Michael Dell, founder and CEO of Dell Technologies, has generated excitement with a curious message suggesting that his company might explore Bitcoin (BTC) as a possible investment.
On June 21, Dell tweeted, "Scarcity creates value," a phrase often associated with Bitcoin due to its supply cap of 21 million tokens against rising demand. His tweet quickly drew the attention of Michael Saylor, a prominent advocate for Bitcoin as a corporate treasury asset.
Dell's subsequent repost of Saylor’s reply, coupled with an image of Cookie Monster eating Bitcoin, left the market abuzz with anticipation that he may invest in the cryptocurrency in the future, either from his personal investment portfolio or via his company.
Dell's Bitcoin tweet comes after his $2.1 billion cashout
Dell's recent financial moves provide a strong backdrop for this potential investment into Bitcoin.
For instance, Dell Technologies’ stock has appreciated nearly fivefold since its return to the public market in December 2018. In the past 18 months alone, the company’s Class C common stock has surged from $40 to $145 per share, quadrupling Dell’s net worth to around $120 billion, making him the 14th richest person globally.
So far, in 2024, Dell has cashed out $2.1 billion while retaining 58% of the company's ownership. In other words, he has excess capital available to deploy into the Bitcoin market, particularly against the backdrop of rising U.S. debt, which may negatively impact the U.S. dollar's value in the future.
Related: History of Crypto: Crippling inflation, rising debt, and the evolving crypto landscape
What if Dell Technologies' portfolio goes 1% Bitcoin?
Joe Consorti, an analyst at the Bitcoin Layer— a global macro research firm—argues that Bitcoin can benefit from corporations like Dell Technologies, given their potential to garner excess cash due to the advent of cost-cutting artificial intelligence technologies.
"Outsized returns on their reserves during this AI boom will provide a further buffer for capital allocation during a time when spending and scaling in computer manufacturing haven’t been this rapid or hotly contested in decades," he wrote, adding:
"Dell is sitting on $5.83 billion in cash to make that happen."
For corporates, holding even a small percentage of the balance sheet in Bitcoin—say 1%—could give them a significant edge over competitors.
For example, if Dell Technologies allocates 1% of its $5.83 billion cash reserves to Bitcoin, amounting to $58.3 million, it could potentially see this investment grow to $118.7 million in just one year, based on Bitcoin's historical annualized returns of approximately 103.5% over the past decade.
Historical data suggests that corporations can greatl benefit from Bitcoin investment. For instance, Saylor’s MicroStrategy boasts a staggering profit of approximately $6.33 billion from its strategic BTC acquisitions in recent years.
At the same time, top investors like Warren Buffett have refrained from buying Bitcoin. Hypothetically, Buffett would have boosted his company Berkshire Hathaway's returns from 214% to 240% over five years if he had allocated even 1% of its net portfolio to Bitcoin.
"Bitcoin is the single best asset to position yourself in for outsized risk-adjusted returns over any multi-year timeframe," noted Consorti, adding:
"You're simply not working in the best interest of your shareholders if you ignore this without reason."
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.