The new bitcoin bull cycle is spilling over into the stock market. And it’s already benefiting some companies…
In October, the Financial Accounting Standards Board (FASB) recommended new standards that could be a catalyst that helps increase bitcoin adoption.
Let us explain…
FASB establishes the rules for how U.S. companies report their financial standing under generally accepted accounting practices (GAAP). More specifically, it set the rules for how companies report bitcoin holdings on their financial statements.
Current guidance says that when the price of the bitcoin drops below a company’s purchase price, the company must lower the reported value of its BTC.
However, the company can’t raise the value of its bitcoin if it rises. So even when bitcoin had a major rally – under the current policy – it remained a black eye on balance sheets.
But under the new policy, companies can report their crypto’s value based on its current level.
On Thursday, Yahoo Finance reported companies like Tesla (TSLA) and Block (SQ) are among the biggest beneficiaries of this rule change.
Under the current accounting regime, firms such as Tesla and Block that hold bitcoin must report a loss in earnings reports if the digital asset drops in value during a given time. At the same time, they can’t record a profit if the price goes up. In practice, this means that a company that bought bitcoin at $25,000 and saw it dip to $20,000 must maintain the lower value on its balance sheet – even if the price soars to $40,000 right after.
The price of bitcoin, which jumped on the FASB news, was a little over $42,000 at midday on Wednesday. Tesla owns around 10,000 while Block has about 8,000, and as both firms acquired most or all of their bitcoin holdings at a lower price, they stand to reap a gain when the new rules are enacted, according to FASB, “for fiscal years beginning after December 15, 2024.”
Following the FASB announcement of the rule change in October, Tesla’s stock has climbed nearly 20%, and Block shares are up 70%.
If you’re a longtime follower of the Daily, then you know our analyst Michael Gross broke this story more than a year ago.
Here’s what Michael wrote in the Daily on December 26, 2022…
So as bitcoin rebounds from its lows, this proposed policy would boost the value of liquid assets on their balance sheets… And it would be more apparent to the market that their financial standing is getting healthier.
That’s good news for bitcoin miners… But the policy’s effects would also make bitcoin a more attractive asset for any company to hold on its balance sheet…
Even if those companies don’t believe in the true value of bitcoin, they won’t turn down a chance to earn a positive return.
This will create another source of demand for bitcoin – along with the imminent approval of a spot bitcoin exchange-traded fund.
That will run head-on into the next bitcoin halving, which is scheduled for April 2024 and will diminish incoming supply of BTC.
You don’t need a doctorate in economics to know where the price will go next. Since the start of the year, bitcoin is up 153%.
As corporations increasingly add bitcoin to their balance sheets, Teeka believes the price of bitcoin will go much higher – all the way to $1 million.
That’s why Teeka says everyone should hold some bitcoin for the long term.
And as goes bitcoin, so does the altcoins… That means when bitcoin enters another three-year bull market, it’ll act as a slingshot for altcoins.
So if you’re looking for altcoins to add to your stack, Teeka’s paying close attention to a project that’s enabling another major trend he’s following: the rollout of a central bank digital currency, or CBDC.
You see, the Federal Reserve recently launched a program that could lead to a mandatory recall on the U.S. dollar.
This program could replace the dollar with a new digital version that will be radically different from what you have in your bank account right now.
He’s put together a briefing to explain what this new digital dollar regime means for you and your money. You can stream the video here.
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Regards,
Chaka Ferguson
Editorial Director, Palm Beach Daily