Bitwise: Corporate Bitcoin buying is an overlooked trend

summary

This isn’t just MicroStrategy’s doing; it’s a real trend that’s powerful enough to drive a big rally in the bitcoin market this year.

In this weekly memo, I try to point out some places where I think the conventional wisdom is wrong. Here’s one:

What MicroStrategy is doing is not getting enough attention.

I know what you’re thinking: “Not getting enough attention? This company and its founder, Michael Saylor, are all over the media.”

But most investors I spoke with seemed to think the company was a unique case, a single entity with a unique founder doing a unique thing.

This view is wrong.

Over the past few months, I have been doing a deep dive into the purchase and holding of Bitcoin by corporations as a reserve asset and it turns out that this trend is much bigger than most people realize. In fact, I think it is a truly big trend.

My prediction is that within the next 12-18 months we will see hundreds of businesses using their cash reserves to buy Bitcoin, and their purchases will significantly drive up the entire Bitcoin market.

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

Reason 1: MicroStrategy’s influence is beyond imagination

MicroStrategy isn’t a particularly large company. It’s currently ranked 220th in the world by market capitalization, slightly larger than Chipotle, a restaurant chain, and slightly smaller than Sherwin-Williams, a paint company.

MicroStrategy purchased approximately 257,000 Bitcoins in 2024. Is this a lot or a little?

To put this number into context, this is more than all the Bitcoin that will be mined in 2024 (218,829 Bitcoins).

I’ll say that again: a company the size of Chipotle has purchased more than 100% of Bitcoin’s new supply through 2024.

And it’s not stopping there. MicroStrategy recently announced plans to raise more than $42 billion to buy more Bitcoin. At current prices, that’s equivalent to about 2.6 years of new supply.

So you might as well ask yourself: What would happen if really big companies started following MicroStrategy’s lead? Meta (which is currently considering a shareholder proposal to add Bitcoin to its balance sheet) is 20 times the size of MicroStrategy.

Reason 2: This trend affects more than just MicroStrategy

MicroStrategy has gotten a lot of media attention, but it’s by no means alone. Today, 70 public companies hold Bitcoin on their balance sheets, as do many private companies (including Bitwise, by the way).

The list of listed companies includes well-known cryptocurrency companies such as Coinbase and Marathon Digital, as well as non-cryptocurrency companies such as Block, Tesla, Semlar Scientific and Mercado Libre. Excluding MicroStrategy, these companies hold a total of 141,302 bitcoins.

Private companies are not required to disclose how much bitcoin they hold, but those that voluntarily disclose (such as SpaceX, Block.one, etc.) hold at least another 368,043 bitcoins, according to BitcoinTreasuries.com.

This is significant. It means that even today, MicroStrategy’s Bitcoin holdings represent less than 50% of the corporate Bitcoin market. I expect it will ultimately be very small.

Reason 3: The number of companies buying Bitcoin will explode

I am writing this memo today because I believe the number of businesses holding Bitcoin on their balance sheets will explode.

Why? Until early 2025, two factors prevent companies from joining this trend.

The first is reputational risk. In 2024, the CEO of a large public company faces significant obstacles in adopting Bitcoin as a reserve asset. The company faces risks such as negative media coverage, shareholder lawsuits, regulatory attention, and a board of directors that firmly disagrees. The same constraints that have prevented institutional investors from allocating Bitcoin for many years are also putting pressure on companies.

But over the past few months, reputational risk has been reduced significantly. After the election, cryptocurrencies have become more accepted at the highest levels in Washington, and holding Bitcoin has become more common and more popular. This alone could double the number of businesses buying Bitcoin.

But there is a more important factor at work.

Starting in December 2024, the Financial Accounting Standards Board (FASB, which regulates the way public companies report their financials) implemented a new rule called ASU 2023-08, which changes the way Bitcoin is accounted for in Generally Accepted Accounting Principles (GAAP) reports.

Before the beginning of 2025, Bitcoin is considered an "intangible asset" under GAAP and is subject to an "impairment test." This means that companies that purchase Bitcoin must record its value on their books when they purchase it, and write it down if the price drops. But if the price rises, companies are not allowed to increase the value.

I know it sounds crazy, but it’s true. However, under ASU 2023-08, things change. Now, if the price of Bitcoin increases, businesses can mark it to market and record a profit.

If 70 companies were willing to put Bitcoin on their balance sheets when the value of Bitcoin could only go down from an accounting perspective, imagine how many companies would be willing to do so now? 200? 500? 1,000?

Conclusion: Why Businesses Buy Bitcoin

Many people are skeptical of the trend because they struggle with the question of why companies are buying Bitcoin.

We all know why MicroStrategy is doing this—it’s the company’s primary mission. But why would a thriving medical device company like Semlar Scientific get on board?

I’ve asked myself this question many times over the past few months, and then one day it hit me: businesses are buying Bitcoin for the exact same reasons that individual investors are.

Some companies are motivated by greed, hoping that adding Bitcoin to their balance sheets will boost their stock prices. Others are concerned about the depreciation of the dollar and want to protect their cash from long-term erosion. Still others want to show that they are part of the Bitcoin camp, hoping to attract customers. Some companies may just follow their intuition.

The reasons vary, but at the end of the day, it doesn’t matter. As an investor, you don’t have to know why every business is buying Bitcoin, just like you don’t have to know why every institution, financial advisor, and retail investor is buying Bitcoin. You just have to look at the data and ask yourself two questions: Where is this demand from businesses going? And what does it mean for the market?