Article source: BitPush
Authors: Aoyon Ashraf, Nick Baker
Translation: BitpushNews
Summary:
Following MicroStrategy's successful accumulation of Bitcoin, many companies (some small caps and unrelated to cryptocurrency) began announcing similar initiatives.
This strategy has led to significant short-term stock price increases for some of these companies, but according to market observers, the long-term viability remains uncertain.
While optimists see this as a step towards more mainstream Bitcoin adoption, skeptics believe it's just some small companies' short-term hype.
Body:
What do fitness equipment manufacturers, biopharmaceutical companies, and battery materials producers have in common?
Of course, it’s Bitcoin.
With BTC skyrocketing to unprecedented levels this month, at least 12 previously unrelated public companies have announced plans to purchase Bitcoin (BTC), using it as an intermediary for storing idle cash — indeed recently very profitable. This is the path that Michael Saylor illuminated with 'laser eyes' since 2020 when he began transforming his relatively obscure software company MicroStrategy into a Bitcoin treasury.
This has led MicroStrategy to tremendous success in the U.S. stock market — since Saylor began purchasing Bitcoin for the company, its value has increased by about 30 times, accumulating a massive reserve worth approximately $38 billion (as of the time of this writing).
Just this month, the company's stock price nearly doubled since Donald Trump promised to embrace cryptocurrency and was elected President of the United States. (Other crypto stocks have also seen a rise. Exchange operator Coinbase has surged nearly 70% since the day before the election.)
Other companies are attempting to replicate this success.
On Friday, a 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 surged 19% at one point but closed up only 5%. Meanwhile, fitness equipment company Interactive Strength (TRNR) stated 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 surged over 80% at one point but ended the day with a "mere" 11% gain.
Earlier last week, biopharmaceutical company Hoth Therapeutics (HOTH) announced a $1 million Bitcoin purchase plan, which triggered its stock price to rise by up to 25% — although nearly the entire gain was wiped out 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 short-lived stock surges after announcing Bitcoin treasury plans in November. Only one company saw its stock drop after announcing this news: Acurx Pharma (ACXP).
"The recent Bitcoin craze, combined with MicroStrategy's stock price rising over 500% in 2024, has sparked a wave of companies (especially small caps) announcing Bitcoin purchasing strategies," said Youwei Yang, chief economist at BIT Mining (BTCM).
Whether these companies that are emulating MicroStrategy will achieve success like Saylor remains an unknown.
Youwei Yang said, "This behavior could end in the same way as [previous bull markets]: unsustainable hype followed by a significant pullback as the market realizes that many of the announcements lack substance."
Additionally, whether the latest entrants will stick it out remains technically uncertain. So far, only the AI company Genius Group is known to have genuinely purchased Bitcoin.
But who can blame them?
Early investors in MicroStrategy have made a fortune, and even recent investors can easily profit. Saylor primarily raised funds through issuing stocks and bonds, which were then used to purchase Bitcoin. These followers may gain access to capital market channels that they otherwise would not have.
The market follows the old adage 'never fight the market,' meaning to go with the flow regardless of the fundamentals. Companies want to meet market demand; no one wants to be the one telling the boss or shareholders that their poor performance is due to not following in MicroStrategy's footsteps.
"Just a few years ago, buying Bitcoin was almost too risky. However, now the risk seems to be the opposite — not buying is the real risk," said Brian D. Evans, CEO and founder of BDE Ventures, adding that, "Not being involved with Bitcoin is really painful."
For those filled with hope, this sudden corporate scramble may signal that mainstream Bitcoin adoption is finally arriving, especially in the context of President-elect Trump expressing a desire for the U.S. government to also hoard Bitcoin.
"For supporters of BTC, macro factors like anticipated inflation and newfound regulatory friendliness will stimulate more companies to incorporate this asset into their balance sheets," stated the Toronto-based crypto platform FRNT Financial in a report.
Furthermore, Bitcoin purchasing strategies can open up capital markets for companies, as seen with MicroStrategy and mining company MARA Digital (MARA). 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 forego current income in exchange for the ability to eventually convert debt into equity, thus gaining exposure to Bitcoin.
Evans of BDE stated that their plan to purchase Bitcoin "is a useful way for companies to raise funds, not much different from what MicroStrategy has done over the past few years."
However, for some, it sounds like a repeat of a brief trend from the late 2010s when many companies unrelated to cryptocurrency added the term 'blockchain' to their names.
The most famous example is the obscure beverage manufacturer Long Island Iced Tea rebranding itself as Long Blockchain, which at least initially achieved explosive results: its stock price nearly doubled in a day after the rebranding to cryptocurrency. The gains did not hold, and the stock was later delisted from NASDAQ. (Three individuals were charged with insider trading by the U.S. Securities and Exchange Commission.)
There are other 'magic' buzzwords. In the 2021 crypto bull market, many large companies jumped on the 'Web3', 'metaverse', and 'NFT' bandwagons in an attempt to boost their stock prices. Even Facebook rebranded itself as Meta, betting heavily on the metaverse. However, these initiatives ultimately led to significant losses.
Meanwhile, some struggling stocks, completely unrelated to cryptocurrency, have also begun venturing into Bitcoin mining, which was then considered a lucrative business. However, the subsequent brutal bear market caused these once-promising crypto concepts to fall from grace and become 'the street rat.'
Youwei Yang stated that although MicroStrategy has been able to raise billions from capital markets to fund Bitcoin purchases, if others adopt this strategy, it could have negative effects on smaller companies. "For small caps, it may be seen as a short-term gimmick that deters serious investors. If Bitcoin's price stabilizes or falls, 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 amplifies potential losses during market corrections, highlighting its inherent dangers," he noted, adding that some companies are utilizing the Bitcoin hype to increase debt on their balance sheets.
Whoever is right, Bitcoin has repeatedly set historical highs since Trump won the U.S. election, the magic remains: announce a Bitcoin plan similar to Saylor's and see if your stock takes off.
"We seem to be at a point where many companies feel they must do this," said Brian D. Evans, founder of BDE.
Either way, welcome to the new cryptocurrency bull market.
