Recently, many companies have been mimicking MicroStrategy's Bitcoin purchasing strategy, leading to a sharp rise in stock prices in the short term. While this is seen as part of the process of Bitcoin's mainstreaming, there remain concerns about the long-term impact on the market.
Following the successful accumulation strategy of MicroStrategy, many companies (some small caps and those unrelated to cryptocurrency) have begun announcing similar initiatives. This strategy has led to significant short-term increases in stock prices for some of these companies, but market observers say the long-term viability remains uncertain.
While optimists see this as a step toward more mainstream Bitcoin adoption, skeptics argue it is just short-term hype from some small companies.
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Fitness equipment manufacturers, biopharmaceutical companies, battery materials 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 their plans to purchase Bitcoin (BTC), using it as an intermediary to store idle cash— which has indeed been quite profitable recently. This is the path that Michael Saylor illuminated with his 'laser eyes' since 2020, when he began transforming the obscure software maker MicroStrategy into a Bitcoin treasury.
This has led MicroStrategy to achieve tremendous success in the U.S. stock market— since Saylor began purchasing Bitcoin for the company, its value has increased about 30 times, accumulating a massive reserve worth approximately $38 billion (as of the time of writing).
Just this month, the company's stock price nearly doubled since Trump promised to embrace cryptocurrencies and was elected President of the United States. (Other crypto stocks also saw increases. Exchange operator Coinbase has risen nearly 70% since the day before the election.)
Other companies are trying 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 rose 19% at one point but only closed up 5%.
Meanwhile, fitness equipment company Interactive Strength (TRNR) announced on Thursday that it plans to purchase up to $5 million worth of Bitcoin after its board approved cryptocurrency as a treasury reserve asset. After the news broke, the company's stock surged over 80% at one point but only rose 'just' 11% for the day.
Earlier last week, biopharmaceutical company Hoth Therapeutics (HOTH) announced a $1 million Bitcoin purchasing plan, which caused its stock price to surge by as much as 25%— although nearly 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 their stock prices spike temporarily 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 emulating MicroStrategy will achieve success similar to Saylor's remains uncertain.
Youwei Yang stated, "This behavior could end in the same way as [the previous bull market]: unsustainable hype followed by a significant pullback as the market realizes that many of these announcements lack substance."
Furthermore, whether the latest entrants will stick it out is technically unknown. So far, only the artificial intelligence 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 stock and bond issuances, which were then used to purchase Bitcoin. These emulators may thus gain access to capital market channels they otherwise could not have accessed.
The market follows the old adage 'never fight the market,' suggesting that regardless of the fundamentals, one should go with the flow. Companies want to meet market demand, and nobody wants to be the one to tell the boss or shareholders that they underperformed because they did not follow 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, founder and CEO of BDE Ventures, adding, "Not getting involved with Bitcoin is really painful."
For those filled with hope, this sudden corporate scramble may signal that mainstream adoption of Bitcoin is finally coming, especially in the context of President-elect Trump's statement showing hope that the U.S. government would also hoard 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," stated FRNT Financial, a crypto platform based in Toronto, in a report.
Additionally, the Bitcoin purchasing strategy can open up capital markets for companies, as seen with MicroStrategy and miner 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 forgo current income in exchange for the ability to eventually convert the debt into equity, thus gaining Bitcoin positions.
Evans from BDE stated that expressing their plan to purchase Bitcoin "is a useful way for companies to raise funds, similar to what MicroStrategy has done over the past few years."
However, for some, this sounds like a rehash of a fleeting 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, which renamed itself Long Blockchain and achieved explosive results at least initially: its stock price nearly doubled in a day after the renaming to cryptocurrency. The gains did not last, 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. During the crypto bull market of 2021, many large companies rushed to promote terms like 'Web3,' 'metaverse,' and 'NFTs,' attempting to leverage them to boost stock prices. Even Facebook rebranded itself as Meta, fully betting on the metaverse. However, these moves ultimately led to massive losses.
Meanwhile, some companies with lackluster stock prices and no connection to cryptocurrency have started getting involved in Bitcoin mining, which at the time was seen as a lucrative business. However, the subsequent brutal bear market brought these once-promising crypto concepts crashing down, turning them into 'street rats.'
Youwei Yang stated that while MicroStrategy has been able to raise billions from the capital markets to fund Bitcoin purchases, it could have adverse effects on smaller companies if others adopt the same strategy.
"For small-cap stocks, this may be viewed as a short-term gimmick, which could deter 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, saying, "While this approach may yield short-term gains in a bull market, it also carries significant risks. Unlike directly holding assets, leverage magnifies potential losses during market corrections, highlighting its inherent dangers," he noted that some companies are using the hype around Bitcoin to increase debt on their balance sheets.
Regardless of who is right, after Trump won the U.S. election, Bitcoin has repeatedly set new all-time highs, and the magic remains: announce a Bitcoin plan similar to Saylor's and see if your stock can take off.
"It seems we have reached a point where many companies feel they must do this," said Brian D. Evans, founder of BDE.
In any case, welcome to the new cryptocurrency bull market.
