BTCS (BTCS.OTC) has strengthened its cash position by $500,000 in a convertible note financing to take advantage of the tricky economic situation caused by COVID-19.
A core part of BTCS’ business plan includes shoring up positions in key digital assets like Bitcoin, Ethereum and certain other cryptocurrencies. They believe, as many people do, that these assets work as a great store of value and can be used as an effective economic hedge against monetary debasement in the wake of the multi-trillion dollar bailouts.
“In times of crisis, market participants often react emotionally, broadly disposing of assets. We believe this is what happened in recent weeks in the digital asset space. Moving forward, buoyed by strong fundamentals, including their fixed and limited supply, we strongly believe Bitcoin and Ethereum will benefit from a flight to higher quality amongst digital assets. Conversely, we believe smaller cryptocurrency projects and their associated digital assets will likely be negatively impacted by the economic downturn, specifically if those projects need additional funding,” said Charles Allen, CEO of BTCS.
Admittedly, it’s decently strange to hear this kind of rhetoric coming from a publicly traded company, which usually put more faith in the economy and the potential for economic rebound than this, but it’s not that it isn’t a solid strategy. If you hide your money online in Bitcoin, Ethereum and other big-name cryptocurrencies, then you’re only subject to volatility. Especially when you factor in Bitcoin’s halving in the next few weeks, which will cause price shocks throughout the system, but ultimately rise.
Still, it’s not like COVID-19 is going away anytime soon. As the first wave begins to ease off and government’s consider relaxing quarantine conditions and reopening economies, there are some voicing concerns about a re-emergence. In that case, we could simply enjoy a few months of relative calm before the virus re-emerges and we find ourselves staring down empty toilet-paper aisles in Walmart once again wondering where it all went sideways. If that’s the case, then BTCS may have made the right decision.
“The coronavirus pandemic has sent shockwaves through the global economy. While digital assets tumbled with the initial sell-off in equities in March, we believe this is an anomaly that could create opportunity for us to accumulate digital assets at attractive prices. With a strengthened cash position and lowered burn, we are in an ideal position to increase exposure to digital assets at depressed values,” said Charles Allen, CEO of BTCS.
The company also applied for a $42,000 loan through CARES Act Paycheck Protection Program, which is forgivable subject to certain restrictions. They have also implemented cost reduction measures, including lowers it annual independent director fee from $75,000 to $18,750 for 2020, and to $15,000 for 2021 and thereafter. Additionally, BTCS management has agreed to defer 35% of their salaries for Q2 2020.
With no active mining operations, BTCS believes it’s in a stronger position to capitalize on the ongoing market dislocation compared to some of its public company peers. Given the halving next month and the havoc it’s going to wreak on Bitcoin miners, and then the altcoins shortly after, BTCS might be right.
—Joseph Morton
