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

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In this week's memo, one thing I want to do is emphasize areas where I think traditional views are mistaken, one of which is:

The act of MicroStrategy purchasing Bitcoin has not received enough attention.

I know what you're thinking: "Not enough attention? This company and its founder Michael Saylor are media fixtures."

That's true. But most of the investors I've spoken with seem to view this company as an outlier, a unique entity with a unique founder doing a unique thing.

That's wrong.

Over the past few months, I've delved into the phenomenon of companies purchasing and holding Bitcoin as a reserve asset, and my conclusion is that this trend is much more widespread than most people realize. In fact, I believe it is a significant trend.

My prediction is: Over the next 12-18 months, hundreds of companies will start buying Bitcoin, and their buying behavior will significantly boost the entire Bitcoin market.

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

Reason 1: The Impact of Only MicroStrategy Is Beyond Imagination

MicroStrategy is not a particularly large company. By market capitalization, it currently ranks 220th globally, slightly larger than Mexican fast-food chain Chipotle and slightly smaller than paint company Sherwin-Williams.

Last year, MicroStrategy purchased approximately 257,000 bitcoins. Is that a lot? Or is it little?

To make this number more intuitive, it is more than all the bitcoins mined in 2024 (218,829 bitcoins).

Let me say it again: A company of similar size to Chipotle purchased more bitcoins in 2024 than the year's new bitcoin supply.

And they haven't stopped. MicroStrategy recently announced plans to raise over $420 billion to acquire more bitcoins. At current prices, this is roughly equivalent to 2.6 years of new supply.

So ask yourself: What would happen if real big companies started to emulate MicroStrategy? Currently considering a shareholder proposal to include Bitcoin on its balance sheet is the Metaverse platform company Meta, which is 20 times the size of MicroStrategy.

Reason 2: This Trend Has Long Since Outgrown MicroStrategy

MicroStrategy may be in the spotlight, but it is by no means unique. Today, there are 70 publicly traded companies with Bitcoin on their balance sheets, with many private companies following suit (including Bitwise, by the way).

The list of public companies includes well-known cryptocurrency companies like Coinbase and Marathon Digital, as well as non-crypto companies like Block, Tesla, Semlar Scientific, and Mercado Libre. These companies (excluding MicroStrategy) collectively hold 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 holds less than 50% of the share in corporate Bitcoin holdings. I expect its share to eventually be even smaller.

Reason 3: The Number of Enterprises Buying Bitcoin Is About to Soar

The reason I am writing this memo today is because I believe the number of enterprises holding Bitcoin on their balance sheets is set to soar.

What's the reason? Until early this year, there were two factors hindering corporate participation in this trend.

The first factor was reputational risk. Last year, the CEO of a large publicly traded company faced significant hurdles in adopting Bitcoin as a reserve asset. The company was at risk of negative media coverage, shareholder lawsuits, regulatory scrutiny, and the board simply did not buy into it. The same constraints that have long hindered institutional investors from allocating to Bitcoin have also plagued corporations.

However, over the past few months, reputational risk has significantly decreased. Since the election, as the highest levels of Washington began embracing cryptocurrency, holding Bitcoin has become more commonplace and popular. This fact alone should double the number of enterprises buying Bitcoin.

But there is a second, and even bigger, factor at play.

Since December of last year, the Financial Accounting Standards Board (FASB), responsible for overseeing the financial reporting of public companies, has implemented a new regulation called ASU 2023-08, which has changed the accounting treatment of Bitcoin in Generally Accepted Accounting Principles (GAAP) reporting.

Prior to the beginning of this year, under GAAP, Bitcoin was considered an "intangible asset" and was subject to an "impairment test." This meant that companies holding Bitcoin had to initially record its value on their books at the purchase price and write down the value if the price decreased. However, they were not allowed to write up the value if the price increased.

I know this sounds crazy, but it's true. However, under ASU 2023-08, the situation has changed. Now, if the price of Bitcoin goes up, companies can value it at the market price and record a profit.

If 70 companies were willing to include Bitcoin on their balance sheets when they thought its value could only go down from an accounting perspective, imagine how many companies would be willing to do so now. 200 companies? 500 companies? Or 1,000 companies?

Conclusion: Reasons Corporations Purchase Bitcoin

Many people are skeptical of this trend because they are puzzled about why corporations are buying Bitcoin.

We all know why MicroStrategy is doing it: it's the company's core mission. But why would a thriving medical device company like Semlar Scientific get involved?

For the past few months, I have asked myself this question numerous times. But one day, it suddenly clicked for me: the reasons for corporations buying Bitcoin are exactly the same as those for individual investors.

Some companies are greedy, hoping that adding Bitcoin to their balance sheet will boost their stock price. Some companies are concerned about the devaluation of the dollar and want to protect their cash from long-term losses. Some companies want to show they are part of the Bitcoin movement to attract customers. Some companies may just be acting on intuition.

There are many reasons, but that's not important. As an investor, you don't need to understand why every institution, financial advisor, and retail investor is buying Bitcoin as you do not need to understand why each company is doing so. Just look at the numbers and ask yourself two questions: where do these corporate demands seem to be heading? And what does this mean for the market?