Will Microsoft Ride $5 Trillion Bitcoin Wave (Or Avoid Risk); PolyMarket Betters Skeptical

Microsoft’s shareholders will soon vote on adding Bitcoin to its balance sheet.

Will Michael Saylor’s pitch Orange Pill the tech giant? What are the stakes and risks?

CoinTelegraph’s Daniel Ramirez-Escudero reports that next week, Dec. 10 will mark a key date for Microsoft and the Bitcoin community because the tech giant’s shareholders will vote on whether to add BTC to its balance sheet.

The results will show whether shareholders are attracted by the current Bitcoin bull market or wish to stick to Microsoft’s pragmatic and profitable approach to tech development.

On Oct. 24, before the United States presidential election, Microsoft’s 14a filing with the US Securities and Exchange Commission included a section called “Assessment of Investing in Bitcoin.” The filing says the company should consider diversifying its assets with Bitcoin as an “excellent, if not the best, hedge against inflation.”

However, just beneath the proposal, in the “Board Recommendation” section, Microsoft’s board of directors advised shareholders to vote against it, saying that the company’s management had already carefully considered the topic.

Nate Holiday, co-founder and CEO of Microsoft-backed Web3 decentralized data firm Space and Time, told Cointelegraph, “The board‘s pre-vote statement was clear: They have a sophisticated treasury management function that is returning tremendous returns for their investors.”

Will Saylor’s orange pill be enough to convince Microsoft?

To assess the potential impact on its stock, Microsoft invited MicroStrategy chairman Michael Saylor to make a pitch for adding Bitcoin to the treasury. 

In a three-minute slot containing 44 slides, Saylor went all-in, claiming Microsoft could add $5 trillion to its current value of about $3.19 trillion. He argued that Microsoft should invest $100 billion annually in Bitcoin, asserting, “It makes more sense to buy Bitcoin than to buy back your own stock or hold bonds.”

Solo Ceesay, co-founder and CEO of decentralized social Web3 platform Calaxy, told Cointelegraph that Saylor may have an effect on Microsoft shareholders as his “relentless advocacy paved the way for BlackRock and the rest of ‘orange-pilled’ Wall Street to push Bitcoin nearly past $100,000.”

However, Nick Cowan, CEO of fintech firm Valereum, told Cointelegraph that “influencing Microsoft’s board or shareholders would require more than just Saylor’s endorsement.” He said, “The decision will likely hinge on internal evaluations of risk, strategy alignment and long-term vision rather than external lobbying.”

While it’s debatable whether Saylor’s intervention will work, the shareholder vote could be a massive event for adoption.

Under Saylor’s guidance, MicroStrategy became a Bitcoin proxy for market participants who wanted to gain exposure to the asset through a US trading stock. 

However, founder and CEO of market maker Peanut Trade, Alex Momot, told Cointelegraph that Microsoft and MicroStrategy stocks are like apples and oranges.

“Microsoft enjoys consistent cash flow and revenue from product sales, while MicroStrategy largely relies on stock revaluation and virtual balance adjustments,” said Momot. “Microsoft’s business model centers on tangible products, driving stock value through actual sales growth, whereas MicroStrategy operates more as a market hedge.” 

“Microsoft’s scale, risk tolerance, and fiduciary responsibilities are far different from those of MicroStrategy, which, although originated as a software company, is now effectively a Bitcoin treasury company,” said Cowan.

Holiday highlighted that “MicroStrategy was not a high-growth software company, so in order to drive growth, it had to change its focus to increase shareholder returns.” 

In contrast, “Microsoft has an incredibly healthy balance sheet. They have proven growth over decades and are well-positioned for the future powered by AI and data.” 

“If Microsoft were to make a significant Bitcoin investment, it could fundamentally alter how the market perceives the company, influence shareholder sentiment, and require a significant strategic pivot,” said Momot. 

The decision on whether to adopt Bitcoin comes at a pivotal moment as Bitcoin adoption is becoming institutionalized and could be just months away from becoming a US reserve asset.

Microsoft shareholders must evaluate the pros and cons of adopting Bitcoin for their treasury.  

Pros and Cons of Microsoft adopting Bitcoin

Daniel Cawrey, chief strategy officer of TON wallet Tonkepeer, told Cointelegraph that “buying some Bitcoin as a diversification strategy is a good idea for public companies as inflation does slowly erode the value of cash over time.”

“Bitcoin is becoming the ‘modern-day savings’ account right in front of our eyes, with individuals and institutions parking long-term capital in the asset instead of leaving it in US dollars or treasury bills that no longer outperform inflation,” said Ceesay.

Inflation destroys the purchasing power of cash. To battle this decrease in value, MicroStrategy followed a model where it invested practically all of its cash into Bitcoin. Cawrey pointed out Microsoft’s frequent enormous pot of cash on hand:

“Microsoft’s cash on hand, according to public reports, is around $75 billion. So they certainly have the ability to convert some of that into Bitcoin if they wanted to.”

Microsoft has reported well over $100 billion in cash on hand in prior years. Currently, it hovers around $80 billion.

Microsoft’s quarterly values of cash on hand from 2010-2024. Source: Macrotrends

Microsoft’s decrease in cash reserves stems from significant tech investments and acquisitions, including a $68.7 billion purchase of videogame developer Blizzard and the highly publicized $10 billion investment in ChatGPT.

“Microsoft’s ability to invest is not the issue; it’s whether the potential risks align with its long-term financial and strategic goals,” said Cowan.

“Holding Bitcoin ties up liquidity that could otherwise be allocated to strategic acquisitions, research and development, or other initiatives more closely aligned with Microsoft’s core business objectives,” said Cowan.

Momot said that for Microsoft’s board, “embracing such a strategy would require a complete overhaul of its business operations.”

He said, “Expecting major companies to pivot their models as MicroStrategy did is premature.” Momot added, “It’s unlikely that any large corporation will take such a step in the foreseeable future, as it would require a fundamental shift that doesn’t align with their established objectives.” 

However, the advantages of Bitcoin adoption are apparent. Cowan said that Bitcoin’s “finite supply makes it a compelling hedge against inflation.” 

Holiday said, “Bitcoin should be a consideration for corporations,” as many will begin “to consider digital assets to diversify their investments” from “a world of inflation and unsustainable spending and debt.”

Cowan said that Bitcoin could represent a unique tool for companies to hedge against fiat currencies.

“Incorporating Bitcoin into its holdings could diversify Microsoft’s assets, reducing dependency on fiat currencies and traditional financial instruments.” 

Furthermore, Cowan said, “Such an investment could signal forward-thinking leadership, potentially attracting tech-savvy investors and customers who value decentralization and technological innovation.”

Observers noted that there are, of course, some cons Microsoft may take into account.

Cowan pointed out that Bitcoin’s “price volatility poses a significant risk, as the company prioritizes stability in financial reporting and treasury management.” 

These price oscillations may be disliked by shareholders, as “Microsoft has always been known as a more conservative tech company,” Daniel Cawrey, chief strategy officer of TON wallet Tonkepeer, told Cointelegraph.

Another disadvantage is that “Bitcoin’s evolving regulatory landscape could expose Microsoft to compliance risks and potential liabilities,” as Cowan noted.  

Microsoft’s reputation is highly regarded as a solid and trustworthy tech company. Cowan said that Bitcoin’s “public perception also plays a role” in the final decision-making, which may deter Microsoft’s Bitcoin adoption. “Despite Bitcoin’s growing acceptance, its association with speculative trading, money laundering and environmental concerns could lead to reputational risks.”

“Microsoft has certainly focused a lot recently on AI efforts, and therefore, the board may consider a move such as this too aggressive for the company for the time being,” said Cawrey.

Cowan said that “the board may also prioritize allocating cash reserves to the core and growing business areas such as AI, cloud computing, and acquisitions, which provide more tangible synergies and clearer returns,” rather than to an asset with an uncertain destiny.

“The long-term viability of Bitcoin as a store of value remains a subject of debate, potentially making it inconsistent with the company’s financial principles,” said Cowan.

Cowan concluded that as MicroStrategy works on a smaller scale, it allows for greater risk-taking. However, “Microsoft must carefully manage decisions to maintain shareholder confidence and avoid undue exposure.”

For now, PolyMarket betters are skeptical of Saylor’s pitch being successful, assigning only a 10% chance of the bitcoin investment…

As CoinDesk reports, one Polymarket bettor argued that there wasn’t really a point for institutional investors to want Microsoft to add bitcoin to its balance sheet, because there are already so many options out there to get bitcoin exposure – which wasn’t the case when Microstrategy originally bought.

“They’re just making their value assessment more difficult by muddying up safe investments (MFST) with volatile ones (BTC),” trader Oxymirin wrote, who holds a position on the ‘no’ side worth $2000.

Another bettor, who holds the opposite side of the trade, argued that given Microsoft’s comfortable cash position, the company might buy a small amount of BTC.

“I think a small amount of funds will be allocated for testing. After all, shareholders’ rights must be taken into consideration. Microsoft’s cash position is sufficient. Microsoft offers some options for buying Bitcoin,” a trader that goes by the handle of titanlin wrote.

We shall soon see…