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“Since January 2020, the US has printed 40% more US dollars than previously existed. We are not privy to conversations at central banks or departments of treasury, but we foresee no end to this in the near term.”
– Nexon CEO, Owen Mahoney
Nexon Bitcoin Purchase
Nexon is a Japan-based company that makes video games and disclosed today that they purchased $100 million in bitcoin.
Journalists couldn’t articulate the magnitude of this news similar to when Norweigan billionaire Kjell Rokke purchased a slug of bitcoin for his company called Seetee.
Nexon has a $30 billion market cap and is a top 30 holding in the Nikkei 225 Index.
To compare, MicroStrategy is only a $6 billion market cap and look at the impact Michael Saylor has had on the digital asset space.
If you dig deeper the story is even more interesting.
Here are the top mutual fund holders:
Nexon is a huge global corporation owned by other mega corporations like Vanguard and Fidelity.
Those mega asset managers now indirectly own bitcoin through Nexon.
Transactions like these will keep happening as global growth slows with demographics.
Capital and corporate balance sheets will continue to seek stores of value.
The worlds of legacy finance and digital assets are inexorably merging.
Mega asset managers should front-run this phenomenon if they are going to own it indirectly through their corporations anyways.
Fiat Currency Wars
While this $100 million purchase was only 2% of Nexon’s cash reserves, it symbolizes a bigger conundrum.
Global corporations are realizing their purchasing power is being eroded by governments and are being forced to protect themselves.
Isn’t this how you would picture it unraveling?
What makes things so healthy for the bitcoin ecosystem is a geographically and geopoltiically diverse holder base.
Take a look at bitcointreasuries.org:
These are corporations from Japan, the US, China, the UK, Canada, Germany, Norway, Hong Kong, Australia, Ukraine and probably a lot more private companies that haven’t disclosed their holdings.
It may be the most geographically diverse holder base next to the FANGMAN stocks.
In a globalized world of secular stagnation and fiat currency wars, is it really surprising we are seeing this happen?
Money printing and fiat devaluation allows countries to adjust their trade balances, and corporations are finally buying insurance on these monetary policies.
Nexon’s CEO, Owen Mahoney, wrote a medium article explaining the purchase.
“Nexon holds more than $5 billion of cash and cash-equivalents, primarily in the form of JP¥, US$ and KRW [Japanese yen, US dollars and Korean won]. These financial resources provide us enormous strategic flexibility to invest for productive uses, such as to create new Virtual Worlds, to build out our technology stack, or to buy or invest in other companies. Usually ‘cash in the bank’ that waits for such uses can generate a few percentage points of interest at very low risk, typically by lending it to others. But in the current historically-low interest rate environment, these holdings generate almost no return, especially when compared with inflation. Even junk bonds — which carry higher risk and were formerly known as ‘high yield’— have become a source of ‘rewardless risk.’”
Yes! Mahoney just said it!
Bonds are REWARDLESS RISK and he is betting on the convexity of bitcoin to be a safe haven.
Canadian high-yield trader, Greg Foss, was correct when he posited, “Bitcoin is equivalent to a default insurance on a basket of fiat credit.”
I can’t overstate the ramifications of this.
If corporations see inflation on the horizon and refuse to hold bonds with their excess cash, then we could be at a global turning point in understanding what value really is.
Let’s watch bond yields closely and see how bitcoin reacts if we see the beginnings of a credit crisis.
The US dollar and treasury yields will tell us if this will end with hyperinflation or deflation.
It appears Jay Powell is out to lunch after today’s FOMC release so I’m leaning towards hyperinflation for now.
One thing is for sure…
We are at a seminal turning point in history.
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We're Reading
- Peter Smith: What Bitcoin Bubble? – Blockworks
- Powell: Recovery is Far From Complete – Blockworks
- US Chamber of Commerce Veteran Joins Square – Blockworks
- Genesis: Corporates Account for $8B in Spot Trading in Q1 – Blockworks
- Game Giant Nexon Puts $100M in Bitcoin on Balance Sheet – Blockworks
- SEC delays decision on approving bitcoin ETF – CNBC
- Nexon’s Purchase of Bitcoin – Owen Mahoney (CEO, Nexon)
- European Investment Bank Issues $121M Digital Notes Using Ethereum – CoinDesk
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Come together this Thursday to explore how legacy finance and crypto companies will join forces to build the future of finance.
Date: Thursday, April 29
CLO of Kraken and CIO of Arca examine the evolving role of prime brokerage in the world of digital assets.
Date: Thursday, May 6
Can't make it? Register here and we'll send you the video after the webinar so you can access it anytime on demand.
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We're Tweeting
- The biggest gaming company in South Korea, Nexon, bought $100 million worth of Bitcoin. Nexon also bought Bitstamp and Korbit, two major exchanges in Europe and South Korea, in the past three years. This is a big step forward for institutional BTC adoption in Asia. – Joseph Young
- Elon proved that Bitcoin is liquid on the downside and illiquid on the upside – Vijay Boyapati
- As Bitcoin's market cap grows, its network becomes more secure. As network security improves, the more certain is the fixed money supply of 21 million Bitcoin. The more certain its money supply, the better Bitcoin insures against uncertainties, including fiat inflation. – Robert Breedlove
- Some price changes in USD over the last year: (list) – Bitcoin
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Developing Story
We've got the 5th piece in the "Gone Crypto" series coming tomorrow. It's the most unique one yet, stay tuned.
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A Note From Us
On today’s episode of On the Margin, Blockworks’ Michael Ippolito is joined by the one and only Danielle DiMartino Booth. She brings her deep historical knowledge of the Fed to a wide-ranging and fascinating discussion of the economy.
And don't forget to register for our webinar next Thursday. We're exploring how prime brokerage is evolving with the influx of institutional players in digital assets.
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Written by @tylerneville and @corinnemoshy.
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