Four compelling justifications warrant Apple's potential acquisition of Bitcoin:
At its annual shareholder meeting scheduled for December 10, Microsoft shareholders will deliberate on the possibility of the company investing in Bitcoin (BTC 0.64%). With Bitcoin's price skyrocketing 1,300% in the last five years and an additional 140% in 2024 (as of December 9), the digital asset has gained substantial attention from corporate executives who recognize the potential benefits of holding some Bitcoin in the company's balance sheet.
Although no proposal regarding Bitcoin investment has been proposed for Apple (AAPL -0.20%), the world's most valuable company, I propose that Apple should start exploring the world's leading cryptocurrency. Here are four compelling reasons why Apple should consider investing in Bitcoin:
1. Apple's financial strength
As of September 28, Apple boasted a staggering $157 billion in cash, cash equivalents, and marketable securities on its balance sheet. This substantial financial strength, stemming from consistently high free cash flow, positions Apple as one of the most financially sound companies globally.
While a significant portion of Apple's cash has been invested in share buybacks (to the tune of $95 billion in fiscal 2024), there remains plenty of room for Apple to explore alternative investment opportunities. With such a large cash reserve and fewer opportunities for reinvestment, Apple can explore innovative possibilities, such as accepting Bitcoin as a form of payment or incorporating Bitcoin support directly into Apple Pay and Apple Card.
2. Bitcoin's market dominance
Bitcoin's spectacular growth throughout the years has transformed it from a niche internet currency to a globally recognized financial asset, carrying a market capitalization of nearly $2 trillion. This substantial size makes Bitcoin an attractive investment opportunity, as even a modest 10% investment from Apple would not significantly impact the market price.
Such a purchase would amount to $16 billion worth of Bitcoin, potentially divided into multiple purchases over a 12-month period for effective risk management. By allocating 1% of its net income to Bitcoin every quarter, Apple can further manage its exposure, while also benefiting from the regulatory-compliant purchase options provided by the launch of spot Bitcoin ETFs.
3. Inflation hedge
Apple's cash, cash equivalents, and marketable securities mainly consist of money market funds, U.S. and foreign government debt, and corporate debt. While these investments are generally considered safe, they may not keep pace with inflation, making Bitcoin an attractive alternative.
Bitcoin's price appreciation has averaged an annualized rate of 69% over the past five years. Even if this growth rate slows down to 20% per year in the near future, the long-term value that Bitcoin can bring to Apple's balance sheet is substantial.
4. Set an example for the industry
Apple is often slow to introduce new products to the market, preferring to focus on quality rather than speed. This strategy has proven successful with products like the iPad, iPhone, MacBook, Apple Watch, and AirPods.
As other companies such as Block and MicroStrategy have started investing in Bitcoin, Apple, with its reputation for innovation and high customer satisfaction, could follow suit, potentially leading a wave of Bitcoin adoption among other businesses. This increase in demand could ultimately drive up Bitcoin's price further, providing additional benefits to Apple's investment.
It remains unclear whether Bitcoin is a consideration for Apple's executive team, but as Bitcoin's price continues to rise, it is not a stretch to imagine that more publicly traded companies will eventually consider investing in the digital currency.
Considering Apple's substantial financial strength with a cash reserve of $157 billion, exploring alternative investment opportunities, such as Bitcoin, could be beneficial. With Bitcoin's market dominance and growing acceptance as a financial asset, investing a portion of its net income into Bitcoin could potentially serve as an effective hedge against inflation.
