Original Title: Companies Buying Bitcoin: An Overlooked Megatrend

Original Author: Matt Hougan, Chief Investment Officer at Bitwise

Original Translation: Luffy, Foresight News

In this week's memo, one thing I want to do is emphasize areas where I think the conventional wisdom is wrong, one of which is:

The act of MicroStrategy buying Bitcoin has not received enough attention.

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

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

That's a mistake.

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

My prediction is that in the next 12-18 months, hundreds of companies will start buying Bitcoin, and their buying behavior will significantly drive up the entire Bitcoin market.

Here are the top three reasons why this trend is much more significant than most people imagine.

Reason 1: The Impact of MicroStrategy Alone Is Mind-Boggling

MicroStrategy is not a particularly large company. By market cap, it is currently ranked 220th globally, slightly larger than Mexican fast-food chain Chipotle and slightly smaller than paint company Sherwin-Williams.

Last year, MicroStrategy bought approximately 257,000 bitcoins. Is this a lot? Or is it a little?

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

Let me say it again: a company the size of Chipotle bought more bitcoins in 2024 than the Bitcoin's new supply that year.

And it hasn't stopped there. MicroStrategy recently announced plans to raise over $420 million to purchase more Bitcoin. At current prices, this is roughly equivalent to about 2.6 years' worth of new supply.

So ask yourself: What would happen if truly large companies started following MicroStrategy's lead? A metaverse platform company, Meta, currently considering a shareholder proposal to add Bitcoin to its balance sheet, is 20 times the size of MicroStrategy.

Reason 2: This Trend Has Long Outgrown MicroStrategy

MicroStrategy may be grabbing headlines, but it is by no means alone. Today, 70 publicly traded companies hold Bitcoin on their balance sheets, as do many private companies (including Bitwise, by the way).

The list of publicly traded companies includes well-known cryptocurrency firms like Coinbase and Marathon Digital, as well as non-crypto firms 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 the website BitcoinTreasuries.com, companies that have voluntarily disclosed (such as SpaceX, Block.one, and others) hold at least 368,043 bitcoins.

That means that even today, MicroStrategy holds less than 50% of the corporate Bitcoin holdings. I expect its share to shrink further over time.

Reason 3: The Number of Enterprises Buying Bitcoin Is About to Explode

The reason I am writing this memo today is that I believe the number of enterprises holding Bitcoin on their balance sheets is about to explode.

Why? Until the beginning of this year, two factors were holding back corporate participation in this trend.

The first factor was reputation risk. Last year, the CEO of a large publicly traded company faced significant obstacles when considering Bitcoin as a reserve asset. The company was exposed to negative media coverage, shareholder lawsuits, regulatory scrutiny, and the board simply did not buy in. The same restrictions that have hindered institutional investor allocations to Bitcoin over the years have also plagued enterprises.

But over the past few months, reputation risk has been greatly reduced. After the election, with the top echelons of Washington starting to embrace cryptocurrency, holding Bitcoin has become more commonplace and acceptable. This fact alone should lead to a doubling in the number of enterprises purchasing Bitcoin.

But there is a second, even bigger factor at play.

Starting in December of last year, the Financial Accounting Standards Board (FASB), which oversees the way public companies account for their financial reports, implemented a new rule called ASU 2023-08, changing how Bitcoin is accounted for in Generally Accepted Accounting Principles (GAAP) reporting.

Prior to the beginning of this year, under GAAP, Bitcoin was considered an "intangible asset" and was subject to impairment testing. This meant that companies holding Bitcoin had to initially record its value on their books at the purchase price and write down the value if the price decreased, but were not allowed to write the value back up if the price increased.

I know this sounds crazy, but it's true. However, with the implementation of ASU 2023-08, things have changed. Now, if the price of Bitcoin goes up, companies can mark it to market value and record the profit.

If there were 70 companies willing to include Bitcoin on their balance sheets knowing that, from an accounting perspective, its value could only go down, imagine how many more companies might be willing to do so now. 200 companies? 500 companies? Or 1,000 companies?

Conclusion: Why Companies Are Buying Bitcoin

Many have been skeptical of this trend, wondering why companies are buying Bitcoin in the first place.

We all understand why MicroStrategy did it: it's their core mission. But why would a thriving medical devices company like Semlar Scientific get involved?

I have asked myself this question many times over the past few months. But one day, it hit me: the reasons companies are buying Bitcoin are no different from individual investors.

Some companies are greedy, hoping that adding Bitcoin to their balance sheet will boost their stock price. Some are concerned about the devaluation of the dollar and want to protect cash from long-term erosion. Some want to show they are part of the Bitcoin tribe to attract customers. Some may just be following their gut.

There are many reasons, but they don't matter. As an investor, you don't need to understand why every institution, financial advisor, and retail investor is buying Bitcoin, just like you don't need to understand why every company is buying Bitcoin. Just look at the numbers and ask yourself two questions: Where do these corporate inflows seem to be heading? And what does that mean for the market?

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