The hottest business strategy this summer is buying crypto

Small companies are raising billions of dollars to buy bitcoin and other, more obscure cryptocurrencies. What could possibly go wrong?

Since June 1, 98 companies have announced plans to raise over $43 billion to buy bitcoin and other cryptocurrencies, according to Architect Partners, a crypto advisory firm. Picture: AFP

It’s the hottest trade of the summer.

Companies are raising tens of billions of dollars, not to invest in their businesses or hire employees, but to purchase bitcoin and more obscure cryptocurrencies. A Japanese hotel operator, a French semiconductor manufacturer, a Florida toy maker, a nail-salon chain, an electric-bike maker -- they’re all plowing cash into tokens, helping to send all kinds of digital currencies to record levels. News that a new company plans to buy crypto is enough to send its shares flying -- spurring others to consider joining the frenzy.

Since June 1, 98 companies have announced plans to raise over $43 billion to buy bitcoin and other cryptocurrencies, according to Architect Partners, a crypto advisory firm. Nearly $86 billion has been raised for this purpose since the start of the year. That’s more than double the amount of money raised in initial public offerings in the US in 2025, according to Dealogic.

Skeptics say the rush of companies buying crypto is a sign the market is overheating, noting that digital tokens, especially the obscure ones, are notoriously volatile and have uncertain futures. They scratch their heads about why an investor would buy shares of a company purchasing cryptocurrencies when they can buy them on their own through low-cost exchange-traded funds and other vehicles.

Others note that many of these companies are worth much more than the cryptocurrencies they hold, as if investors are willing to pay $2 for a $1 bill.

That hasn’t stopped big-name bankers, investors and others from jumping in. Mutual-fund giant Capital Group, hedge fund D1 Capital Partners and investment bank Cantor Fitzgerald are among those backing recent efforts by companies to raise huge sums to purchase cryptocurrencies.

Venture capitalist Peter Thiel’s Founders Fund, Mike Novogratz’s Galaxy Digital and other investors backed a move by a company called Bitmine Immersion Technologies to raise $250 million to buy ether. The company, worth $26 million on June 27, the Friday before its announcement, is now worth over $2 billion after a surge of more than 800 per cent. Thiel, the tech billionaire known for starting PayPal and Palantir, holds a 9.1 per cent stake in the company, according to a recent filing. He declined to comment.

“If you blink, you miss a couple of these deals,” said Bob Diamond, the former Barclays chief executive.

He should know. Last week, an investment firm Diamond co-founded called Atlas Merchant Capital said it was working with Paradigm, D1, Galaxy, 683 Capital and other big investors to form an entity that will spend $305 million to buy a seven-month-old crypto token called Hype. Diamond will be chairman of the new entity, while Eric Rosengren, the former president of the Boston Fed, is expected to be on its board of directors.

“We think Hype is pretty special,” Diamond says.

The new entrants are following in the footsteps of the company once known as MicroStrategy, whose CEO, Michael Saylor, pioneered the so-called crypto-treasury strategy in 2020. Now known simply as Strategy, it has spent years selling shares and debt to buy bitcoin. It is now worth over $115 billion, up 153 per cent in the past year and 3,371 per cent in the past five years.

Venture capitalist Peter Thiel’s Founders Fund backed a move by Bitmine Immersion Technologies to raise $250 million to buy ether. Picture: Getty Images

Saylor has long implored other companies to buy bitcoin with their excess cash. Most everyone ignored or scoffed at the notion. Using spare cash or raising money to buy volatile cryptocurrencies seemed a dicey proposition. Executives who run companies that sell products and services weren’t supposed to speculate on bitcoin. As of last August, just a handful of companies were using their cash to buy any crypto.

That all changed this year. President Trump has embraced crypto, vowing to make America the “crypto capital of the planet.” He has installed crypto-friendly cabinet members and Congress has advanced legislation that could make cryptocurrencies part of the mainstream financial system. Trump Media and Technology Group, the social-media firm controlled by the president’s family, has also bought about $2 billion worth of bitcoin and related securities as part of its treasury strategy.

Lately, companies have been taking things further than even Saylor suggested -- buying overlooked or unknown digital currencies, not to diversify their holdings but to make outright wagers on risky tokens. Even Saylor is unsure that’s a wise move.

“Applying a treasury strategy to other crypto assets introduces a different -- and often speculative -- risk profile,” Saylor said in an email. “I haven’t seen a compelling rationale for doing so.” Some bears are wading into the frenzy, including well-known short seller Jim Chanos, to bet against some of these companies.

MicroStrategy founder and CEO Michael Saylor turned to bitcoin as a way to help his struggling software company. Picture: WSJ

“In my three decades experience I have never witnessed a period where investors are willing to pay such large premiums for assets they can readily purchase on their own,” says Michael O’Rourke, chief market strategist at JonesTrading.

Big companies, including tech giants Meta and Microsoft, have resisted the idea, as have their investors. Shareholder proposals at both companies sought to add bitcoin to their balance sheets at recent annual meetings, but were overwhelmingly voted down. Meta and Microsoft’s boards of directors recommended voting against the proposals to invest in bitcoin.

The companies that are taking the plunge are being transparent about their plans to raise cash and put it all in crypto. They argue that they can do things an ETF cannot, such as “stake” tokens, or lock them up for a specified amount of time t o earn a return. The companies can also borrow money to buy additional cryptocurrencies, something ETFs also can’t do.

Cryptocurrencies are volatile even in the best of times. If the price of a token plunges after a company has bet the farm, it could be left holding a worthless asset. Staking amplifies the risk, since it means an investor can’t touch the locked-up tokens if they start to fall in value. And then there’s the risk that investors sour on the strategy.

Last week, Volcon, an electric-bike maker based in Austin, Texas, raised $500 million in just seven days to initiate its bitcoin treasury strategy, according to co-CEO Ryan Lane. Shares of Volcon jumped from $9.22 to more than $44 on the day of its announcement as speculators rushed to snap up the stock. Shares have fallen every day since, closing Friday at $13.40.

Two weeks ago, French semiconductor manufacturer Sequans Communications raised $384 million from more than 40 institutional investors to buy bitcoin. The company’s stock jumped 215 per cent that week and peaked at $5.83 a share -- but it’s since fallen back down to $1.98.

“What happens in six, 12 or 18 months from now and instead of the current bull market, we have a bear market?” said Evgeny Gaevoy, the co-founder of crypto market-making firm Wintermute. “A lot of low-effort crypto treasury companies will potentially crash and burn. And a lot of the retail investors that predominantly invested in them will be affected.” Executives of some of the companies aren’t waiting to see if their plans work out -- they’re dumping their personal shares after making the announcements, pocketing millions in the process.

On June 16, for example, SRM Entertainment, a toy-and-souvenir manufacturer in Winter Park, Fla., with a market value of $25 million the Friday before, announced plans to spend $100 million on a cryptocurrency called Tron.

The token purchase is part of a reverse merger between SRM and crypto entrepreneur Justin Sun’s company, also called Tron. SRM’s stock, which traded between 28 cents and $1.45 a share all year, shot up past $9.

Over the next several days, the company’s CEO, Richard Miller, and its chief financial officer, Douglas McKinnon, exercised previously issued stock options to buy a combined 600,000 shares at 56 cents a share, according to data from The Washington Service. They sold a combined $2 million or so of the newly acquired shares. A vice president of the company sold $941,000 worth of stock.

Executives of the company, which has changed its name to Tron Inc. and rang the Nasdaq opening bell on Thursday, declined to comment.

Lately, tiny companies are working with recognized names in finance to raise cash to buy crypto. Among them is Cantor Fitzgerald, run by Howard Lutnick before he became commerce secretary this year and passed the reins to his sons Brandon and Kyle Lutnick. Cantor last week said it would form a $5.3 billion bitcoin treasury company with Adam Back, an early cryptographer. It was Cantor’s second multibillion-dollar crypto-treasury SPAC deal in less than three months. The firm also facilitated several other bitcoin treasury deals and acted as an adviser to Trump Media’s plan to buy bitcoin.

For now, many investors are scoring big profits betting on these deals, which remind some of the frenzied SPAC boom of the pandemic era, when established members of the financial world jumped on the wave. Fabio Giorno, an entrepreneur who operates a tutoring business in Toronto, says he has begun to invest in Bitmine and SharpLink Gaming, another ether-focused treasury stock.

He’s done well on the stocks, but says the volatility of the shares shakes him. “Sometimes it’s a little risky when you walk away from your computer, because you never know what’s going to happen with the news,” he said.

Wall Street Journal