbides 6y ago
I had been looking recently for a way to invest in companies doing interesting things with the blockchain. I came across the ETF called BLOK. It’s largest holding is with Microstrategy .... because they hold a lot of Bitcoin. It’s really unfortunate to see something like that. They aren’t doing anything with the blockchain (that I know of), yet are the largest holding in a blockchain ETF because they have a bunch of Bitcoin. Hopefully we don’t start seeing more and more companies hodling in hopes of making their balance sheets look better.
BenoitEssiambre 6y ago
Note that in a way, this is a best case scenario, at least if it happens early. Extra volatility in the crypto coin market disincentivizes hoarding. So while it might hurt specific companies that over do it, it may prevent an economy wide gridlock where all companies are hoarding coins instead of investing in real production. In a way, volatility caused by corrections is a natural cure for the bad Nash equilibrium. It's when the correction mechanism stops happening that things can build up into dangerous situations. That's why when governments tried to stabilize gold in the 1930s, preventing it from naturally correcting into a volatile asset, it caused the great depression.

TheDurfAbides 6y ago

I had been looking recently for a way to invest in companies doing interesting things with the blockchain. I came across the ETF called BLOK. It’s largest holding is with Microstrategy .... because they hold a lot of Bitcoin. It’s really unfortunate to see something like that. They aren’t doing anything with the blockchain (that I know of), yet are the largest holding in a blockchain ETF because they have a bunch of Bitcoin. Hopefully we don’t start seeing more and more companies hodling in hopes of making their balance sheets look better.

BenoitEssiambre 6y ago

Note that in a way, this is a best case scenario, at least if it happens early. Extra volatility in the crypto coin market disincentivizes hoarding. So while it might hurt specific companies that over do it, it may prevent an economy wide gridlock where all companies are hoarding coins instead of investing in real production. In a way, volatility caused by corrections is a natural cure for the bad Nash equilibrium. It's when the correction mechanism stops happening that things can build up into dangerous situations. That's why when governments tried to stabilize gold in the 1930s, preventing it from naturally correcting into a volatile asset, it caused the great depression.