Bitwise Chief Investment Officer: Hundreds of Companies Will Buy Bitcoin in the Next Year and a Half

Original author: Matt Hougan, Chief Investment Officer of Bitwise

मूल अनुवाद: लफ़ी, फ़ोरसाइट न्यूज़

One of the things I wanted to do in this week’s memo is to highlight some of the things I think the conventional wisdom gets wrong, one of which is this:

MicroStrategys purchase of Bitcoin has not received enough attention.

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

That’s true. But most investors I’ve spoken to seem to view this company as a unique case, a unique entity with a unique founder doing a unique thing.

This is wrong.

Over the past few months, I have been digging into the phenomenon of companies buying and holding Bitcoin as a reserve asset, and I have come to the conclusion that this trend is much more widespread than most people realize. In fact, I think it is a real big trend.

My prediction is that over the next 12-18 months, hundreds of businesses will start buying 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 alone is beyond imagination

MicroStrategy isn’t a particularly large company. It’s currently ranked 220th in the world by market value, a little bigger than Chipotle and a little smaller than Sherwin-Williams.

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

To put this number into perspective, it is more than all the Bitcoins mined in 2024 (218,829 BTC).

Ill say it again: a company the size of Chipotle would purchase more Bitcoin in 2024 than the total new supply of Bitcoin created that year.

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

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

Reason 2: This trend extends beyond MicroStrategy

MicroStrategy gets a lot of attention, but it’s far from alone. Today, 70 public 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 क्रिप्टोcurrency companies like Coinbase and Marathon Digital, as well as non-cryptocurrency companies like Block, Tesla, Semlar Scientific and Mercado Libre. These companies (excluding MicroStrategy) hold a total of 141,302 bitcoins.

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

This means that even today, MicroStrategy accounts for less than 50% of corporate Bitcoin holdings. I expect it will eventually be even smaller.

Reason 3: The number of businesses buying Bitcoin is about to surge

The reason I’m writing this memo today is that I believe the number of businesses holding Bitcoin on their balance sheets will explode.

Why? Until earlier this year, two factors held companies back from joining this trend.

The first factor is reputational risk. Last year, the CEO of a large public company faced huge obstacles in adopting Bitcoin as a reserve asset. The company faced negative media coverage, shareholder lawsuits, regulatory attention, and the board of directors was not buying it. The same constraints that have prevented institutional investors from allocating Bitcoin for many years also plagued companies.

But over the past few months, reputational risk has been reduced significantly. After the election, as cryptocurrencies began to be embraced at the highest levels in Washington, holding Bitcoin became more commonplace and more popular. This alone should double the number of businesses buying Bitcoin.

But there is a second, larger factor at work.

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

Before the beginning of this year, Bitcoin was considered an intangible asset under GAAP and was subject to impairment testing. This means that companies that buy Bitcoin must record its value on their books at the purchase price when they buy it, and if the price falls, the value must be written down. But if the price rises, it is not allowed to readjust 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, companies can mark it to market and record a profit.

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

Conclusion: Reasons for Businesses to 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 involved?

I’ve asked myself this question many times over the past few months, but one day it dawned on me: businesses are buying Bitcoin for the exact same reasons as individual investors.

Some companies are greedy and hope that adding Bitcoin to their balance sheets will boost their stock prices. Some companies are worried about the depreciation of the dollar and want to protect their cash from long-term losses. Others want to show that they are part of the Bitcoin camp to attract customers. Some companies may just act on their instincts.

There are many reasons, but they don’t matter. As an investor, you don’t have to understand why every company is buying Bitcoin any more than you have to understand why every institution, financial advisor, and retail investor is buying Bitcoin. You just have to look at the numbers and ask yourself two questions: Where does this demand from businesses look like it’s going? And what does this mean for the market?

This article is sourced from the internet: Bitwise Chief Investment Officer: Hundreds of Companies Will Buy Bitcoin in the Next Year and a Half

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