Bitwise: Businesses Buy Bitcoin A Neglected Big Trend

Weekly Observation: Businesses Hoarding Bitcoin – A Brewing Change

I often point out some overlooked market trends in weekly memos. MicroStrategy's move is a stark example.

Many people may say, "MicroStrategy and Michael Saylor are already very famous, what are you going to pay attention to?" This is true, but many investors regard it as a special case and ignore the deeper market forces behind it. This view is one-sided.

In-depth research on enterprises' adoption of Bitcoin as reserve assets in recent months shows that this is not an isolated case, but a major trend that is emerging. I predict that in the next 12-18 months, hundreds of businesses will follow suit and buy Bitcoin in large quantities, thereby significantly pushing up market prices.

The following three reasons explain the potential impact of this trend:

1. MicroStrategy's influence is underestimated

MicroStrategy is not a giant company, and its market value ranks only about 220th in the world, which is comparable to Chipotle and Sherwin-Williams. However, in 2024, MicroStrategy purchased about 257,000 Bitcoins, exceeding the entire new supply of Bitcoin that year (218,829). More importantly, they plan to raise more than $42 billion to continue purchasing, which is equivalent to about 2.6 years of new Bitcoin supply. Imagine what would happen if a larger company, such as a Meta with a market value of 20 times MicroStrategy (which is currently considering shareholder proposals for inclusion of Bitcoin on the balance sheet) also joined?

2. Trends have surpassed MicroStrategy

In addition to MicroStrategy, cryptocurrency companies such as Coinbase and Marathon Digital, as well as non-cryptocurrency companies such as Block, Tesla, Semlar Scientific and Mercado Libre, all hold a considerable amount of Bitcoin. Public data shows that these listed companies hold a total of 141,302 Bitcoins. Private companies that have not publicly held positions (such as SpaceX, Block.one, etc.), according to BitcoinTreasuries.com, hold at least another 368,043 Bitcoins. This means that even now, MicroStrategy's share in the enterprise bitcoin market is less than 50%, and this proportion will further decline in the future.

3. Enterprises will grow exponentially by purchasing Bitcoin

I believe that the number of companies holding Bitcoin as reserve assets will grow rapidly. Until early 2025, two major factors hindered this trend: reputational risk and accounting standards.

In 2024, the CEO of listed companies faces huge reputation risks by using Bitcoin as a reserve asset, including negative media reports, shareholder litigation and regulatory reviews. However, this risk has been significantly lowered with the shift in Washington's attitude towards cryptocurrencies following the 2024 elections and the growing popularity of Bitcoin.

More importantly, the new regulations of the Financial Accounting Standards Board (FASB) ASU 2023-08, which began implementation in December 2024, have changed the accounting treatment of Bitcoin in GAAP reports. Previously, Bitcoin was regarded as an "intangible asset" and needed to conduct an "impairment test", which means that only impairment losses can be made, and appreciation gains cannot be recorded. The new regulations allow companies to deduct Bitcoin based on market value and record profits. If there are still 70 companies willing to hold Bitcoin under the old rules, how many companies will join under the new rules? 200 companies? 500 companies? Even more?

Conclusion: Why do companies buy Bitcoin?

Many people question the motivation of companies to buy Bitcoin. MicroStrategy's motivation is clear, but why do companies like Semlar Scientific do the same?

The answer is simple: the motivation of a company to buy Bitcoin is no different from that of an individual investor. Some companies are pushing up stock prices, some are to hedge the risk of US dollar depreciation, some are to attract customers, and some may be based on intuition. Regardless of the motivation, as investors, we don’t have to focus on the specific reasons for each company, but on the big trend: where will the company’s demand for Bitcoin go, and what does this mean for the market?

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