The Relationship between a Company’s Cryptocurrency Holdings and Its Sustainable Performance—With a Focus on External and Internal Financial Issues and Cash

Abstract

This study explores the relationship between a company’s cryptocurrency holdings and its sustainable performance. The study also looks into how factors such as external financial crises, internal financial conditions, and cash shortages affect the link between possession of cryptocurrencies and company sustainable performance. The empirical findings showed that while holdings of cryptocurrencies may generally have a negative impact on a company’s performance, cryptocurrency holdings by businesses during an external financial crisis such as COVID-19 may have a positive relationship with the sustainable performance of the business. The findings support earlier research that suggested cryptocurrency ownership can have both positive and negative effects on a company, but that it can also boost firm performance in times of external financial hardship. By demonstrating a higher favorable connection for larger amounts of cryptocurrency holdings, these results can be further supported. The implications of holding cryptocurrencies on internal and external financial strain vary. Regarding internal financial issues, it was discovered that keeping cryptocurrencies had a favorable impact on sustainable performance for financially healthy businesses. It was also demonstrated that the company’s cryptocurrency holdings, which it keeps despite its cash shortage, had a detrimental impact on performance. Even in such a case, it was confirmed that holding cryptocurrencies has a favorable impact on a company’s sustainable performance when it is in good financial standing. The findings imply that, despite the unavoidable external financial challenges, the internal financial condition must be healthily maintained if a business engages in cryptocurrency.

1. Introduction

The introduction of Bitcoin, the most well-known type of cryptocurrency, which was originally created in 2009, established the so-called “world of cryptocurrencies”. Despite being created relatively recently, it is quickly gaining popularity and changing the globe. Cryptocurrency is also known as digital money or virtual currency, which is secured via cryptography. The usage of distributed ledger technology (DLT) is, of course, what distinguishes cryptocurrencies [1]. Cryptocurrency is a novel concept that was first introduced by Satoshi Nakamoto, which has both advantages and disadvantages. Cheaper and quicker money transactions as well as decentralized systems are two primary advantages of cryptocurrencies. Cryptocurrencies’ disadvantages include high energy requirements for mining. However, this is exclusive to cryptocurrencies that use proof of work; it does not apply to consensus mechanisms that use proof of stake [2]. There are also some claims that it might help with the switch to renewable energy, which would improve energy use [3,4]. Initially, it was easy for miners to generate Bitcoin by solving transactions as there were fewer miners who were competing to solve these hash puzzles. However, with the surge in the number of Bitcoin miners, it has become much harder to generate Bitcoin, requiring powerful computers to actually run the programs and algorithms needed to solve these hash puzzles. Moreover, it has become harder for Bitcoin miners to produce mass amounts of bitcoins for profit.

The introduction of cryptocurrency has been met with a lot of controversy; while some have been in favor of the implementation of cryptocurrency, many also believed that cryptocurrency posits risks due to how volatile it is [5]. Too much uncertainty still surrounds cryptocurrencies. Overly volatile prices are another major drawback of cryptocurrency. There is no denying the extraordinarily unpredictable price fluctuations of cryptocurrency. As an example of price surge, cryptocurrency values skyrocketed following the collapse of the prominent Silicon Valley Bank (March 2023). At the time, the market displayed typical financial crisis behavior, with stocks plunging and gold prices soaring. However, the price of Bitcoin has risen during such a financial crisis. Has there also been a preference for non-conventional financial system-related assets such as cryptocurrencies in addition to mistrust in traditional financial markets? Bitcoin’s action was viewed by proponents of cryptocurrencies as evidence of its stability and expanding acceptability [6].

Nevertheless, according to E-Crypto News [7], a lot of cryptocurrencies, between 1700 and 2500, had failed as of March 2023. The tokens UST, SQUID, LUNA, and BCC are well-known instances of coins that have failed. Furthermore, Coinbase, the largest cryptocurrency exchange in the US, was sued by the Securities and Exchange Commission in June 2023. On hearing the news, Coinbase’s stock price dropped by 12%. According to a Wall Street Journal analysis [8], “this complaint marks the beginning of a serious threat to the cryptocurrency market”. Assets classified as securities by the SEC are required to disclose financial statements and establish investor protection measures. However, in the market for cryptocurrencies, these institutional safeguards are almost nonexistent. According to the most recent cryptocurrency market capitalization data, as of early November 2023, Bitcoin is the most valuable cryptocurrency, with USD 683,989,258,681, followed by Ethereum (USD 222,691,744,502) and Tether USDt (USD 85,456,557,728) [9]. Accordingly, global discussions over cryptocurrency regulation are ongoing.

Cryptocurrency is a form of digital money that differs from many other forms of currency. Unlike many other forms of currency, cryptocurrency solely exists in the virtual world as an intangible currency and is not tied to any physical currency or value. Hence, in accounting, it also leads to a number of issues. The requirement for accounting rules that recognize cryptocurrency in financial statements is underscored as the number of businesses holding and issuing cryptocurrency rises and the use of cryptocurrency grows. International Financial Accounting Standards (IFRS) require cryptocurrency to be accounted for as inventory or intangible assets depending on the purpose of holding them.

The majority of cryptocurrencies are classified as intangible assets according to US accounting standards (US-GAAP). The American Institute of Certified Public Accountants (AICPA) states that because cryptocurrencies are not recognized as true fiat currency, they cannot be classified as cash or cash equivalents. In addition, they cannot be classified as financial assets as they do not represent a contractual right to receive other financial products. AICPA specifies that they should be treated as intangible assets.

The most significant distinction between cryptocurrencies and traditional types of currency is that cryptocurrencies are decentralized. Unlike traditional flat currency, which is controlled by the central bank and other financial institutions, Bitcoin is not [10,11]. According to Baur et al. [12], Bitcoin has relatively little correlation to traditional assets such as equities, bonds, and commodities. Because cryptocurrencies are not a part of the mainstream financial markets, holding them may be typically conducted for financial diversification. Per various research [2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18], Bitcoin can be used as a hedge against risks related to inflation, stock market volatility, and exchange rate fluctuations.

The firm with the most cryptocurrency holding as of September 2023, is Microstrategy, followed by Marathon Digital Holdings Inc. and Tesla. One estimate from late 2022 states that 2352 US companies currently accept Bitcoin. Worldwide, an increasing number of businesses are turning to Bitcoin and other cryptocurrencies and digital assets for a variety of commercial, operational, and investment needs [19]. Korea is no exception to the growing number of businesses owning and issuing cryptocurrencies. Korean businesses are holding more cryptocurrencies than ever before. According to the Korean Financial Supervisory Service, there are already 37 domestically listed Korean corporations that own cryptocurrencies as of the end of 2022, and nine different types of cryptocurrencies have been issued. In addition, the issuer holds 81.9% of the total volume. The estimated value of cryptocurrencies held by Korean companies is now around 201 billion won; self-issued cryptocurrencies are not included in this estimate. In Korea, it is not yet obligatory to declare cryptocurrencies in financial statements footnotes, but starting in 2024, businesses that issue or hold cryptocurrencies will have to do so through stock disclosures in financial statements.

The aforementioned circumstances served as inspiration for this study, which will look at how cryptocurrency possession impacts business performance. Particularly, as was the case in the preceding example, the value of cryptocurrency tended to increase during financial crises, when customary events such as a decrease in stock prices took place.

Chuen et al. [20] and Aggarwal [21] have also confirmed that Bitcoin can be used as a hedge against the volatility of the world economy and is a good alternative to conventional investments. In some cases of uncertain economic policy, particularly in emergency situations, Bitcoin can also function as a hedge or a diversifier [22,23,24,25,26,27,28]. In fact, uncertainty over international economic policies may have both favorable and unfavorable effects on Bitcoin, according to Qin et al. [29]. In this regard, this study will also investigate how circumstances such as an external financial crisis, like the one that took place during the COVID-19 pandemic period, and the internal financial condition, as measured by the modified Altman’s Z-Score, as well as cash shortage, affect the relationship between cryptocurrency holdings and firm sustainable performance. The study also investigates whether having a sizable cryptocurrency holding has an impact on business performance. The rest of the paper is structured as follows. Section 2 contains a review of the literature as well as the hypotheses. Section 3 goes into research samples and methodology. Descriptive statistics, correlations, and regression results are presented in Section 4. Section 5 discusses the findings and makes recommendations based on the analysis.

2. Literature Review and Hypothesis

Since their inception, cryptocurrencies have garnered considerable interest from a range of specialists and scholars. The price of fiat money is where central banks attempt to manage inflation; however, cryptocurrencies are not always under the power of a central bank or a central government. To put it another way, the motivation for holding cryptocurrencies is frequently financial diversification because it is not a part of the established financial markets. Several earlier research efforts have examined this, as described below.

Bitcoin is independent of the control that is exercised by the central bank and other financial institutions, in contrast to the conventional fiat currency [10]. Moreover, Bitcoin is very weakly correlated with conventional assets such as equities, bonds, and commodities [12], suggesting significant benefits for portfolio diversification and risk management [14,16]. Given that Bitcoin has been shown to be a hedge against risks associated with inflation, stock market volatility, and exchange rate fluctuations [13,17,18], it can be viewed as a new basket for eggs [14]. According to Dyhrberg [13], investors who are risk averse and want to minimize losses when they are faced with the likelihood of unfavorable market shocks might consider using Bitcoin.

If cryptocurrencies are not subject to central bank oversight, holding them during a financial crisis might have different repercussions on a company than are often seen in the case conventional financial assets. Now, let us examine a case where a business is experiencing financial difficulties or low on cash.

Cash is necessary for a business to survive, but having too much is not always a good thing. The value of holding additional cash decreases as the cash amount increases, suggesting that there may be a cap on the total amount of cash that the company is compensated for retaining [30]. Meanwhile, cash resources quickly run out when organizations are facing financial constraints. As a result, having alternative investments that provide income during a crisis is essential, and cryptocurrencies are one of your possibilities [28]. Cryptocurrency can be used as an alternative with high rewards in tumultuous periods of fluctuating cash holdings [31]. For financial diversification, cryptocurrencies can be helpful. According to Kurosaki and Kim [32], diversification can generate larger returns than traditional portfolios for the same degree of risk. Cryptocurrencies can be used as a high-yielding alternative resource during a crisis such as COVID-19 because they are not really connected to other types of financial assets [28] and have weak association with traditional assets [11]. Because it tends to be unaffected by exchange rates and stock markets around the world, cryptocurrency is appropriate for inclusion in global investment portfolios [33,34]. By measuring the self-similarity intensity of cryptocurrency returns during the COVID-19 pandemic, Mnif et al. [35] concluded that COVID-19 had a beneficial impact on the efficiency of the cryptocurrency market.

Moreover, Bitcoin can be used as a hedge against the instability of the global economy, according to Bouri et al. [14]. According to Bouri et al. [15], Bitcoin can serve as a solid hedge and safe haven to protect investors from the dangers associated with fluctuations in the prices of energy commodities. Chuen et al. [20] and Aggarwal et al. [21] claim that portfolios containing Bitcoin have higher risk-adjusted returns than those excluding it. This is strong evidence that Bitcoin can be considered a viable alternative to traditional investments. Gupta and Symss [28] look at the usage of cryptocurrencies as a substitute financial asset to deal with the issue of corporate financial restrictions. Research has indicated that cryptocurrencies can be a good option because of their independence from traditional financial markets, especially during times of crisis, and that they have experienced the greatest revenue growth during the pandemic. Real-time data reveal that during the pandemic, when businesses were experiencing severe cash shortages, bitcoin returns surged at the quickest rate. Cryptocurrency might be seen as an asset used to reduce risks [23]. Under some circumstances of economic policy uncertainty, bitcoin can also operate as a hedge or a diversifier [22,23,24,25,26,27]. Parino et al. [36] find that trade freedom and per capita GDP are two socioeconomic characteristics that influence how widely consumers adopt the Bitcoin blockchain. The uncertainty surrounding global economic policies can have an impact on Bitcoin in both positive and negative ways, according to Qin et al. [29]. To determine whether or not Bitcoin may be seen as a new egg basket, they investigate the causal link between the Bitcoin market and uncertainty in global economic policy. The positive effects suggest that Bitcoin can be utilized as a hedge or safe haven to avoid political uncertainty, indicating that Bitcoin is a new egg basket. Sarkodie et al. [37] claim that despite the fact that the COVID-19 worldwide pandemic has hampered sustainable economic growth in many different nations, market signals for cryptocurrencies seem to benefit from the economic uncertainty caused by COVID-19 containment attempts. They discover evidence from the Romano-Wolf novel, where multiple hypotheses show that COVID-19 shocks cause Litecoin to increase by 3.20–3.84%, Bitcoin to increase by 2.71–3.27%, Ethereum to increase by 1.43–1.75%, and Bitcoin Cash to increase by 1.34–1.62%. They also noted an average daily rise in the prices of Ethereum, Bitcoin, Litecoin, and Bitcoin Cash of 0.58%, 0.44%, 0.36%, and 0.15%, respectively. According to Corbet et al.’s [38] findings, the liquidity of the cryptocurrency market dramatically surged after the WHO declared a global pandemic. The effects of bitcoin price and liquidity are found to interplay significantly.

At the same time, concerns about cryptocurrency volatility, security, efficiency, and transparency are widespread. Some argue that the ability of cryptocurrencies, such as Bitcoin, to hedge is questionable. Bitcoin, according to Bouri et al. [16], is solely useful for diversifying investments. Smales [39] also notes that investors are unlikely to perceive the Bitcoin market to be profitable until it reaches maturity, particularly in terms of considering cryptocurrency as a secure investment alternative during a crisis. Does this imply that cryptocurrencies can be exceptional in a crisis situation, despite the uncertainties they have?

According to Qin et al. [29], Bitcoin should not always be considered as a new basket for eggs because its price is influenced by both internal (security concerns and bubbles) and external (the value of other assets) variables. Due to their significant and dramatic return swings, cryptocurrencies are also found by Borri [40] to be riskier than the majority of other investments. Cryptocurrency volatility can have a substantial influence on financial stability and may necessitate extra caution and scrutiny [41]. Although cryptocurrency trading is made transparent and efficient on a global scale by blockchain technology, there is a need to regulate cryptocurrency trading to make it a potentially safe asset to invest in [28]. The bubble risk brought on by high volatility with cryptocurrencies, however, could lead to greater uncertainty [10,42,43,44,45]. Around the time of the financial crisis, Bitcoin price saw an unheard-of surge [38]. With regard to cryptocurrencies, security issues such as hacking, theft, and storage problems also exist [17,42,46,47]. According to Mauro et al. [46] and Zaghloul et al. [47], the demand for Bitcoin has mostly decreased due to security concerns.

As such, there are opposing viewpoints on cryptocurrencies, whether in academia or on the market. According to the aforementioned literature, the ability to avoid risks associated with cryptocurrencies is of special interest. Depending on the reason for retaining them, accounting standards require cryptocurrencies to be recorded as either inventories or intangible assets. The characteristics of cryptocurrencies are defined in the case of Korean listed companies to which the Korean International Financial Reporting Standards apply, and if they are held for sale or traded for brokerage in the course of normal business activities, they are accounted for as inventory assets; in all other cases, intangible asset standards must be applied. Holding cryptocurrencies may ultimately lead to profit or loss from the valuation of cryptocurrencies, profit or loss from selling cryptocurrencies, etc., which may have an impact on net income and firm performance either directly or indirectly. In light of this, this study investigates how possessing cryptocurrencies may affect a company’s sustainable performance. While other research has focused on the pros and cons of cryptocurrencies, this study is primarily concerned with the utility of cryptocurrencies. In Korea, the number of companies holding cryptocurrency has been increasing since 2017, and related information has been disclosed since then. Disclosure of financial statement notes for cryptocurrencies is not yet mandatory, but from 2024, companies issuing or holding cryptocurrencies will be required to disclose this through notes to the financial statement. Accordingly, research will be conducted on listed and unlisted companies from 2017, when cryptocurrencies were initially introduced, to 2022, to determine how owning cryptocurrency may affect a company’s sustainable performance. Although the Korean cryptocurrency industry has exhibited continued growth, occurrences such as the Luna cryptocurrency collapse, which was mostly built by a Korean man in 2022, have raised an alarm regarding cryptocurrencies. This situation also prompted research on the usefulness of cryptocurrency investments for businesses. In particular, as supported by the study by Gupta and Symss [28], cryptocurrencies have demonstrated significant revenue growth because of their independence from traditional financial markets, particularly during crisis situations such as the pandemic period and when businesses have faced severe cash shortages. Campello et al. [48] find that, in comparison to financially unconstrained enterprises, financially constrained firms intended to eliminate more investment, technology, marketing, and employment during the crisis. Furthermore, firms that experience both a financial crisis and their own financial issues minimize cash outflows including investments, when compared to enterprises that do not [48,49]. Companies with financial difficulties seek to keep corporate cash to hand for preventive purposes. According to Almeida et al. [50], financially constrained companies often conserve money from their cash flow while unconstrained companies do not. The cautious motive for saving money will be less significant if a company has easy access to external finance [30,51,52]. Larger cash holdings are desirable for businesses having debt with shorter maturities, and doing so would be beneficial in reducing the risk of refinancing [53]. So, in some situations, especially those involving a tough financial situation or a lack of cash, investing in cryptocurrencies may be a prudent move. In this context, this study will look into how things such as external financial crises, such as the COVID-19 pandemic, the internal financial condition as determined by the modified Altman’s Z-Score, and a cash crunch affect the connection between cryptocurrency holdings and business sustainable performance. Additionally, companies that run cryptocurrency exchanges frequently possess cryptocurrency in Korea, and the largest cryptocurrency holding company in Korea is the cryptocurrency exchange Dunamu. As these data inspired, the study further explores whether having a significant cryptocurrency holding has a distinct effect on company performance.

Hence, the study establishes Hypotheses 1 and 2.

Hypothesis 1.

Cryptocurrencies held by a company will have an impact on its sustainable performance.

Hypothesis 1.1.

Cryptocurrencies held by a company will have a distinct impact on its sustainable performance depending on its external and internal financial situation.

Hypothesis 1.2.

Having a sizable cryptocurrency holding has a distinct impact on business sustainable performance.

Hypothesis 2.

Cryptocurrencies held by a company despite cash shortage will have a distinct impact on its sustainable performance depending on its financial condition.

3. Research Design

3.1. Sample Selection

This study looks at how possessing cryptocurrencies affects a company’s sustainable performance using a hand-collected sample from 2017 to 2022. This is due to the fact that since 2017, companies have been gradually increasing their amount of cryptocurrency holdings, and since then, relevant data have been made public. This research uses data from companies that held virtual currency between 2017 and 2022, both listed and unlisted. As previously indicated, the companies chosen for this study are based on information released by the Financial Supervisory Service because the company’s disclosure policy regarding cryptocurrency holdings is not yet apparent. Cryptocurrency information for listed companies was manually taken from financial statements (notes) supplied by the Financial Supervisory Service’s electronic disclosure system, while general financial data for listed corporations were gathered via Bureau van Dijk Osiris data. For unlisted enterprises, all information was manually acquired from financial statements (notes) supplied by the Financial Supervisory Service’s electronic disclosure system. To lessen the impact of outliers, the top and bottom 1% of all continuous variables are Winsorized. The total sample thus contains 188 firm-year observations, 116 listed and 72 unlisted. The sample’s distribution by industry is shown in

Table 1. Industry distribution of the sample.

Industry	Number of Firms	%
Cryptocurrency/Blockchain	44	23%
Information and Communication Technology	59	31%
Game	60	33%
Advertising	10	5%
Financial Investment	12	6%
Restaurant	3	2%
Total	188	100%

below.

3.2. Regression Model and Measurement of Variables

With sustainable future performance as the dependent variable, the ordinary least squares (OLS) model is employed to examine Hypothesis 1 and 1.1. Below is a display of the regression model:

PERSROA_i,t+1 = α + β₁Crypto_i,t + β₂CryptoFD1_i,t + β₃CryptoFD2_i,t + ∑α_jX_j + ∑α_kIND_k + ∑α_lYEAR_l + ε_i,t

(1)

where PERSROA_i,t+1 stands for the persistence of return on asset (ROA), a metric for long-term sustainable performance. PERSROA is calculated using the following regression model, with the coefficient β₁ representing the persistence of the ROA. Net income is divided by all assets to determine return on assets (ROA).

ROA_i,t+1 = α + β₁ROA_i,t + ε_i,t

(2)

Crypto is a dummy variable coded as 1 if the company holds a cryptocurrency; otherwise, it is coded as 0. CryptoFD1 is the interaction between Crypto and Covid. Covid is a proxy for external financial difficulties. Covid, a dummy variable, is set to 1 if the sample period is the Covid pandemic period, which is the 2020–2022 period, and set to 0 otherwise.

CryptoFD2 is the interaction between Crypto and internal financial distress. The modified Altman’s Z score is used to determine the proxy for internal financial condition [54,55]. The modified Altman’s Z score is calculated as 1.2*(working capital to assets ratio) + 1.4*(retained earnings to assets ratio) + 3.3*(earnings before interest and tax to assets ratio) + 1*(sales to assets ratio). A higher z-score value denotes lower levels of financial difficulty.

The model contains control variables that can have an impact on company performance. These variables include leverage, size, operating cash flow, sales growth, investment. Leverage is calculated by dividing total liabilities by total assets. To adjust for size impacts, size is quantified as the natural log of total assets. OCF, operational cash flows, divided by assets, and growth, the changes in assets, defined as (assets_t − assets_t−1)/assets_t−1, are also included. Investment is utilized as a control variable since it might have an impact on a company’s performance. As control factors, industry dummy variables and year dummy variables are also included.

For the analysis of Hypothesis 1.2, MCrypto, MCryptoFD1_i,t, and MCryptoFD2_i,t are included. MCrypto is coded as 1 if holdings of cryptocurrency divided by assets are greater than the median; if not, it is coded as 0. MCrypto FD1 is an interaction term between MCrypto and external financial difficulties, Covid. MCrypto FD2 is an interaction term between MCrypto and internal financial difficulties, Altman’s Z score. The following is the regression model:

PERSROA_i,t+1 = α + β₁MCrypto_i,t + β₂MCryptoFD1_i,t + β₃MCryptoFD2_i,t + ∑α_jX_j + ∑α_kIND_k + ∑α_lYEAR_l + ε_i,t

(3)

The following regression model is used to examine Hypothesis 2:

PERSROA_i,t+1 = α + β₁CryptoLcash_i,t + β₂CryptoLcashFD_i,t + ∑α_jX_j + ∑α_kIND_k + ∑α_lYEAR_l + ε_i,t

(4)

CryptoLcash is an interaction term between Crypto and Lcash. Lcash is coded as 1 if cash (calculated as cash and cash equivalents divided by assets) is less than the median; if not, it is coded as 0. CryptoLcashFD is an interaction term between CryptoLcash and FD2 (financial distress).

4. Empirical Results

4.1. Descriptive Statistics and Correlations

The descriptive statistics for the key variables are displayed in

Table 2. Descriptive Statistics.

Variables	Mean	StdDev	Median	Quatile 1	Quatile 3
PERSROA	−0.0100	0.0039	−0.0097	−0.0107	−0.0085
Crypto	0.4361	0.4968	0	0	1
CryptoFD1	0.2556	0.4370	0	0	1
CryptoFD2	0.4456	0.9241	0	0	0.8934
MCrypto	0.2338	0.4240	0	0	0
MCryptoFD1	0.7619	2.2903	0	0	1.6228
MCryptoFD2	0.8888	1.1847	0.7461	0	1.6228
CryptoLcash	0.1316	0.3387	0	0	0
CryproLcashFD	0.1074	0.5282	0	0	0
LEV	0.4321	0.2514	0.4020	0.2008	0.6333
SIZE	17.5702	6.5691	14.0337	11.8072	24.1268
OCF	0.0028	0.2953	0.0323	−0.0693	0.1053
GROW	0.3557	0.9903	0.0846	−0.0776	0.3510
INV	0.0663	0.0964	0.0255	0.0091	0.0776

Notes. PERSROA: Persistence of return on asset. Crypto: Dummy variable coded as 1 if the company holds a cryptocurrency; otherwise, it is coded as 0. CryptoFD1: Interaction term between crypto and external financial distress. External financial distress represent the COVID-19 pandemic period. CryptoFD2: Interaction term between Crypto and internal financial distress. Internal financial distress is determined using the modified Altman’s Z score; modified Altman’s Z score = 1.2*(working capital to assets ratio) + 1.4*(retained earnings to assets ratio) + 3.3*(earnings before interest and tax to assets ratio) + 1*(sales to assets ratio). MCrypto: MCrypto is coded as 1 if holdings of cryptocurrency divided by assets are greater than the median; if not, it is coded as 0. MCryptoFD1: Interaction term between MCrypto and external financial distress. MCryptoFD2: interaction term between MCrypto and internal financial distress. CryptoLcash: CryptoLcash is an interaction term between Crypto and Lcash. Lcash is coded as 1 if cash (calculated as cash and cash equivalents divided by assets) is less than the median; if not, it is coded as 0. CryptoLcashFD: CryptoLcashFD2 is an interaction term between CryptoLcash and FD2. LEV: Total liabilities divided by total assets. SIZE: Natural logarithm of total assets. OCF: Operating cash flow divided by total assets. GROW: Asset growth. INV: Plant, property, and equipment (except land and construction in progress) divided by total assets.

. The mean (median) for PERSROA is −0.0100 (−0.0097). The mean (median) for the Crypto is 0.4361 (0). The means (median) for CryptoFD1 and CryptoFD2 are 0.2556 (0) and 0.4456 (0), respectively. The mean for CryptoFD1 means that 26% of the sample firms held cryptocurrencies during the Covid pandemic period. The means (median) for MCrypto, MCryptoFD1, and MCryptoFD2 are 0.2338 (0), 0.7619 (0), and 0.8888 (0.7461), respectively. According to MCrypto’s mean, 23% of the sample firms own more cryptocurrency than the median. The means (median) for CryptoLcash and CryproLcashFD are 0.1316 (0) and 0.1074 (0), respectively. The mean for CryptoLcash indicates that 13% of the sample firms with less than the median cash levels own cryptocurrencies.

The mean (median) values for control variables LEV, SIZE, OCF, GROW, and INV are 0.4321 (0.4020), 17.5702 (14.0337), 0.0028 (0.0323), 0.3557 (0.0846), and 0.0663 (0.0255), respectively.

The pairwise correlations are shown in

Table 3. Correlations.

Variable	PERSROA	Crypto	CryptoFD1	CryptoFD2	Mcrypto	MCryptoFD1	MCryptoFD2	CryptoLcash	CryproLcashFD	LEV	SIZE	INV	GROW	OCF
PERSROA	1
Crypto	−0.0600	1
CryptoFD1	0.0774	0.6664 *	1
CryptoFD2	0.5123 *	0.5230 *	0.4923 *	1
Mcrypto	0.0590	−0.4383 *	−0.2838 *	−0.2111 *	1
MCryptoFD1	0.1182	0.2590 *	0.5249 *	0.2816 *	0.2618 *	1
MCryptoFD2	0.5357 *	−0.1835 *	−0.1179	0.2981 *	0.1813 *	0.0233	1
CryptoLcash	−0.1450 *	0.4426 *	0.3328 *	0.1040	−0.2342 *	0.1494 *	−0.2197 *	1
CryproLcashFD	0.3489 *	0.2205 *	0.2320 *	0.4968 *	−0.1093	0.1561 *	0.3003 *	0.4640 *	1
LEV	−0.1655 *	0.2145 *	0.0915	−0.0421	−0.2003 *	−0.0670	−0.3381 *	0.1247	−0.0427	1
SIZE	0.0578	0.5084 *	0.3106 *	0.2419 *	−0.6594 *	−0.1253	−0.1577 *	0.1597 *	0.0933	0.1799 *	1
OCF	0.4418 *	−0.1280	0.0024	0.2196 *	0.0478	−0.0108	0.4499 *	−0.1479 *	−0.0948	−0.0272	−0.0676	1
GROW	0.2346 *	0.0290	−0.0299	0.1024	−0.0364	−0.0781	0.1021	0.0457	0.0658	0.2340 *	0.2340 *	0.3703 *	1
INV	0.1484 *	−0.0249	0.0157	0.0520	−0.0087	−0.1207	0.0473	−0.0313	0.1339	0.0636	0.0636	−0.0187	−0.1313	1

Note. See Table 2 for variable definitions. * p < 0.05.

. Sustainable future performance and CryptoFD2, MCryptoFD2, CryptoLcash, and CryptoLcashFD are significantly positively correlated. It seems likely that the hypotheses can be confirmed given the association between the dependent variable and the main explanatory factors. There are no problems with multi-collinearity according to the variance inflation factors (VIFs) for all variables with a value lower than 10.

4.2. Regression Results and Discussion

The results of the OLS regression for the correlation between cryptocurrencies and sustainable future performance are shown in Panel A of

Table 4. Regression results.

Variables	Dependent Variable: PERSROA
	Model 1.	Model 2.
Panel A. OLS Regression Results
Crypto	−0.2055 * (−1.70)	-
CryptoFD1	0.0312 (0.21)	-
CryptoFD2	0.2813 *** (4.08)	-
MCrypto	-	−0.0657 (−0.58)
MCryptoFD1	-	0.2745 ** (2.09)
MCryptoFD2	-	0.3655 *** (5.30)
LEV	−0.1634 ** (−2.23)	−0.1005 (−1.41)
SIZE	0.1931 ** (2.09)	0.2200 ** (2.30)
OCF	0.2940 *** (3.87)	0.2739 *** (3.69)
GROW	0.0904 (1.31)	0.0739 (1.12)
INV	0.2417 *** (3.43)	0.2553 *** (3.82)
Industry dummies	Included	Included
Year dummies	Included	Included
F value	6.81 ***	8.29 ***
Adjusted R2	0.3585	0.4099
N	188	188
Panel B. Fixed Effect Regression Results
Constant	−0.0159 *** (−3.39)	−0.0172 *** (−3.86)
Crypto	−0.0006 * (−0.59)	-
CryptoFD1	0.0003 (0.27)	-
CryptoFD2	0.0004 *** (2.96)	-
MCrypto	-	0.0002 (0.14)
MCryptoFD1	-	0.0028 ** (2.56)
MCryptoFD2	-	0.0004 *** (3.43)
LEV	−0.0061 ** (−3.27)	−0.0058 *** (−3.15)
SIZE	0.0005 (1.61)	0.0005 * (1.88)
OCF	0.0044 *** (4.47)	0.0041 *** (4.34)
GROW	0.0002 (0.56)	0.0001 (0.54)
INV	0.0127 *** (2.97)	0.0126 *** (3.07)
Industry dummies	Included	Included
Year dummies	Included	Included
F value	8.46 ***	10.38 ***
Adjusted R2	0.2407	0.2799
N	188	188

Note. See Table 2 for variable definitions. t-values are shown in parentheses. * p < 0.10 ** p < 0.05 *** p < 0.01.

. Table 4, Panel A presents standardized regression coefficients, often known as beta coefficients, specifically to compare coefficients across different regressions. The outcomes of Model 1 validate Hypotheses 1 and 1.1. A dummy variable based on holding cryptocurrencies is utilized for Hypotheses 1 and 1.1. The results show that a company’s performance is impacted by its holdings of cryptocurrencies. Here, a significant negative relationship is shown. Although the result is not significant, in this study, businesses that held cryptocurrencies who experienced external financial distress, due to COVID-19, exhibited a positive link with the sustainable performance of the business. This finding is significant if, as in Hypothesis 1.2 below, a substantial amount of cryptocurrencies is held. Additionally, the findings using the Altman Z-score as a proxy for internal financial distress demonstrate that the better a company’s internal financial position, the more positive influence holding cryptocurrencies has on corporate sustainable performance. This indicates that a solid internal financial condition must be maintained despite the unavoidable external financial issues. The control variables OCF, SIZE, and INV have significant positive relations with sustainable future performance. The control variable LEV has significant negative relations with sustainable future performance.

The findings for Hypothesis 1.2, which further investigated whether the effect of cryptocurrencies held by companies on their performance would differ depending on the amount held, first show that the negative effects of a cryptocurrency on business performance can be mitigated when the amount is substantial, above the sample median, as shown by the Model 2 results. Furthermore, when a company possesses a significant quantity of cryptocurrencies, it is confirmed that the company’s sustainable performance is strongly positively correlated with cryptocurrency ownership during COVID-19, an external financial crisis. It is feasible to confirm the effect of the amount of cryptocurrencies owned on firm performance by comparing the results of hypothesis 1.1 above for the full sample, which reveal a positive correlation that is not significant. When it comes to a company’s internal financial situation, the better the situation, the more positive the impact of the cryptocurrencies held by the organization on corporate sustainable performance. This finding is the same as Hypothesis 1.1, but comparing the standardized regression coefficients, it shows a stronger positive correlation. The impact of the amount of cryptocurrencies held is further supported by this result. The outcomes demonstrate the positive impact of corporate cryptocurrencies ownership on corporate sustainable performance.

The findings back up claims made in prior studies that cryptocurrency ownership can affect a company in either a favorable or negative way, but that they can improve performance when a company is dealing with external financial issues. [8,9,14,15,16,17,18,19,20,21,22]. The control variables OCF, SIZE, and INV have significant positive relations with sustainable future performance. The fixed effect regression findings are shown in Panel B of Table 4. Fixed effect regression is employed to control the potential effect of variables on the dependent–independent variables connection that could not be observed. These outcomes stayed in line with the OLS outcomes for the explanatory variables.

The analytical findings for Hypothesis 2 are shown in

Table 5. Regression results.

Variables	Dependent Variable: PERSROA
Panel A. OLS Regression Results
Constant	−0.0108 *** (−8.43)
CryptoLcash	−0.0027 *** (−3.59)
CryptoLcashFD	0.0031 *** (6.60)
LEV	−0.0024 ** (−2.27)
SIZE	0.0001 (1.20)
OCF	0.0037 *** (4.30)
GROW	0.0006 ** (2.18)
INV	0.0103 *** (3.91)
Industry dummies	Included
Year dummies	Included
F value	9.56 ***
Adjusted R2	0.4377
N	188
Panel B. Fixed Effect Regression Results
Constant	−0.0107 *** (−2.93)
CryptoLcash	−0.0027 *** (−2.93)
CryptoLcashFD	0.0028 *** (5.70)
LEV	−0.0042 ** (−2.35)
SIZE	0.0001 (0.32)
OCF	0.0041 *** (4.65)
GROW	0.0004 (1.64)
INV	0.0120 *** (3.03)
Industry dummies	Included
Year dummies	Included
F value	12.48 ***
Adjusted R2	0.4453
N	188

Note. See Table 2 for variable definitions. t-values are shown in parentheses. ** p < 0.05 *** p < 0.01.

, Panel A. The findings suggest that a company’s cryptocurrency holdings despite a cash crunch—an additional metric for assessing financial situation—may have a distinct impact on the performance of the company depending on whether the company is experiencing internal financial hardship, which is determined using the modified Altman’s Z score. The findings indicate that while a company’s performance may be negatively correlated with the amount of cryptocurrencies it held despite not having any cash on hand, in such a circumstance, cryptocurrencies actually have a positive impact on businesses with financially healthy status. This outcome also reinforces the possibility of a beneficial impact on the sustainable performance of the company from investing in cryptocurrencies. This conclusion suggests, however, that even if a business invests in cryptocurrencies with the intention of boosting performance even in the face of a cash crunch, the benefit can only be realized provided the organization maintains a stable internal financial situation. Overall, this study’s findings can help corporate cryptocurrency investors by indicating that, despite disagreements on the benefits and drawbacks of cryptocurrency investments, enhancing the corporate environment is essential to making these investments more beneficial. Depending on the financial and operational state of the business, strategic investment may be required. Significantly strong positive relationships exist between the control variables OCF, GROW, and INV and sustainable future performance. The results of the fixed effect regression are displayed in Panel B of Table 5. These results were consistent with the explanatory factors’ OLS results.

5. Conclusions

Cryptocurrency first appeared in 2009, introduced by Satoshi Nakamoto, and in 2022, more than 10,000 cryptocurrency tokens had been created around the world. There has been a lot of discussion surrounding the adoption of cryptocurrencies. Cryptocurrency has spread as a global issue due to expectations that it can generate high profits despite the fact that the volatility of cryptocurrencies entails risks [5]. According to the Boston Consulting Group’s “Future of Assets 2020” analysis, the cryptocurrency market in Korea is expected to reach one trillion won by 2026. Accordingly, estimates state that it will generate 5 trillion won in economic value and 40,000 jobs in connected businesses and industries.

As such, it is obvious that cryptocurrency has the advantage of being able to generate large profits for investors and even contributing to the economy. This does not, however, imply that potential investors can make careless investments while neglecting the significant disadvantage of market volatility. Additionally, institutional safeguards are hardly present in the cryptocurrency market. Nevertheless, the passion for cryptocurrency does not seem to be waning.

The primary distinction is that cryptocurrency is unregulated by the government or other authorities, in contrast to traditional fiat currency, which is governed by the central bank and other financial organizations [10,11,12]. Therefore, adopting bitcoin can aid in risk management and holding them may be easily conducted for financial diversification [13,14,15,16,20,21,22,23,24,25,26]. Furthermore, cryptocurrencies can be a smart alternative, especially in financial emergency scenarios or when there is a severe cash shortage, due to their independence from traditional financial markets, according to research by Gupta and Symss [28]. During the financial crisis that followed the collapse of Silicon Valley Bank, the value of cryptocurrency actually increased, in contrast to the usual pattern of stock prices falling.

In this regard, this study examined how cryptocurrencies possession affects firm sustainable performance. The study also looked into how factors such as external and internal financial concerns and cash shortages affected the link between cryptocurrency holdings and business performance. The research further investigated whether having a significant cryptocurrency holding has a particular impact on business performance. The empirical findings first demonstrated that cryptocurrency holdings may have a detrimental effect on a company’s performance. On the other hand, cryptocurrencies held by companies experiencing external financial hardship—in this study, during the COVID-19 pandemic period—showed a favorable correlation with the sustainable performance of the company. A higher positive relationship was shown when the holding of cryptocurrencies was substantial. This result serves as further proof of the positive effect. This discovery provides some validity to other studies’ findings that owning cryptocurrencies can have either a positive or negative impact on a firm, but that it can also have a positive impact on sustainable performance when a company is experiencing a financial crisis. Having cryptocurrencies has a variety of effects on both internal and external financial strain. In terms of internal financial problems, it has been shown that holding cryptocurrencies had a positive effect on corporate sustainable performance for financially sound organizations. This means that, regardless of the unavoidable external financial difficulties, strong internal financial conditions must be maintained.

Second, depending on whether a company is experiencing financial difficulties or not, holding cryptocurrencies in the face of a cash crunch seemed to have a distinct effect on company performance. According to the analysis’s findings, a company’s performance was negatively correlated with cryptocurrencies it was holding despite a cash deficit. However, even in this situation, it has been proven that holding cryptocurrencies may benefit a company’s sustainable performance if its finances are in good shape. This outcome may also highlight once more the need for companies investing in cryptocurrencies to take their internal financial health into account.

There are, of course, limitations to this study. Since it is not currently required for corporations to disclose their cryptocurrency holdings in their financial statements, fewer businesses are providing this information, which results in a smaller volume of data and the inability to perform more in-depth study. In addition, belonging to the asset class, holding Bitcoin and Ether might be considered representative, as they now account for more than 50% and nearly 20% of the cryptocurrency market capitalization, respectively. Because of this, the research supporting the benefits of owning cryptocurrencies is mainly restricted to these high-cap coins.

Nevertheless, the research is credited as making a significant contribution because it employed manually gathered data to do an empirical analysis of cryptocurrencies, which has drawn great interest from a variety of experts, academics, and even private investors. The findings may be able to advise corporate cryptocurrency investors that efforts to enhance a company environment are needed in order to improve the usefulness of investing in cryptocurrencies, which are controversial. Ultimately, this is to secure a company’s sustainability. Furthermore, it is imperative to promptly reinforce the disclosure requirement with regard to the issuance and possession of cryptocurrencies. This is also essential since it would help to lower their risks and expand the usefulness of cryptocurrencies. Suggestions for further research include examining the connection between business financial liquidity and cryptocurrencies, as well as if the characteristics of the firm affect the patterns of cryptocurrency investment.