Michael Dell, founder and CEO of Dell Technologies, has sparked interest with an interesting message suggesting that his company may be exploring Bitcoin (BTC) as a possible investment.
On June 21, Dell tweeted “Scarcity creates value,” a phrase often associated with Bitcoin, which has a supply cap of 21 million compared to growing demand. His tweet quickly caught the attention of Michael Saylor, a prominent advocate for Bitcoin as a corporate treasury asset.
Dell later reposted Saylor’s response and added an image of Cookie Monster eating Bitcoin, buzzing the market with anticipation that he might invest in cryptocurrencies in the future, either through his personal investment portfolio or through his company.
Dell’s Bitcoin tweet comes after a $2.1 billion cash payout.
Dell’s recent financial moves provide a strong backdrop for this potential investment in Bitcoin.
For example, shares of Dell Technologies have risen nearly fivefold since it returned to the public markets in December 2018. In the last 18 months alone, the company’s Class C common stock has skyrocketed from $40 to $145 per share, nearly quadrupling Dell’s net worth. He is worth $120 billion, making him the 14th richest person in the world.
So far in 2024, Dell has cashed out $2.1 billion while retaining 58% ownership of the company. That means he has excess capital that he can deploy into the Bitcoin market, especially against the backdrop of rising US debt, which could have a negative impact on the value of the US dollar in the future.
Related: Crypto History: Extreme Inflation, Rising Debt, and the Evolving Crypto Landscape
What would happen if Dell Technologies’ portfolio went to 1% Bitcoin?
Joe Consorti, an analyst at global macro research firm Bitcoin Layer, argues that Bitcoin could benefit from companies like Dell Technologies that have the potential to free up excess cash due to the advent of cost-cutting artificial intelligence technology.
He added, “The significant returns on reserves during this AI boom will provide an additional buffer for capital allocation at a time when spending and expansion in computer manufacturing has not been this rapid or fiercely competitive in decades.”
“Dell has $5.83 billion in cash on hand to make this happen.”
For companies, holding even a small percentage of their balance sheet (say 1%) in Bitcoin can give them a significant advantage over their competitors.
For example, if Dell Technologies allocates 1% of its $5.83 billion cash reserves, or $58.3 million, to Bitcoin, this investment would be worth $100 million in just one year, based on Bitcoin’s historical annual return of approximately 103.5%. That could potentially increase to $18.7 million. Last 10 years.
Historical data shows that businesses can greatly benefit from investing in Bitcoin. For example, Saylor’s MicroStrategy boasts massive revenues of approximately $6.33 billion through strategic BTC acquisitions in recent years.
At the same time, top investors such as Warren Buffett have refrained from purchasing Bitcoin. Hypothetically, if Buffett had allocated even 1% of his net portfolio to Bitcoin, he would have boosted the returns of his company, Berkshire Hathaway, from 214% to 240% over five years.
“Bitcoin is the single best asset for delivering outsized risk-adjusted returns over many years,” Consorti added.
“If you ignore this without reason, you are not working in the best interests of your shareholders.”
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.