MicroStrategy is a tech company operating in the field of mobile and tablet software and cloud services. It has existed since 1989, but became famous for becoming a bitcoin holder after it started accumulating the cryptocurrency in August 2020, reaching approximately 424k bitcoins by the end of last year.
Another – even more famous – case of a serial bitcoin accumulator is Tesla, which began purchasing bitcoins in January 2021 (for a value of $1.5 billion), going even further by aiming to accept vehicle payments directly in bitcoin, thus bypassing the conversion from fiat to crypto.
According to Coinkite, 78 American companies (mainly in the pharmaceutical sector) are considering following the example of MicroStrategy and Tesla by using bitcoin as a strategic reserve for their corporate treasury.
KURL Technologies, a small-cap American company specializing in solutions for sustainable energy storage and thermal management, with major clients such as NASA, planned last December to invest 90% of its cash surplus in bitcoin.
Semler Scientific, specialized in the early diagnosis of chronic diseases, issued convertible bonds to finance bitcoin purchases, while the Japanese company Metaplanet, whose core business is hotel construction and development, announced its intention to shift its business model to become a bitcoin vault.
These choices obviously raise concerns: evaluating these companies and their economic and financial health becomes more complicated because the bitcoin contribution must be isolated. Purchasing bitcoin is neither innovative nor complex – anyone, including private individuals, can easily do it. Furthermore, if debt or capital increases are used to finance bitcoin accumulation, the resulting leverage effect will increase risk, which could have a devastating impact in the event of a sudden and significant bitcoin price collapse.
Another case is the use of bitcoin to defend a company from hostile short selling. This is the strategy of a U.S. microcap, OneMedNet (healthcare): the appreciation of bitcoin would significantly increase the company’s share value, discouraging large and persistent (even fraudulent) short-selling attempts. The recent change in U.S. accounting rules, which now allows digital assets to be valued at mark-to-market, clearly serves this purpose.
In our view, mixing a company’s business – often in a completely different sector – with bitcoin accumulation is not only misleading but also dangerous. No one can rule out the possibility that bitcoin will experience significant drawdowns in the future. Therefore, the idea of creating funds (active or passive) whose portfolios include only companies with bitcoin holdings in their treasury does not inspire our enthusiasm or agreement.
Disclaimer: This article expresses the personal opinion of the collaborators of Custodia Wealth Management who drafted it. It does not constitute investment advice, personalized consultancy, or an invitation to carry out transactions on financial instruments.
