Bitcoin Buying Plans Are Supercharging Stocks. Is This a Michael Saylor Redux — or Another 'Long Island Iced Tea' Fad?
2024-11-26

What does the ragtag group including a fitness equipment maker, biopharmaceutical company and producer of battery materials have in common?
Bitcoin, of course.
As the cryptocurrency skyrockets to unheard-of levels this month, at least 12 publicly traded companies that previously had nothing to do with crypto announced they plan to buy bitcoin BTCUSD, choosing it as a modern — and, lately, quite profitable — place to park spare cash. It's a path illuminated by Michael Saylor's laser eyes since 2020, when he began converting his sleepy software maker MicroStrategy into a corporate vault for bitcoin.
That's turned MicroStrategy into a massive stock market success — up roughly 30 times in value since Saylor began buying bitcoin for the company, amassing a massive stockpile now worth about $38 billion. Just this month, its shares have nearly doubled in price since Donald Trump was elected U.S. president after pledging to embrace crypto. (Other crypto stocks have jumped, too. Coinbase, the exchange operator, is up nearly 70% since the day before the election.)
Others are trying to duplicate that success. On Friday, a biotech company, Anixa Biosciences (ANIX), said its board of directors approved buying an undisclosed amount of bitcoin to diversify the company's treasury reserves. The stock rallied as much as 19% but settled for a 5% advance by the end of the day. Meanwhile, on Thursday, fitness equipment company Interactive Strength (TRNR) said it plans to buy up to $5 million of bitcoin after its board approved the cryptocurrency as a treasury reserve asset. Following the announcement, its stock soared more than 80% at one point before settling for "only" a full-day gain of 11%.
Earlier last week, biopharma company Hoth Therapeutics (HOTH) announced a $1 million bitcoin buying plan, triggering an up to 25% surge in its stock — though nearly the entire rally fizzled by the end of the day. Similarly, companies including LQR House (LQR), Cosmos Health (COSM), Nano Labs (NA), Gaxos (GXAI), Solidion Technology (STI) and Genius Group (GNS) saw momentary spikes in their stock prices after revealing bitcoin treasury plans in November. Only one company fell after its announcement: Acurx Pharma (ACXP).
"The recent bitcoin boom, coupled with MicroStrategy's 500+% stock surge in 2024, has inspired a wave of companies — particularly microcaps — to announce bitcoin buying strategies," said Youwei Yang, chief economist at BIT Mining (BTCM).
Whether these newcomers to the Saylor playbook will ever see Saylor-like benefits remains a very open question. "This behavior could end the same way [as previous bull markets]: unsustainable hype followed by sharp corrections as the market realizes many of these announcements lack substance," Yang said.
And whether the recent entrants ever follow through is also technically unknown. So far, only artificial intelligence firm Genius Group is known to have actually bought any bitcoin.
But who can blame them for trying? Investors who invested early in MicroStrategy are getting ridiculously rich, and even recent investors are making easy money. Saylor largely funds MicroStrategy's bitcoin purchases with money raised from stock and debt sales. The copycats might gain access to capital markets that they wouldn't otherwise have had. Traders are following the old adage, "Never fight the tape" — meaning follow the market's direction no matter the fundamentals, while companies are providing what the market wants. Nobody wants to be "that" person or company telling their bosses, shareholders or anybody else that they underperformed the market because they didn't follow MicroStrategy's footsteps.
"Only a few years ago, it was almost too risky to buy bitcoin. Now, however, the risk increasingly seems to be the opposite — not buying is actually the risk," said Brian D. Evans, the CEO and founder of BDE Ventures, adding that "there’s real pain in not having exposure."
 To the hopefuls, this sudden corporate scramble might be a sign that mainstream bitcoin adoption is finally arriving, especially in an environment where President-elect Trump has said he wants the U.S. government to stockpile bitcoin, too.
"For BTC proponents, the expectation is that a combination of macro factors such as inflation and new-found regulatory friendliness will spur further examples of the asset being placed on corporate balance sheets," Toronto-based crypto platform FRNT Financial said in a report.
Also, a bitcoin buying strategy could open up capital markets for companies, like it did for MicroStrategy and miner MARA Digital MMARA. Both were able to raise money recently through convertible debt that pays no interest to investors, meaning those investors are willing to forego current income in exchange for the ability to eventually convert the debt to equity, thus gaining bitcoin exposure.
Saying they plan to buy bitcoin "is a useful way for companies to raise capital, not unlike the way MicroStrategy has done over the last few years," said BDE's Evans.
However, to cynical ears, it all sounds a bit like the passing fad in the late 2010s that involved companies that previously had nothing to do with crypto adding the word "Blockchain" to their corporate name.
The most famous example of this was little-known beverage maker Long Island Iced Tea renaming itself Long Blockchain, with an explosive result, at least initially: Its share price nearly tripled in a single day after the crypto-rechristening. The gains didn't stick and the stock was later delisted by Nasdaq. (And three people were accused of insider trading by the U.S. Securities and Exchange Commission.)
There have been other magic words. In the 2021 crypto bull market, big-name companies touted their Web3, metaverse and non-fungible token NFTUSD initiatives — trying to hitch their shares to crypto and related hype. Facebook even changed its name to Meta to focus on the metaverse business, which subsequently faced massive losses. Meanwhile, companies with languishing share prices and no connection to crypto dipped their toes into bitcoin mining, a then extremely profitable business.
The brutal bear market that followed turned crypto terminology into dirty words that few wanted to use.
Though MicroStrategy has been able to raise billions from capital markets to fund bitcoin purchases, such a strategy, if pursued by others, could backfire for smaller companies, said Yang. "For microcaps, it risks being seen as a short-term gimmick, deterring serious investors. If bitcoin's price stabilizes or declines, the stocks' speculative appeal may fade, leaving these firms vulnerable to investor skepticism and regulatory scrutiny."
Echoing this sentiment, David Siemer, co-founder and CEO of Wave Digital Assets, said, "While this approach may yield short-term gains in a bullish market, it carries significant risks. Unlike straightforward asset holding, leverage amplifies potential losses during market corrections, underscoring its inherent danger," he said, pointing to firms that are leveraging the hype around bitcoin to add debt to their balance sheet.
Regardless of who is right, with bitcoin repeatedly smashing all-time highs after Trump's U.S. election win, magic remains in the air: Announce a Saylor-like bitcoin plan and see your stock take off.
"It’s almost as though we are at a point where a lot of companies feel compelled to do this," BDE's Evans said.
Welcome to the new crypto bull market.