One of this month’s best-performing stocks is KindlyMD. You’d be forgiven if you’re not familiar with this little-known healthcare company, but it exploded 250% higher on the day it announced it was merging with a bitcoin investment company.
It’s not the only stock enjoying big gains simply by muttering the word “cryptocurrency.” In fact, it seems like a lot of companies are turning to crypto as a new method for producing value out of thin air.
Today, GameStop announced it officially purchased 4,710 bitcoins worth over half a billion dollars, following through on its new bitcoin play it laid out earlier this year. And yesterday, Trump Media said it was raising $2.5 billion to start buying bitcoin.
Meme stocks aren’t the only companies going cuckoo for crypto. Penny stock and logistics firm Freight Technologies reported earlier this month that it plans to buy between $1 million and $20 million worth of Donald Trump’s memecoin as a treasury asset. Or, look at health tech firm Coeptis Therapeutics, which merged with Dogecoin miner Z Squared in April. Just last week, medical equipment company Semler Scientific completed its third-largest bitcoin purchase of 455 bitcoins since it started buying the digital asset about a year ago.
This trend is rapidly accelerating: At the start of April, just 89 publicly traded companies held bitcoin. Now, 114 firms hold over 800,000 bitcoins worth roughly $88 billion, according to BitcoinTreasuries.net.
The OG
Whether they’re merging with crypto miners or buying cryptocurrencies outright, these companies are all pulling from the MicroStrategy playbook.
Strategy (which dropped the “Micro” earlier this year) has transformed from an obscure software firm into the largest corporate bitcoin holder in the world by zealously buying bitcoin since 2020. The company, run by bitcoin bull Michael Saylor, currently owns over 580,250 bitcoins worth over $62 billion.
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The strategy has worked wonders for Strategy. Retail traders use the publicly traded company as a bitcoin play, and have pushed the stock 115% higher over the past 12 months—dramatically outpacing both the S&P 500’s gain of 11% and bitcoin’s 57% return over the same period.
But not every company can necessarily mimic Strategy’s success. After all, as Bloomberg columnist Matt Levine pointed out, Strategy had the advantage of being the first on the trend, and caught the bitcoin wave at a crucial moment.
Is this…a good idea?
It’s awesome to see your stock picks pop just because they bought a couple of crypto coins, but remember: they’re not creating real value. At least, not in the sense that Benjamin Graham and Warren Buffett define value.
After all, a lot of Strategy’s growth has been speculation: Strategy’s market cap has risen to $101 billion, outpacing the value of its actual bitcoin holdings, which is theoretically what investors are paying to gain exposure to.
Plus, now that spot bitcoin ETFs are on the market, there’s an easier way for investors to get direct exposure to bitcoin in their portfolios. Why complicate that?
It seems like investors may be starting to agree: Trump Media closed 10% lower after its announcement yesterday and fell another 6.77% today, while GameStop sank 10.85% this afternoon. Then again, KindlyMD is still up over 540% since it pivoted to bitcoin.—LB