Not just MicroStrategy, corporate purchases of Bitcoin are a major trend, with enough influence to significantly boost the Bitcoin market this year.

Written by: Matt Hougan, Chief Investment Officer of Bitwise

Translated by: Luffy, Foresight News

In this week's memo, one thing I want to emphasize is where I believe conventional wisdom is mistaken, one of which is:

The purchase of Bitcoin by MicroStrategy has not received enough attention.

I know what you're thinking: "Not enough attention? This company and its founder Michael Saylor are regulars in the media."

That's true. But most investors I've spoken with seem to view this company as an outlier, a unique entity with a unique founder doing unique things.

This is wrong.

Over the past few months, I have delved into the phenomenon of companies purchasing and holding Bitcoin as a reserve asset, and I conclude that this trend is much broader than most people realize. In fact, I believe it is a genuine major trend.

My prediction is that in the next 12 to 18 months, hundreds of companies will begin purchasing Bitcoin, and their buying behavior will significantly boost the entire Bitcoin market.

Here are three reasons why this trend is more important than most people imagine.

Reason 1: The influence of MicroStrategy is beyond imagination

MicroStrategy is not a particularly large company. By market capitalization, it currently ranks 220th in the world, slightly larger than the Mexican-style restaurant company Chipotle and slightly smaller than the paint company Sherwin-Williams.

Last year, MicroStrategy purchased about 257,000 Bitcoins. Is that a lot? Or a little?

To make this number more intuitive, it is more than all the Bitcoins mined in 2024 (218,829 Bitcoins).

Let me say that again: a company the size of Chipotle purchased more Bitcoins in 2024 than the new supply of Bitcoin that year.

And it hasn't stopped. MicroStrategy recently announced plans to raise over $42 billion to acquire more Bitcoin. At current prices, this is roughly equivalent to 2.6 years of new supply.

So ask yourself: what would happen if truly large companies began to follow MicroStrategy's lead? The metaverse platform company Meta, which is currently considering shareholder proposals to include Bitcoin on its balance sheet, is 20 times the size of MicroStrategy.

Reason 2: This trend has long exceeded the scope of MicroStrategy

MicroStrategy is in the spotlight, but it is by no means an outlier. Today, there are 70 publicly traded companies holding Bitcoin on their balance sheets, and many private companies are doing the same (by the way, including Bitwise).

The list of public companies includes well-known cryptocurrency companies like Coinbase and Marathon Digital, as well as non-cryptocurrency companies like Block, Tesla, Semlar Scientific, and Mercado Libre. These companies (excluding MicroStrategy) collectively hold 141,302 Bitcoins.

Private companies are not required to report their Bitcoin holdings, but according to BitcoinTreasuries.com, voluntarily disclosed companies (such as SpaceX, Block.one, etc.) hold at least 368,043 Bitcoins.

This means that even today, MicroStrategy's share of corporate Bitcoin holdings is less than 50%. I expect that its share will ultimately be even smaller.

Reason 3: The number of companies purchasing Bitcoin is about to surge

The reason I am writing this memo today is that I believe the number of companies holding Bitcoin on their balance sheets will surge.

Why? Until the beginning of this year, two factors hindered companies from joining this trend.

The first factor is reputational risk. Last year, a CEO of a large publicly traded company faced significant obstacles when considering Bitcoin as a reserve asset. The company faced negative media coverage, shareholder lawsuits, regulatory scrutiny, and many other risks, and the board was simply not on board. The constraints that have hindered institutional investors from allocating Bitcoin for years have also troubled companies.

But in the past few months, reputational risk has significantly decreased. After the elections, as Washington's top officials began to embrace cryptocurrency, holding Bitcoin has become more commonplace and popular. This alone should double the number of companies purchasing Bitcoin.

But there is also a second, and even larger, factor at play.

Since December of last year, the Financial Accounting Standards Board (FASB), which oversees the financial reporting of publicly traded companies, implemented a new regulation called ASU 2023-08, which changed the accounting treatment of Bitcoin in Generally Accepted Accounting Principles (GAAP) reporting.

Before the beginning of this year, under GAAP, Bitcoin was considered an "intangible asset" that required "impairment testing." This meant that companies purchasing Bitcoin had to record its value on the books at the purchase price, and if the price fell, they had to write down its value. However, if the price rose, they were not allowed to revalue it upwards.

I know this sounds crazy, but it is true. However, under ASU 2023-08, the situation has changed. Now, if the price of Bitcoin rises, companies can mark it to market and record profits.

If 70 companies were willing to include Bitcoin on their balance sheets when its value was only expected to decline from an accounting perspective, imagine how many companies would be willing to do so now. 200? 500? Or 1,000?

Conclusion: Reasons for companies to purchase Bitcoin

Many people are skeptical of this trend because they are puzzled by why companies are purchasing Bitcoin.

We all know why MicroStrategy is doing it: it is the company's primary mission. But why would a thriving medical device company like Semlar Scientific get involved?

Over the past few months, I have often asked myself this question. But one day, I suddenly realized: the reasons for companies to purchase Bitcoin are exactly the same as those for individual investors.

Some companies are greedy and hope that including Bitcoin on their balance sheets will boost their stock prices. Some companies are concerned about the devaluation of the dollar and want to protect their cash from long-term losses. Others want to signal that they are part of the Bitcoin camp to attract customers. Some companies may just be acting on instinct.

There are many reasons, but that doesn't matter. As an investor, you don't need to understand the reasons for every company purchasing Bitcoin, just as you don't need to understand the reasons for every institution, financial advisor, and retail investor. You just need to look at the numbers and ask yourself two questions: where do these demands from companies seem to be heading? What does this mean for the market?

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