Accumulating Bitcoin: A Risky Digital Rush by Companies?

An increasing number of companies are purchasing substantial amounts of bitcoin, including US President Donald Trump’s media group and Tesla, the electric vehicle manufacturer owned by tech billionaire Elon Musk.

According to analysts, the primary motivations are to diversify reserves, hedge against inflation, and attract investors.

Who Else Is Investing?

Many companies hold bitcoin—the largest cryptocurrency by market capitalisation—to engage in related activities such as “mining,” the process of validating blockchain transactions in return for digital tokens.

Tesla has previously accepted bitcoin payments, while Trump Media is preparing to launch cryptocurrency investment products soon.

Some businesses with core operations unrelated to cryptocurrency, such as the Japanese hotel operator MetaPlanet, have also shifted towards buying bitcoin.

Notably, US firm MicroStrategy, originally a software seller, now holds over 600,000 bitcoins—equivalent to more than three percent of all bitcoin tokens in circulation.

Michael Saylor, co-founder of MicroStrategy, “created real value for its original investors” by offering shares linked to cryptocurrencies, explained Andy Constan, CEO of financial analysts Damped Spring Advisors, speaking to AFP.

This occurred five years ago, before many financial products allowing indirect cryptocurrency investments were permitted.

Why Do Companies Invest?

Eric Benoist, a technology and data research expert at Natixis bank, said companies accumulate bitcoin “to diversify their cash flow and counter the effects of inflation.”

Some struggling firms adopt the trend to “restore their image” by backing themselves with an asset perceived as solid and likely to appreciate over time.

MicroStrategy’s current strategy focuses on amassing bitcoin to attract investors who see potential in the currency.

Bitcoin also has practical applications; for instance, the Coinbase exchange uses its bitcoin reserves as collateral to back users’ transactions.

What Are the Risks?

Bitcoin’s value has surged roughly ninefold in five years, recently supported by US regulatory changes during Trump’s administration, a strong advocate of the crypto sector.

However, its volatility is approximately four times that of the main US stock index, the S&P 500, according to Campbell Harvey, a finance professor at Duke University.

Harvey cautions against companies using their cash reserves—typically a “safe haven”—to invest in cryptocurrencies.

Currently valued at around $117,000 per bitcoin, the price has been driven by large holders known as “whales.”

Harvey points out that for a “major buyer” like MicroStrategy, liquidating their 600,000 bitcoins is far from straightforward due to the immense value involved.

“Assuming you could sell all those bitcoins at market price is a heroic assumption,” he told AFP, warning that such a sale would likely cause the price to plummet.

Conversely, Jack Mallers, CEO and co-founder of bitcoin-focused firm Twenty One Capital, said his company embraces market volatility and believes the token’s price would only crash if the market were flooded with bitcoin.

Is It a Bubble?

MicroStrategy’s stock currently trades at approximately 70 percent above the value of its bitcoin holdings, according to its own calculations.

The company— which did not respond to AFP’s requests for comment—has grown thanks to its bitcoin purchases, which in turn attract investors and push up its share price.

However, to sustain its business, MicroStrategy will ultimately need to monetise its cryptocurrency assets, for example, by linking them to financial products.

Eric Benoist warns that if MicroStrategy and other so-called “bitcoin treasury funds” fail to achieve this, the crypto investment bubble could burst.

He emphasises that this accumulation strategy contradicts bitcoin’s original philosophy, conceived in 2008 as a decentralised means of payment.

Today, “bitcoins end up in electronic safes that are left untouched,” Benoist concluded.

Summary Table: Key Bitcoin Investment Players and Their Strategies

Bitcoin’s rise as a corporate reserve asset is a high-stakes gamble—potentially lucrative but fraught with risks tied to volatility, market liquidity, and fundamental philosophical questions about the cryptocurrency’s purpose.