Bitwise: An overlooked megatrend in corporate buying of Bitcoin

Author: Matt Hougan, Chief Investment Officer of Bitwise; Compiler: 0xjs@金财经

summary

This isn’t just MicroStrategy; it’s a real megatrend powerful enough to drive the Bitcoin market significantly higher this year.

In this weekly memo, I often try to point out some of the areas where I think the conventional wisdom is wrong. Here is one:

What MicroStrategy is doing doesn't get enough attention.

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

Indeed. But most investors I spoke to seemed to believe that this company was an exception, a single entity with a unique founder that was doing a unique thing.

This view is wrong.

Over the past few months, I’ve taken an in-depth look at corporate purchases and holdings of Bitcoin as a reserve asset, and found that the trend is much larger than most people realize. In fact, I think this is a really big trend.

My prediction is this: Within the next 12-18 months we will see hundreds of businesses using their cash reserves to purchase 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: The influence of MicroStrategy itself is beyond imagination

MicroStrategy is not a particularly large company. It currently ranks 220th in the world by market capitalization, slightly larger than Chipotle (a restaurant chain) and slightly smaller than Sherwin-Williams, a paint company.

In 2024, MicroStrategy purchased approximately 257,000 Bitcoins. Is this too much or too little?

To give you a better idea of ​​this number, know that this is more than all Bitcoins mined in 2024 (218,829 Bitcoins).

I’ll say it again: A company the size of Chipotle purchased more than 100% of the new Bitcoin supply in 2024.

And it hasn't stopped yet. MicroStrategy recently announced plans to raise over $42 billion to buy more Bitcoin. At current prices, this equates to approximately 2.6 years of new supply.

So you might as well ask yourself: What would happen if the really big companies started to follow MicroStrategy's lead? Meta (which is currently considering shareholder proposals to include Bitcoin on its balance sheet) is 20 times the size of MicroStrategy.

Reason 2: This trend extends beyond MicroStrategy

MicroStrategy gets a lot of media attention, but it's not alone. Today, 70 public companies hold Bitcoin on their balance sheets, as do many private businesses (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 the number of Bitcoins 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 means a lot. This means that even now, the Bitcoin held by MicroStrategy accounts for less than 50% of the enterprise Bitcoin market. I expect it will end up being a very small percentage.

Reason 3: The number of companies buying Bitcoin will explode

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

Why? There are two factors preventing companies from joining this trend until early 2025.

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

But over the past few months, reputational risk has been significantly reduced. Following the election, Washington embraced cryptocurrencies at the highest levels, and holding Bitcoin became increasingly common and popular. This alone could double the number of businesses buying Bitcoin.

But there is a more important factor at play.

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 that changes Bitcoin’s reporting under Generally Accepted Accounting Principles (GAAP) accounting treatment methods.

Before the beginning of 2025, according to GAAP, Bitcoin is considered an "intangible asset" and is subject to "impairment testing." This means that businesses that buy Bitcoin need to record its value on their books at the time of purchase and write down the value if the price falls. But if the price rises, the company is not allowed to increase the value.

I know this sounds crazy, but it's true. However, under ASU 2023-08, the situation has changed. Now, if the price of Bitcoin increases, businesses can mark to market and record profits.

If from an accounting perspective, 70 companies are willing to include Bitcoin on their balance sheets when the value of Bitcoin can only fall, then imagine how many companies are willing to do so now? 200? 500? 1,000 homes?

Conclusion: Why Businesses Buy Bitcoin

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

We all know why MicroStrategy does this - it's the company's primary mission. But why should a booming medical device company like Semlar Scientific get involved?

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

Some companies are motivated by greed, hoping that adding Bitcoin to their balance sheets will drive up their stock prices. Others are worried about a falling dollar and want to protect their cash from long-term erosion. There are also companies that want to show that they are part of the Bitcoin camp in the hope of attracting customers. Some businesses may just be intuitive.

The reasons are varied, but at the end of the day, it doesn’t matter. As an investor, you don’t have to know the reasons why every business buys Bitcoin, just like you don’t have to know the reasons why every institution, financial advisor, and retail investor buys Bitcoin. All you need to do is look at the data and ask yourself two questions: Where are these needs from the business going? What does this mean for the market?