What Will Happen to Bitcoin's Price if Microsoft Invests in BTC?

The upcoming vote by Microsoft on whether to establish a position in Bitcoin signals the increasing interest from companies and institutional investors. On October 24, a filing by Microsoft Corp. (MSFT) with the U.S. Securities and Exchange Commission (SEC) revealed an unexpected agenda item for its annual shareholder meeting on December 10. Alongside routine votes, such as the election of directors and the ratification of its independent auditor, one proposal stood out: a "Bitcoin Investment Assessment." Interestingly, Microsoft’s board recommended shareholders vote against it.

Microsoft’s Cash Position and Potential Impact on Bitcoin’s Price

As of its Q2 2024 financial report, Microsoft held $76 billion in cash and equivalents. If shareholders push for even 10% of that amount to go into Bitcoin, it would mean a massive $7.6 billion investment. With an average Bitcoin price of $73,000, this translates to 104,109 BTC—almost eleven times the amount held by Tesla, which currently has 9,720 BTC. However, Microsoft would still trail behind MicroStrategy, which has amassed 252,220 BTC.

With Bitcoin’s supply dwindling—more than 80% of BTC has been unmoved in over six months, and BTC balances on exchanges have fallen to their lowest levels in more than four years—an acquisition of this scale by Microsoft could create a supply shock. Whether this becomes reality depends on how shareholders vote in December, but even the possibility has sent ripples through corporate and cryptocurrency circles.

How U.S. Shareholder Votes Work

In U.S. public companies like Microsoft, shareholders vote on major decisions at annual meetings. Votes on special proposals, like the Bitcoin investment, are typically non-binding but reflect shareholder sentiment and can push the company to act if there’s enough support. A significant shareholder can require the company to consult all shareholders on specific topics, per SEC regulations for public companies. However, the board has advised against the Bitcoin proposal, likely reflecting caution around volatility and regulatory uncertainty. Nonetheless, rising institutional demand for Bitcoin can’t be ignored.

Reid Hoffman, LinkedIn founder and Microsoft board member, voiced support for Bitcoin in a Yahoo Finance interview, describing it as a digital store of value and highlighting its role in reshaping the future of financial systems. Hoffman is also known for his early investment in Xapo, a key Bitcoin custody service provider.

If Microsoft decides to invest in Bitcoin, several methods are available. It could purchase Bitcoin directly on regular exchanges, similar to Tesla's approach. Alternatively, it could buy shares in a spot Bitcoin ETF, offering indirect exposure with greater liquidity and regulatory clarity, avoiding the direct custody risks associated with physical asset holdings. This structure also simplifies buying and selling, potentially enhancing capital efficiency.

Microsoft might also consider leveraging derivatives, such as call options, to strategically increase market exposure without deploying substantial initial capital. This allows speculation on price movements, potentially amplifying returns, though it introduces added risks due to the leveraged nature of such positions.

Ultimately, while Microsoft is unlikely to invest in Bitcoin immediately, shareholder pressure highlights Bitcoin’s appeal, which could encourage other companies to explore it.