Bitcoin News Today: Bitcoin's Indirect Holdings Spark Pension Board Battle: Risk or Folly?

CalPERS board candidates remain divided on the inclusion of Bitcoin in the $506 billion California Public Employees' Retirement System’s investment portfolio, despite the pension fund’s indirect exposure to the cryptocurrency through its ownership of shares in Strategy. The firm, formerly known as MicroStrategy, holds over 636,505 BTC valued at more than $70 billion, according to recent filings and public statements. This indirect exposure, estimated at $165.9 million through 410,596 Strategy shares held by CalPERS as of its Q2 13F filing, has become a focal point of debate among board candidates vying for positions on the Administration Board [1].

During a recent forum, board candidates expressed diverging views. Incumbent David Miller criticized challenger Dominick Bei for his advocacy of Bitcoin education through the nonprofit Proof of Workforce, stating that “cryptocurrency should not have a seat on our board.” Bei countered by questioning the contradiction of holding indirect exposure through Strategy while opposing direct investment [1]. Another challenger, Steve Mermell, was unequivocal in his stance, declaring “Hell no!” to crypto inclusion, comparing it to historical financial failures like the Orange County bankruptcy and the Enron scandal. He argued that cryptocurrencies are “opaque” and unsuitable for a pension system [1].

Meanwhile, challenger Troy Johnson adopted a more moderate position. While acknowledging the volatility and risks associated with hyper-sensitive investments like crypto, he stated he would not “close the door entirely” on its future inclusion. This nuanced perspective highlights the broader tension between risk aversion and the potential long-term value of Bitcoin as a hedge against inflation [1]. Kadan Stadelmann, CTO at Komodo Platform, echoed this sentiment, emphasizing that Bitcoin’s role as a store of value is increasingly recognized by the market and that pension systems have a duty to consider direct custody of the asset [1].

In separate developments, Strategy recently expanded its Bitcoin holdings by acquiring 4,000 BTC worth $450 million, primarily through the issuance of common shares. The firm now holds approximately 636,500 Bitcoin, valued at $70.6 billion. This move has drawn increased scrutiny, particularly as the company modifies its corporate policies to allow for more flexible issuance of common shares, even when the stock is trading at a discount to the net asset value of its Bitcoin holdings [2]. Strategy’s stock price, which hit a high of $543 in November, has since declined, closing at around $346 as of the latest available data [2].

Benchmark analysts have responded to growing concerns among retail investors, reaffirming their “Buy” rating and maintaining a $705 price target for Strategy’s shares. They argue that while recent changes to Strategy’s share issuance policy have sparked debate, the firm remains the industry standard in Bitcoin strategy [2]. The analysts also highlighted a potential chain reaction caused by the firm’s declining multiple-to-net asset value (mNAV), suggesting that this trend could negatively affect the company’s ability to fund further Bitcoin purchases [2].

Despite the controversy, the indirect exposure of pension funds like CalPERS to Bitcoin through strategic investments in companies like Strategy continues to grow. As board candidates and institutional investors weigh the risks and rewards of direct versus indirect exposure, the broader implications for pension fund strategies and market dynamics remain under intense scrutiny.

Source:

[1] California's $500 Billion Pension Fund Split Over Bitcoin ... (https://finance.yahoo.com/news/california-500-billion-pension-fund-060025772.html)

[2] Strategy Drops $450 Million on Bitcoin, Benchmark Reiterates ... (https://finance.yahoo.com/news/strategy-drops-450-million-bitcoin-153517309.html)