While optimists see this as a step towards more mainstream Bitcoin adoption, skeptics argue that it is merely a short-term hype from some small companies.
Written by: Aoyon Ashraf, Nick Baker
Compiled by: BitpushNews
Summary:
Following MicroStrategy's successful accumulation of Bitcoin, many companies (some small caps and unrelated to cryptocurrency) have begun announcing similar initiatives.
This strategy has led to significant short-term jumps in the stock prices of some of these companies, but according to market observers, the long-term sustainability remains uncertain.
While optimists see this as a step towards more mainstream Bitcoin adoption, skeptics argue that it is merely a short-term hype from some small companies.
Body:
Fitness equipment manufacturers, biopharmaceutical companies, battery material producers... what do these diverse companies have in common?
Of course, it's Bitcoin.
With BTC soaring to unprecedented levels this month, at least 12 previously unrelated public companies have announced their plans to purchase Bitcoin (BTC) as a means of storing idle cash—indeed, recently yielding substantial profits. This is the path illuminated by Michael Saylor since 2020 when he began transforming his relatively unknown software manufacturer MicroStrategy into a Bitcoin treasury.
This has led to enormous success for MicroStrategy in the U.S. stock market—since Saylor began purchasing Bitcoin for the company, its value has increased approximately 30 times, accumulating a massive reserve worth about $38 billion (as of this writing).
Earlier this month, since Donald Trump promised to embrace cryptocurrency and was elected President of the United States, the company's stock price has nearly doubled. (Other crypto stocks have also seen increases. Exchange operator Coinbase has risen nearly 70% since the day before the election.)
Other companies are trying to replicate this success.
On Friday, biotech company Anixa Biosciences (ANIX) announced that its board approved the purchase of a certain amount of Bitcoin to diversify the company's cash reserves. The stock initially rose 19%, but closed up only 5%. Meanwhile, fitness equipment company Interactive Strength (TRNR) announced on Thursday that after its board approved cryptocurrency as a treasury reserve asset, the company plans to purchase up to $5 million worth of Bitcoin. Following the announcement, the company's stock soared more than 80%, but ended the day 'only' up 11%.
Earlier last week, biopharmaceutical company Hoth Therapeutics (HOTH) announced a $1 million Bitcoin purchase plan, causing its stock to rise by as much as 25%—though almost the entire gain was erased by the close. Similarly, companies including LQR House (LQR), Cosmos Health (COSM), Nano Labs (NA), Gaxos (GXAI), Solidion Technology (STI), and Genius Group (GNS) saw brief surges in their stock prices after announcing Bitcoin treasury plans in November. Only one company saw its stock drop after the announcement: Acurx Pharma (ACXP).
"The recent Bitcoin frenzy, coupled with MicroStrategy's stock price rising over 500% in 2024, has sparked a wave of companies (especially small caps) announcing Bitcoin purchase strategies," said Youwei Yang, chief economist at BIT Mining (BTCM).
Whether these companies imitating MicroStrategy will achieve the same success as Saylor remains uncertain.
Youwei Yang stated, "This behavior may end in the same way as [previous bull markets]: unsustainable hype followed by a significant correction as the market realizes that many of these announcements lack substance."
Additionally, whether the latest entrants will stick it out is technically unknown. So far, the only known company that has actually bought Bitcoin is the AI company Genius Group.
But who can blame them?
Early investors in MicroStrategy have reaped enormous rewards, and even recent investors can profit easily. Saylor mainly raised funds through issuing stocks and bonds, which were then used to purchase Bitcoin. These imitators may thus gain access to capital market channels they could not obtain otherwise.
The market follows the old adage 'never fight the market', meaning that regardless of fundamentals, one should go with the flow. Companies want to meet market demands; no one wants to be the one telling the boss or shareholders that poor performance was due to not following in MicroStrategy's footsteps.
"Just a few years ago, buying Bitcoin was almost too risky. However, now the risks seem to be the opposite—failing to buy is the real risk," said Brian D. Evans, CEO and founder of BDE Ventures, adding, "Not having exposure to Bitcoin is truly painful."
For the hopeful, this sudden scramble among companies may signal that mainstream adoption of Bitcoin is finally arriving, especially in light of elected President Trump's statement that he hopes the U.S. government will also accumulate Bitcoin.
"For supporters of BTC, macro factors like expected inflation and new regulatory friendliness will stimulate more companies to incorporate this asset into their balance sheets," stated a report from Toronto-based crypto platform FRNT Financial.
Furthermore, a Bitcoin purchase strategy can open capital markets for companies, as MicroStrategy and miner MARA Digital (MARA) have done. Both companies have recently been able to raise funds through convertible bonds that do not pay interest to investors, meaning these investors are willing to forgo current income in exchange for the ability to eventually convert the debt into equity, thereby gaining Bitcoin exposure.
Evans from BDE stated that indicating their plan to buy Bitcoin "is a useful way for the company to raise funds, not much different from what MicroStrategy has done in recent years."
However, for some, this sounds like a brief trend reminiscent of the late 2010s when many companies unrelated to cryptocurrency added the word 'blockchain' to their names.
The most famous example is the obscure beverage manufacturer Long Island Iced Tea, which renamed itself Long Blockchain, achieving explosive results at least initially: after changing its name to incorporate cryptocurrency, its stock price nearly doubled in a single day. The gains did not last, and the stock was later delisted by Nasdaq. (Three individuals were charged with insider trading by the SEC.)
There are other 'magic' buzzwords. During the 2021 crypto bull market, many large companies waved flags like 'Web3', 'metaverse', and 'NFT', trying to boost their stock prices. Even Facebook changed its name to Meta, betting heavily on the metaverse. However, these initiatives ultimately led to massive losses.
Meanwhile, some struggling companies unrelated to cryptocurrency have also started venturing into Bitcoin mining, which was seen at the time as a lucrative business. However, the subsequent brutal bear market has caused these once-promising crypto concepts to fall from grace and become 'the street rats.'
Youwei Yang stated that while MicroStrategy has been able to raise billions from capital markets to fund Bitcoin purchases, if others adopt this strategy as well, it may have adverse effects on smaller companies. "For small-cap stocks, it may be seen as a short-term gimmick, thus deterring serious investors. If Bitcoin's price stabilizes or declines, the speculative appeal of these stocks may diminish, making these companies susceptible to investor skepticism and regulatory scrutiny."
David Siemer, co-founder and CEO of Wave Digital Assets, expressed a similar view, stating, "While this approach may yield short-term gains in a bull market, it also carries significant risks. Unlike directly holding assets, leverage can magnify potential losses during market corrections, highlighting its inherent dangers," noting that some companies are using the hype around Bitcoin to increase debt on their balance sheets.
Whoever is right, after Trump won the U.S. election, Bitcoin repeatedly set historical highs, and the magic still exists: announce a Bitcoin plan similar to Saylor's and see if your stock can take off.
"We seem to be at a point where many companies feel they have to do this," said BDE founder Brian D. Evans.
In any case, welcome to the new cryptocurrency bull market.
