Accounting rule changes have turned Bitcoin from risky venture to corporate must-have – Bitwise

Bitwise chief investment officer  Matthew Hougan believes that companies adding Bitcoin ( BTC ) to their balance sheets are no longer an anomaly but a burgeoning megatrend that could transform the crypto market this year.

In a recent memo to clients, Hougan highlighted that MicroStrategy has been making the headlines with its aggressive BTC accumulation strategy. The company has acquired approximately 257,000 BTC, more than all the Bitcoin mined last year, and plans to raise an additional $42 billion to continue its purchases.  

Hougan noted that the trend goes far beyond MicroStrategy. As of Jan. 14, 70 publicly traded companies, including household names like Tesla , Block, and Mercado Libre, hold Bitcoin on their balance sheets. 

These companies hold 141,302 BTC combined, while private firms such as SpaceX and Block.one have disclosed at least 368 BTC in holdings.

Regulatory shifts

According to Hougan, the game-changer is the Financial Accounting Standards Board’s (FASB) introduction of ASU 2023-08. This rule allows publicly traded companies to mark Bitcoin holdings to market value, enabling them to record profits when Bitcoin’s price rises.  

Previously, Bitcoin was treated as an “intangible asset,” forcing companies to write down its value if the price fell but not allowing them to recognize gains when it increased. 

With reputational risks declining and the accounting landscape more favorable, Hougan predicts an explosion in the number of companies buying Bitcoin. He estimates that the current count of 70 could grow to hundreds, even thousands, in the next 12 to 18 months.  

Additionally, Hougan argues that companies buy Bitcoin for the same reasons individuals do. Some see it as a hedge against dollar depreciation, others as a speculative asset to boost stock prices, and others as a signal of innovation to attract customers and talent.  

While motivations vary, he believes the influx of corporate demand has the potential to drive Bitcoin prices significantly higher, particularly as major players like Meta and others contemplate entry.   

Hougan concludes the document by saying that retail investors don’t need to understand why every company is buying Bitcoin. Instead, they should ask themselves where this demand is heading and what it means for the market.

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