Investors who want to start in crypto have a few options. It is easiest to buy something from an exchange like Coin base Or bony. This method is quick, cheap and simple and lets it hold Bitcoin or Ethereum (or various other coins) directly. Another option is more of a bank-shot approach: Buy stocks in a listed company that puts crypto in balance and hope that the shares will increase.
Surprisingly, this second approach is currently one of the hottest shops in crypto and dozens of companies to contact the campaign. According to one page called Bitcoin treasuriesThere are now 160 companies all over the world with Bitcoin in the balance sheet, including 90 in the USA. This includes known names like GamestopPresent block And Tesla as well as the Trump Media and Technology Groupwhich is controlled by the president’s family.
In theory, this trade does not make much sense. Sure, the value of the assets of a company helps to inform the share price, but any change in the price of these assets should correlate directly.
If Nike For some reason, it decided to use his free cash to buy a million bushel corn, and the price for corn rose that the share price could increase to the same extent. However, this would not mean that a Bullish on Mais Nike shares should buy instead of corn -and if at all, the Nike shareholders would probably punish the company for being used for something that has nothing to do with his business.
For some reason, crypto is different. Companies that stacked crypto into their balance sheets have pushed an increase in their share price far beyond the value of the crypto they added.
The most famous example is strategy earlier Known as a Microstrategy, an Obencure cyber security company based in Virginia. A few years ago the charismatic founder of the company Michael Saylor Worked away from the core business of Strategy to concentrate on the acquisition of Bitcoin, today it has a striking stock worth around $ 74 billion. This pivot point From the end of July, the market capitalization of the company was an extremely successful and at the end of July 112 billion US dollars, although it reduced its cyber business as a whole.
No wonder that more CEOs respond to the same tactics. If you can achieve an enormous increase in your company’s share price by simply exchanging one currency for your balance sheet for another, why not? To get a feeling for how popular the tactics have become, you will find a screenshot from the list of cheap Bitcoin treasuries company with the most bitcoin (a Bitcoin is currently a value of around $ 118,000):
A “meme effect”
While some of these companies only invest in Bitcoin, many of them are operational companies whose core business concerns something else. Mitchell Petersen, a financial professor at Northwestern University, compares the phenomenon with the internet tactics of the year 2000, as a company found that they could simply increase their share price by simply adding “Dotcom” to their name.
However, Petersen is skeptical of the current trend of companies that bring their free money into crypto. He points out that large companies like Apple And Microsoft Invest your money as part of the company financing business, but this as part of a broader liquidity strategy. This strategy includes a small additional return by holding short -term assets such as money market funds or corporate bonds and at the same time maintaining a rainy day for emergencies or opportunistic acquisitions.
Petersen added that the reporting regulations do not require that companies disclose the special features of the “cash equivalents” in their annual financial statements, but that they almost always consist of secure, liquid assets. The only exception that he can remember are mining companies that occasionally used their money to put gold in their balance sheet, and to justify the move by claiming a special know -how in the direction of gold prices.
The same argument can be found in some companies above. In particular, the companies that deal with Bitcoin mining and are familiar with the cyclical patterns of the crypto industry. Some investors may consider it worth paying a premium for their share price.
In other listed companies, however, it is difficult to see that a compelling reason for the assumption is that your Bitcoin purchases are based on a certain specialist knowledge. At the same time, the volatile nature of the cryptoma markets means that many of these companies could be in a difficult place during an inevitable downturn.
This raises the question of whether the current trend of public companies that buy crypto is sustainable. According to another company financing, the answer is simple: it is not sustainable.
“It is a meme effect that has nothing to do with investment sources or a good corporate strategy,” says Darrell Duffie, financial professor at Stanford University.
Duffie believes that companies should use their capital to invest in their core competencies instead of trying to compete in speculative pieces with hedge funds. He admits that the company’s share price in the case of Michael Saylor’s strategy has cut very well – but says that if more and more companies, the market will try to come to its senses.
“It is a fashion and will disappear and one day a different fashion appearance will take its place,” said Duffie.
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