Authors: Aoyon Ashraf, Nick Baker
Compiled by: BitpushNews
Summary:
Following the success of MicroStrategy's Bitcoin accumulation strategy, many companies (some small caps and unrelated to cryptocurrency) have begun 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 argue that it is just a short-term hype for some smaller companies.
Main text:
Fitness equipment manufacturers, biopharmaceutical companies, battery material producers... what do these diverse companies have in common?
Of course, it's Bitcoin.
As BTC soared to unprecedented levels this month, at least 12 previously unrelated public companies announced plans to purchase Bitcoin (BTC) as a vehicle for storing idle cash—indeed, recently quite profitable. This is the path that Michael Saylor illuminated with 'laser eyes' since 2020, when he began transforming his relatively unknown software manufacturer MicroStrategy into a Bitcoin treasury.
This has brought tremendous success to 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 the time of writing this article).
Just 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 an increase. 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 rose as much as 19% at one point but closed up only 5%. Meanwhile, fitness equipment company Interactive Strength (TRNR) stated on Thursday that after its board approved the use of cryptocurrency as treasury reserve assets, the company plans to purchase up to $5 million worth of Bitcoin. Following the announcement, the company's stock soared over 80% at one point but 'only' rose 11% for the day.
Earlier last week, biopharmaceutical company Hoth Therapeutics (HOTH) announced a $1 million Bitcoin purchase plan, causing its stock price to rise by as much as 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 brief spikes in their stock prices after announcing Bitcoin treasury plans in November. Only one company saw its stock decline after making this announcement: Acurx Pharma (ACXP).
"The recent Bitcoin surge, coupled with MicroStrategy's stock price increasing 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 following MicroStrategy will achieve success like 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, only the AI company Genius Group is known to have actually 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 stock and bond issuance, which were then used to purchase Bitcoin. These followers may have access to capital market channels that they could not have accessed otherwise.
The market follows the old adage of 'never fight the market,' which means going with the flow regardless of the fundamentals. Companies want to meet market demand; no one wants to be the one to tell the boss or shareholders that their 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 risk seems 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 really painful."
For the hopeful, this sudden corporate scramble may herald the long-awaited mainstream adoption of Bitcoin, especially in the context of President Trump's expressed desire for the U.S. government to also accumulate Bitcoin.
"For BTC supporters, macro factors such as expected inflation and new regulatory friendliness will stimulate more companies to include this asset on their balance sheets," said FRNT Financial, a crypto platform based in Toronto, in a report.
Moreover, the Bitcoin purchase strategy can open up the capital markets for companies, just as MicroStrategy and miner MARA Digital (MARA) have done. Both of these 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 and gain exposure to Bitcoin.
BDE's Evans stated that planning to purchase Bitcoin "is a useful way for companies to raise funds, similar to what MicroStrategy has done in recent years."
However, for some, this sounds like a replay of a fleeting trend from 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 renaming itself Long Blockchain, which initially yielded explosive results: its stock price nearly doubled within a day after the name change to cryptocurrency. The gains did not last, and the stock was later delisted by NASDAQ. (Three individuals were charged with insider trading by the U.S. Securities and Exchange Commission.)
There are other 'magic' buzzwords. During the crypto bull market of 2021, many large companies jumped on the 'Web3', 'metaverse', and 'NFT' bandwagon in an attempt to boost their stock prices. Even Facebook changed its name to Meta, betting heavily on the metaverse. However, these moves ultimately led to massive losses.
Meanwhile, some companies with depressed stock prices that have no connection to cryptocurrency have also begun to dabble in Bitcoin mining, which was then considered a lucrative business. However, the subsequent brutal bear market knocked these once-promising crypto concepts off their pedestal, making them 'the rats of the street.'
Youwei Yang stated that although MicroStrategy has been able to raise billions of dollars from the capital markets to fund Bitcoin purchases, if others adopt this strategy, it could have adverse effects on smaller companies. "For small-cap stocks, it may be seen as a short-term gimmick, which could deter 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, shared the same view, stating, "While this approach may yield short-term gains in a bull market, it also carries significant risks. Leverage magnifies potential losses during market corrections, highlighting its inherent dangers," he pointed out that some companies are using the Bitcoin hype to increase debt on their balance sheets.
Whoever is right, Bitcoin has repeatedly hit all-time highs since Trump's victory in the U.S. election, 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 must do this," said BDE founder Brian D. Evans.
In any case, welcome to the new cryptocurrency bull market.
