A growing number of companies are attempting to replicate MicroStrategy’s success by diving into Bitcoin, but will their strategy work?
This month, as Bitcoin continues to soar to new heights, at least 12 publicly traded companies, including a fitness equipment maker, a biopharma firm, and a producer of battery materials, have announced plans to purchase Bitcoin as a way to store excess cash. This trend follows in the footsteps of MicroStrategy, which, under the leadership of CEO Michael Saylor, became a trailblazer in converting its corporate treasury into a Bitcoin vault starting in 2020.
Since then, MicroStrategy has seen its stock price surge by roughly 30 times, driven by its massive Bitcoin holdings, which are now valued at around $38 billion. The company’s market success has been remarkable, with its shares nearly doubling since Donald Trump’s election victory—after he pledged support for cryptocurrency. Other stocks in the crypto space, like Coinbase, have also enjoyed significant price increases.
In an attempt to tap into this success, companies like Anixa Biosciences, Interactive Strength, and Hoth Therapeutics have announced Bitcoin-buying plans. Anixa, for example, saw its stock price rise by 5% after it revealed its Bitcoin investment, while Interactive Strength’s stock spiked 80% before settling with a 11% gain after announcing its own $5 million Bitcoin plan. However, not all companies have seen sustained success—many experienced initial surges that quickly fizzled out by the end of the day.
While the trend of microcap companies announcing Bitcoin purchases may seem like a clever strategy, some analysts caution that this could be unsustainable. “This behavior could end the same way previous market bubbles have: unsustainable hype followed by sharp corrections,” said Youwei Yang, Chief Economist at BIT Mining. Furthermore, while many companies have announced intentions to buy Bitcoin, few have actually followed through, with only Genius Group known to have made a purchase so far.
Despite the risks, the allure of Bitcoin is strong. Investors who got in early with MicroStrategy have made substantial gains, and recent investors are riding the wave. Many of these companies are following a path similar to MicroStrategy’s, using Bitcoin as a way to raise capital by issuing debt and equity to fund purchases, or simply jumping on the bandwagon to avoid missing out on the crypto boom.
Yet, there are those who view this behavior skeptically. The phenomenon is reminiscent of the “blockchain” trend in the late 2010s, where companies would add the term “blockchain” to their name to attract attention—such as the case of Long Island Iced Tea, which changed its name to Long Blockchain. Initially, this caused a brief spike in its stock, but the gains were not sustained, and the company was later delisted.
Similarly, in the 2021 crypto bull market, companies touted their Web3, metaverse, and NFT initiatives in an attempt to capitalize on crypto’s popularity. But when the market turned bearish, these “buzzword” strategies lost their appeal.
While Bitcoin has remained a profitable investment for MicroStrategy, smaller companies may struggle with the same approach. For many, it could be seen as a short-term gimmick that may deter serious investors if Bitcoin’s price stabilizes or declines. “For microcaps, it risks being seen as a short-term gimmick, deterring serious investors,” said Youwei Yang.
In addition, leveraging Bitcoin to raise capital, especially in the form of debt, introduces significant risks. “While this approach may yield short-term gains, it carries significant risks,” said David Siemer, CEO of Wave Digital Assets. “Leverage amplifies potential losses during market corrections, underscoring its inherent danger.”
Despite the risks, the phenomenon of Bitcoin “treasury” announcements continues to grow. For many companies, it may feel like they have no choice but to jump on board in a market where failing to do so could result in underperformance.
In the context of Bitcoin continuing to hit new highs, the question remains: will these newcomers to the Bitcoin strategy see the same success as MicroStrategy, or will their fortunes fade like past speculative trends? Only time will tell.
