(Bloomberg) -- It may seem an odd time for a university to accept Bitcoin as a gift.
Violent swings caused the virtual currency to tank as much as 31 percent at one point on Wednesday before recouping roughly half of those losses. The extreme volatility led to even steeper declines for other digital currencies, outages at major exchanges and a barrage of questions in Washington.
The capitulation occurred as the University of Pennsylvania was preparing to announce it received its largest ever donation in a cryptocurrency -- $5 million in Bitcoin to support the activities of a research center at its Wharton school of business. The university was asked not to disclose the donor’s identity.
Even though the majority of the gift is still in the form of Bitcoin, the tumultuous trading of the past few hours leaves John Zeller, Penn’s senior vice president for development and alumni relations, unmoved.
“There is protection for us on the downside,” Zeller said in an interview. “We have what we needed to support the budget and we’ll just see where it goes in the future.”
Colleges typically sell gifts such as real estate and stocks right away to eliminate risks that come with holding and managing assets.
In this case, the structure of the donation, which was received a few weeks ago, allows Penn to capture any gains if the price of Bitcoin rises and protects it from losses if the value of the currency drops below that of the initial gift, Zeller said.
The portion of the $5 million still held in Bitcoin will be monetized over the coming years to meet the budgetary needs of the Stevens Center, which promotes education and research in the field of financial technology and is named after Ross Stevens, the chief executive officer of Stone Ridge Asset Management.
Colleges have wrestled with how to deal with unusual donations, such as artwork or shares in a family business, that can complicate their portfolios. The gifts may raise accounting questions, complicate tax filings or require special storage or security. Massachusetts Institute of Technology, which has accepted Bitcoin donations since 2016, said it immediately liquidates gifts received in the cryptocurrency.
“The beauty of this is the donor wanted to use Bitcoin as a vehicle and also had an interest in promoting it,” Zeller said. “For us, it is a bit of an experiment.”
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