NYU Professor Warns Against Corporate Bitcoin Holdings: 'A Bad Idea' Unless You're Strategy, PayPal, or a Meme Stock

NYU finance professor Aswath Damodaran warns against corporate Bitcoin holdings, except for Strategy Inc., PayPal, Coinbase, and meme stocks like AMC and GameStop. He advises caution due to market volatility and the need for guardrails like shareholder buy-in, transparency, and clearer accounting rules. Damodaran believes that only companies with exceptional trading skills, day-to-day operations, or failed fiat currencies can justify Bitcoin exposure.

NYU finance professor Aswath Damodaran has issued a cautionary warning against corporate Bitcoin holdings, except for a few notable exceptions. In a recent post on X, Damodaran advised that while the strategy has gained traction, particularly with companies like Strategy Inc. (MSTR) and Michael Saylor's influence, it is fundamentally flawed for most firms. He outlined four exceptions where Bitcoin might be justified on a corporate balance sheet.

First, companies whose leadership is exceptionally skilled in trading Bitcoin could benefit. However, Damodaran warns that perception does not always align with reality, emphasizing the risks of misplacing trust in a CEO’s trading acumen in volatile markets.

Second, firms that use Bitcoin for day-to-day operations, such as PayPal Holdings Inc. (PYPL) and Coinbase Global Inc. (COIN), could justify Bitcoin exposure. Damodaran suggests that Bitcoin holdings should be proportional to Bitcoin transactions and operate more like working capital than an investment.

Third, companies operating in countries with failed fiat currencies could justify Bitcoin exposure, where Bitcoin is less volatile and more likely to hold its value than the domestic currency.

Finally, firms with failing business models that have turned into "meme stocks," such as AMC Entertainment Holdings Inc. (AMC) and GameStop Corp. (GME), might also consider Bitcoin. In such cases, the stock becomes a pure trading play.

Damodaran concludes by emphasizing the need for guardrails, including shareholder buy-in, transparency, and clearer accounting rules, even with these exceptions.

Several other prominent experts have weighed in on this issue. Veteran short-seller James Chanos has pushed back against Strategy’s claims that its valuations should reflect not just the net asset value (NAVs) of its Bitcoin holdings, but a multiple on its unrealized gains. Tom Lee, the head of research at Fundstrat Global Advisors, has come out in support of this model, especially for MSTR.

Crypto prices surged on Wednesday following President Donald Trump's announcement that a vote to approve two long-stalled bills, the GENIUS Act and the CLARITY Act, would take place later in the day. This development came after a series of setbacks, including a failed procedural vote on Tuesday. The GENIUS Act focuses on stablecoins and would prohibit issuers from paying interest to users, reinforcing the importance of the Ethereum network. Bitcoin climbed 2% to $119,114.79, recovering most of its Tuesday losses.

As the US House prepares to vote on crypto bills, analysts are pointing out three 'industry-ready' altcoins that could benefit the most: Hedera (HBAR), Ondo Finance (ONDO), and Sei (SEI). These altcoins are seen as potential beneficiaries of the regulatory environment that could be created by the passage of these bills.

References:
[1] https://www.benzinga.com/markets/equities/25/07/46511459/nyu-professor-warns-companies-against-moving-cash-into-bitcoin-unless-youre-strategy-paypal-or-a-meme-stock-this-is-a-bad-idea
[2] https://www.ainvest.com/news/bitcoin-news-today-crypto-prices-surge-2-3-trump-pushes-crypto-bills-vote-2507/
[3] https://coinedition.com/top-3-altcoins-to-watch-before-us-crypto-bills-pass/