Will Corporations Transform Bitcoin Buying Trends in 2024?

Recently, interest in buying Bitcoin (CRYPTO: BTC) has surged, with individuals, Wall Street banks, institutional investors, and even the U.S. government getting involved. Until now, however, few publicly traded companies have added Bitcoin to their balance sheets.

Billionaire venture capitalist Tim Draper believes this trend could change. Corporations need to start investing in Bitcoin, he argues. Should American corporations embark on a Bitcoin purchasing initiative, it could drive Bitcoin to new all-time highs.

Following the MicroStrategy Model

Corporations appear to be adopting the strategy pioneered by MicroStrategy (NASDAQ: MSTR), now known as Strategy. This strategy focuses on one main action: buying Bitcoin. Currently, Strategy holds an impressive 568,840 Bitcoin, valued at nearly $60 billion. Almost weekly, they announce significant purchases that bolster their holdings.

In 2024, several publicly traded companies began exploring Bitcoin investments, even companies outside tech or blockchain sectors. Though these were smaller firms, their interest hinted at a growing trend in corporate Bitcoin ownership.

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A noteworthy development occurred in December 2024 when Microsoft (NASDAQ: MSFT) voted on a pioneering shareholder proposal. This proposal urged Microsoft to incorporate Bitcoin into its balance sheet, primarily for enhancing shareholder value. Michael Saylor, Executive Chairman of Strategy, presented a brief argument highlighting the potential financial benefits of such a move.

The Case for Corporate Bitcoin Investment

Although Microsoft ultimately rejected the proposal, it served as a significant wake-up call for corporate America. The proposal suggested that purchasing Bitcoin was a responsible decision for maximizing business value. Tim Draper has since echoed this sentiment, declaring it “irresponsible” for companies to avoid Bitcoin investments. Speaking at the Financial Times Digital Assets Summit, he made the case that businesses without Bitcoin are neglecting their shareholders’ interests.

This idea of responsibility may catalyze a trend where corporations prioritize Bitcoin investments similar to their approach to ESG (Environmental, Social, and Governance) initiatives.

Potential Price Impact of Corporate Investments

Investment research from Bernstein indicates that publicly traded corporations could potentially add as much as $330 billion in Bitcoin to their balance sheets over the next five years. Given the total market cap of roughly $2 trillion for Bitcoin, such investments could significantly elevate its market price. Draper predicts that Bitcoin could reach $250,000 by the end of 2025, bolstered in part by substantial corporate purchases.

Risks of Corporate Bitcoin Strategy

However, this strategy carries risks. If Bitcoin’s price declines, corporations holding it would suffer financial losses that could diminish shareholder value. Companies would need to write down the value of their Bitcoin assets, negatively impacting their financial statements over time.

Historically, we’ve seen similar scenarios unfold. In early 2021, Tesla (NASDAQ: TSLA) generated significant buzz after acquiring $1.5 billion in Bitcoin. Initially, this seemed like a brilliant decision as Bitcoin prices soared. However, Tesla later retreated from allowing Bitcoin payments, and by July 2022, it had sold 75% of its Bitcoin holdings after prices fell sharply.

This volatility poses a considerable challenge for corporations contemplating Bitcoin as a balance sheet asset. While the prospect of corporate investments in Bitcoin is appealing for current investors, it raises valid concerns about future price fluctuations.

Evaluating Your Bitcoin Investment Decisions

As you consider investing in Bitcoin, it’s essential to weigh the potential risks carefully.

Despite the discussions surrounding Bitcoin, it’s worth noting that some analysts have recommended other investments. For instance, private analysts recently identified what they consider to be the ten best stocks to buy at this time, excluding Bitcoin from their recommendations.

Dominic Basulto is an investor in Bitcoin. The Motley Fool has positions in Microsoft and Tesla. The views expressed in this article reflect the author’s opinions and do not necessarily represent the views of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.