Businesses Are Bingeing on Crypto, Dialing Up the Market's Risks

Buying bitcoin is becoming a fad for a growing list of companies that have nothing to do with crypto but believe digital assets can boost their stocks.

- Vicky Ge Huang

The approach has been pioneered by executives such as bitcoin evangelist Michael Saylor, who has turned his software company Strategy into a warehouse for the digital currency. Other companies are following suit.

About 60 companies with no previous ties to the market are now pursuing the "bitcoin treasury strategy," according to Standard Chartered Bank, citing data from Bitcoin Treasuries.net. They make software, and offer marketing and healthcare services. Some aren't just buying bitcoin, but are piling into smaller tokens such as ether, solana, and XRP.

Some industry players argue these companies are courting disaster. For one, they say, digital assets have a history of volatility. If the price of bitcoin or another crypto token were to fall sharply, the selloff might also pull down the value of a company's stock. More troubling, though, is that a steep decline might also compel companies to sell their tokens—accelerating the sell-off—especially if they borrowed heavily to acquire their crypto in the first place. For students of financial history, it is a familiar refrain.

"We haven't seen this type of capital activity in any crypto-related strategy within this short amount of time potentially in the history of our industry," said Elliot Chun, a partner at advisory firm Architect Partners. "We just have to be careful because it is great on the way up, but when it is on the way down, it's going to be violent."