One of the most significant trends in the cryptocurrency world right now is the growing number of publicly traded companies investing heavily in bitcoin and, subsequently, increasing their holdings. This movement includes a range of companies adjusting their business models to incorporate bitcoin as a major part of their strategies.
A recent example involves former President Donald Trump’s media company, which unveiled plans to raise $2.5 billion for bitcoin acquisitions. This move positions them alongside an expanding group of “bitcoin treasury companies” as bitcoin prices soar to all-time highs.
Companies have a variety of motivations for purchasing bitcoin. Some see it as a hedge against inflation, while others are demonstrating their support for the broader cryptocurrency industry. A significant number have even transformed their core businesses, employing debt and stock sales to fuel bitcoin purchases.
Dylan LeClair, a top executive at Metaplanet—a company that pivoted from a budget hotel business to a bitcoin treasury entity—remarked at a recent cryptocurrency conference, “The world at large has no idea what’s happening, and they’re in for a big shock. This is a one-way train, nothing is going to stop this.”
The surge in stock prices among these companies might suggest that LeClair’s confidence is warranted. However, caution remains, as a dip in bitcoin value could trigger massive selloffs.
MicroStrategy is one of the leading bitcoin treasury companies, owning an impressive 582,000 bitcoin. This holding represents nearly 3% of the total bitcoin supply. Their bitcoin acquisition efforts have transformed them from a typical software firm into a continuous buyer of bitcoin through various mechanisms, such as selling shares and issuing debt.
Over the past five years, MicroStrategy’s stock value has increased by over 3,000%, far outpacing bitcoin’s 1,000% rise and chipmaker Nvidia’s 1,500% growth within the same timeframe. Meanwhile, founder Michael Saylor’s influence has expanded, placing him at the forefront of the bitcoin movement. His eloquent yet vivid characterization of bitcoin further solidifies his stature within the industry.
The momentous rise and transformation spurred various other companies to take similar steps. Eric Semler, chairman of Semler Scientific, reflected on the widespread adoption, acknowledging how unforeseen circumstances have led many to follow Saylor’s approach.
An average purchase price of $90,000 for bitcoin is noted among half of the 61 publicly traded bitcoin strategy companies, excluding those in bitcoin mining or connected to bitcoin ETFs, according to Standard Chartered’s recent analysis. Geoff Kendrick, heading up digital assets research at the bank, suggests that given crypto’s mainstream integration, the rationale for investing in bitcoin treasury companies diminishes. However, the volatility of bitcoin implies that newer companies might need to offload their holdings to manage debts if prices decrease.
The appeal extends beyond bitcoin in the broader cryptocurrency market. Firms have experienced one-day stock price surges of triple digits upon declaring intentions to hold alternative cryptocurrencies. For example, SharpLink Gaming witnessed a spectacular 400% increase in stock prices following their announcement to procure up to $425 million worth of Ethereum. Similarly, Upexi surged over 300% after revealing plans to invest $100 million in Solana, highlighting interest extending past bitcoin to include various cryptocurrencies.