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

Shareholders need to find a balance between speculative assets and core business investments.

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

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 tech companies such as Amazon have a large amount of cash on hand (870 billion US dollars last year), but with currency depreciation, 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 tech giants will benefit from this.

NCPPR has been promoting this strategy with Microsoft and Amazon. In both companies, the think tank believes that incorporating Bitcoin into their funds will protect cash assets and shareholder value from the impact of inflation.

The proposal argues that the Consumer Price Index (CPI) will keep the inflation rate at 4.95%, which is an 'extremely poor indicator' of measuring real currency depreciation, and suggests that the actual inflation rate may be twice this figure.

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

Microsoft has $780 billion in cash on hand, while Amazon has $870 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 still overwhelmingly voted against NCPPR's Bitcoin reserve proposal, indicating that their so-called volatility is a negative factor.

Next up is Amazon. Will this vote be different?

Amazon is not a technology company as conservative as Microsoft.

Nick Cowan, CEO of the fintech company Valereum, told Cointelegraph that while Microsoft and Amazon may be tech giants, they have very different styles.

“Due to Amazon's reputation in innovation and risk-taking, its shareholder votes may indeed differ from Microsoft's.”

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

Cohn said, "Unlike Microsoft, Amazon's higher willingness to innovate may be consistent with the diversified potential of Bitcoin."

Amazon may vote on the NCPPR's proposal at its annual shareholder meeting in May 2025. The proposal urges the company to allocate more than the usual 1-2% of its investment portfolio to risk assets.

"Amazon should at least evaluate the benefits of holding some (even just 5%) bitcoin assets."

Cowan believes that this ratio is unlikely to be realized. "For a company of Amazon's scale, a 5% bitcoin allocation is ambitious and may be unrealistic," he said. "Although bitcoin provides diversification, its volatility and lack of tangible income make it difficult to justify at this level." He believes that "a smaller experimental allocation similar to Tesla's approach may gain more shareholder support."

Tesla's purchase of Bitcoin in 2021 has brought significant profits to the company. Tesla initially purchased $1.5 billion worth of Bitcoin but sold 70% of its initial holdings in 2021.

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

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

While NCPPR may genuinely want Amazon and Microsoft to adopt Bitcoin, Keane believes a broader strategy is to expand the information that Bitcoin can be seen as an inflation hedge, to 'create potential momentum for institutional acceptance of Bitcoin'.

NCPPR has not immediately responded to Cointelegraph's request for comment.

Do tech giants need Bitcoin to enrich their wealth?

MicroStrategy has achieved significant success in integrating 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 risen from $1.3 billion to nearly $100 billion.

Michael Saylor's bet on Bitcoin as a hedge against inflation has far exceeded expectations, so why don't tech giants emulate Saylor's financial model?

However, MicroStrategy's approach is clearly different as it uses a significant amount of leverage, making its strategy 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 and Microsoft's market value is $3.3 trillion, so its Bitcoin adoption effect will not be similar to MicroStrategy.

Kahn believes that Amazon is not eager to adopt Bitcoin because its 'core business is very strong.' Although reallocating some or all of the 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 profitable 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, "Investing a large portion of the funds in Bitcoin could impact Amazon's ability to provide funding for key growth areas such as AWS, artificial intelligence development, and logistics infrastructure." Shareholder voting determined the need to "strike a balance between speculative asset acquisitions and critical 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 significant impact on their brand and stock price. 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 overshadow potential economic benefits, particularly considering Amazon's focus on ESG initiatives and its need to maintain broad appeal to stakeholders."

Amazon has fundamentally changed commerce by delivering goods quickly to the door. However, according to a report by the environmental organization Oceana in 2022, this model's impact on the environment is shocking, generating over 709 million pounds of plastic waste.

The company has committed to achieving net zero carbon emissions by 2040, ten years ahead of the goals of the Paris Agreement.

The high energy consumption of Bitcoin mining has been heavily criticized by environmentalists. However, as mining infrastructure undergoes more thorough scrutiny, this perception is changing. Despite this shift, the risk of a public relations backlash still remains.

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