Cryptocurrencies

Michael Dell, founder and CEO of Dell Technologies, sparked excitement with a message

Michael Dell, founder and CEO of Dell Technologies, has sparked excitement with a bizarre post suggesting his company could explore Bitcoin (BTC) as a potential investment.

On June 21, Dell tweeted: “Scarcity creates value,” a phrase often associated with Bitcoin due to its peak supply of 21 million tokens in the face of growing demand. His tweets quickly caught the attention of Michael Saylor, a prominent advocate of Bitcoin as a corporate treasury asset.

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A subsequent repost of Saylor’s response by Dale, accompanied by a photo of Cookie Monster eating Bitcoin, left the market hanging with speculation that he might invest in the cryptocurrency in the future, either from from his personal investment portfolio, or through his business.

Dell’s Bitcoin tweet follows $2.1 billion withdrawal

Dell’s recent financial moves provide a strong backdrop for this potential investment in Bitcoin.

For example, shares of Dell Technologies have increased fivefold since returning to the public market in December 2018. In the last 18 months alone, the company’s Class C common stock has risen from $40 to $145 per share. action, thereby doubling Dell’s net wealth. quadruple to around $120 billion, making him the 14th richest person in the world.

Weekly chart of DELL stock performance. Source: Commercial View

So far in 2024, Dell has taken in $2.1 billion while retaining a 58% stake in the company. In other words, it has excess capital to deploy into the Bitcoin market, especially amid rising US debt, which could negatively impact the value of the US dollar in the future.

Related: History of Cryptocurrencies: Crippling Inflation, Rising Debt, and the Changing Cryptocurrency Landscape

What if your Dell Technologies portfolio became 1% Bitcoin?

Joe Consorti, an analyst at Bitcoin Layer – a global macro research firm – says Bitcoin could benefit from companies like Dell Technologies, given its ability to amass excess liquidity thanks to the emergence of artificial intelligence technologies reducing costs.

“The huge returns on its reserves during this AI boom will provide an additional buffer for capital allocation at a time when the spending and expansion of computer manufacturing has not been as rapid or as aggressive contested for decades,” he wrote, adding:

“Dell has $5.83 billion in cash to make this happen.”

Cash and cash equivalents of Dell Technologies. Source: Bloomberg

For businesses, keeping a small percentage of their balance sheet in Bitcoin – say 1% – can give them a significant advantage over their competitors.

For example, if Dell Technologies allocated 1% of its $5.83 billion cash reserves to Bitcoin, the equivalent of US$58.3 million, this investment would likely increase to US$118.7 million in just one year, based on Bitcoin’s historical annual returns. at around 103.5% over the year. the last decade.

Compound annual growth rate of Bitcoin. Source: Curve.eu

Historical data indicates that businesses can greatly benefit from investing in Bitcoin. For example, Saylor’s MicroStrategy posts an impressive profit of around $6.33 billion from strategic Bitcoin acquisitions over the past few years.

BTC performance per MSTR share from MicroStrategy. Source: MSTR-Tracker.com

Meanwhile, major investors such as Warren Buffett have refrained from purchasing Bitcoin. In theory, Buffett would have increased his company Berkshire Hathaway’s returns from 214% to 240% over five years if he had allocated even 1% of his net portfolio to bitcoin.

“Bitcoin is the best asset with which you can earn significant risk-adjusted returns over a period of years,” Consorti noted, adding:

“You’re just not working for your shareholders if you ignore it for no reason.”

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research before making a decision.

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