Macau Financier Bets Big on Bitcoin
One of the largest investment groups backing some of Macau’s high-street casinos has this week announced a shift in it’s capital allocation policy. As the industry has been battered financially through reduced revenue flows, a Hong Kong-based financier and listed firm Success Universe Group Ltd. has decided to purchase 24.3 bitcoin at a cost of $1.35 million. This purchase is part of a portfolio diversification strategy as the firm tries to spread the risk of it’s poorly performing casino investments.
The Success Universe Group is a major investor in the casino business within Macau. Their primary asset in the city is the Ponte 16 Casino, a venue that is considered one of the most popular and successful in Macau. After observing a significant downtrend in their cash-flows and negative net incomes, the firm has taken to asset diversification as a means to raise the equity of their portfolio.
It’s been no secret that Macau’s casinos have been suffering during the pandemic, and whilst that may not play on the heartstrings of many, there have been significant losses across the board in terms of jobs and property leases. As we previously reported, this amounted to nearly $3 million each day in lost revenues as customers were unable to travel and visit the city.
As the industry seeks to pick itself up from a financial battering like no other, it’s no surprise that turning their attention to cryptocurrency has caught the attention. More and more companies across the world have begun accepting cryptocurrencies as a legitimate store of value and even adding it to their balance sheet in a stroke of savvy capital allocation. It seems like the gambling industry, whilst slightly late on the pickup, is also on board with this trend.
New Means of Capital Allocation for a Stalled Gaming Sector
The announcement made to the Success Universe Group Ltd shareholders shows in depth the view the firm has taken, and how bullish they are on the long-term appreciation prospects of cryptocurrency. Whilst they recognize how volatile Bitcoin can be, its prospects as a dependable store of value far into the future seem very promising.
Given the uncertainty of the global economy in its current state, investors across the world have been seeking safe havens to park their wealth. A hedge against inflation, a means of utilizing energy to decentralize finance, and giving freedom to those financially oppressed are all key pillars of the bitcoin philosophy. Aggressive increases in quantitative easing from governments responding to the COVID crisis combined with a halving of the new bitcoin supply rate on the blockchain recently have all contributed to its surge in $ price throughout the start of this year.
Taking a look across the rest of their capital expenditure and it’s clear that this firm is one that understands the complexities and strategies of good investing. Owning a variety of companies across the gaming sector, each constituent on their portfolio is complimentary of the whole cluster of investments. Undoubtedly this strategy serves a benefit to each of those companies who receive the backing of Success Universe Group Ltd.
Longterm Bitcoin Prospects: A Few Final Comments
The furor around the bitcoin energy consumption debate has been recently intensified thanks to a couple of Elon Musk tweets. Critics of the cryptocurrency cite the enormous energy consumption needed to support it as unsustainable, whilst proponents say it’s Proof-of-Work public ledger which converts Kilowatts to hashes as a genius innovation. As always, the market will determine which side is correct.
It is unlikely that the recent attacks on bitcoin are going to deter long-term proponents of the cryptocurrency, this is not the first time that it has been attacked in its 12 years lifespan, each time coming out stronger and more valuable. If anything these criticisms are a test of the currency’s resilience. Bitcoin is one of the largest open-source software projects in the world, and each iteration allows it to scale and become more efficient.
Corporations were the first large investors to start buying up digital currency. Big firms across the world including Tesla have billions of dollars worth of the currency on their balance sheet as they seek to diversify and minimize the risk of their capital allocation. Bitcoin bulls are hopeful of this trend continuing and look to big tech companies such as Apple and Facebook as the next to add the cryptocurrency to their portfolio assets.
We have seen Wall Street banks and institutional investors gradually change their stance from complete rejection of its value to the establishment of bitcoin-focused crypto funds. Goldman Sachs and Morgan Stanley are two such institutions to already back the currency with a dedicated investment division.
A major milestone that’ll need to be met if Bitcoin is to become a new stable currency in the world will be the role of central banks. So far they’ve resisted the calls to adopt and accept the cryptocurrency as a means of payment, but inroads are being made. Notably, the development of cryptocurrencies pegged to their fiat equivalents are being trialed and slowly introduced around the world.