Are Companies Investing in Bitcoin for the Right Reasons?

Left, right and center, countless companies are adding Bitcoin to their balance sheets right now.

They’ve been inspired by MicroStrategy, which raised eyebrows when it started aggressively investing in BTC back in August 2020.

There was a fair dose of cynicism at the time, but almost five years on, Michael Saylor has wiped the smile off his critics’ faces.

MSTR stock has surged by 1,791% over the past five years, with the business intelligence firm now owning almost 500,000 BTC.

What’s more, it’s now sitting on a cool $10 billion in paper profits, and has rebranded to “Strategy” as it looks to build on this momentum. 

Seeing this infinite money glitch unfold before their eyes, other businesses—some of them flagging—are now trying to emulate these tactics.

Shares in HK Asia Holdings Limited, an investment firm based in Hong Kong, rallied by more than 90% after it announced the purchase of just 1 BTC.

Such a surge for such a modest purchase is lunacy, and a sign of the market mania surrounding corporate reserves of Bitcoin.

Metaplanet was best known for being involved in the hotel business, but it’s also shifted its focus to becoming a Bitcoin treasury company.

The Japanese company now owns a grand total of 2,235 BTC, with purchases being made in regular increments. Its share price? Up 2,683% over the past 12 months.

Simply mentioning “Bitcoin” seems to be enough to whip up a frenzy right now.

While institutional adoption has been widely welcomed, there’s a bigger question worth asking: are these companies doing this for the right reasons? 

It’s highly likely that some of the businesses adding Bitcoin to their balance sheets aren’t doing so because they believe this is the future of money. Instead, they’re desperately looking for a way to remain relevant and turn their fortunes around.

GameStop, the company beloved of retail traders on Reddit’s WallStreetBets, is a prime example, with the chain struggling to stay profitable as players download video games online rather than buying physical copies in store.

CEO Ryan Cohen has now started to hint that GameStop’s spare cash will be converted into Bitcoin, and set tongues wagging when he recently posted a picture alongside Michael Saylor.

Businesses that make this shift often end up suffering from erratic stock price movements. Why? Because their shares become a proxy for how Bitcoin is performing on any given day, rather than a reflection of the company’s fundamentals.

Case in point, look at how Coinbase, Robinhood and Strategy have all performed on Wall Street over the past five days, coinciding with a sharp fall in Bitcoin. Each has seen their share price drop by 20% to 25%.

Amazon and Microsoft have both faced pressure from shareholders to consider allocating part of their vast reserves to Bitcoin, in the hope that it would prevent this cash’s value from being eroded by inflation. That’s an interesting argument.

But this isn’t what we’re seeing here. Instead, companies are trying to jump on the bandwagon, grab attention from the markets and the media, and buy Bitcoin for the wrong reasons.

This could have consequences in the long run.

Note: The opinions expressed in this column are those of the author and do not necessarily represent the views of FXCOINZ, its owners, or affiliates.