Is the rise of Bitcoin treasury companies an inevitable path to surpass the US dollar?

Written by: Lyn Alden

Compiled by: AididiaoJP, Foresight News

The views of cypherpunks and traditional institutions on Bitcoin stocks may differ, but both have their reasons. Bitcoin must function as a free currency, but it is also entirely reasonable for large amounts of capital to flow into Bitcoin.

Over the past year or so, the rise of Bitcoin has largely been driven by the emergence of Bitcoin treasury strategies among publicly traded companies.

Although MicroStrategy set the precedent as early as 2020, other companies were slow to follow. However, after the Financial Accounting Standards Board (FASB) made significant updates to the accounting treatment of Bitcoin on balance sheets in 2023, 2024 and 2025 ushered in a new wave of Bitcoin treasury asset strategies.

This article discusses this trend and analyzes its impact on the overall Bitcoin ecosystem. The article also explores related topics of Bitcoin as a medium of exchange and a store of value.

Why Bitcoin, stocks, and bonds?

As early as August 2024, when this trend was still in its infancy, I wrote an article titled "A New Look at Corporate Treasury Strategy," explaining the practicality of Bitcoin as a corporate treasury asset. At that time, only a few companies had adopted this strategy on a large scale, but since then, more and more new and existing companies have begun to adopt this strategy. Companies that adopted this strategy on a large scale early on, such as MicroStrategy and Metaplanet, saw significant increases in their stock prices and market values.

The article explains why companies should consider implementing this strategy. But what about investors? Why is this strategy so attractive to them? From an investor's perspective, why buy Bitcoin stocks instead of buying Bitcoin directly? There are several main reasons.

Bitcoin stocks, reason one: restricted capital

There are tens of trillions of dollars in managed capital globally, a portion of which has strict investment restrictions.

For example, some stock funds can only be used to purchase stocks and cannot buy bonds, ETFs, commodities, or other assets. Similarly, some bond funds can only purchase bonds. Of course, there are more specific restrictions, such as a fund manager being allowed to purchase only healthcare stocks or non-investment grade bonds.

Some fund managers are optimistic about Bitcoin, and many even hold Bitcoin themselves. However, they cannot gain exposure to Bitcoin directly through the funds. However, if someone issues a stock with Bitcoin on the balance sheet (Bitcoin stock), or issues convertible bonds for a company that has Bitcoin on its balance sheet, they can bypass the restrictions to make purchases. This is a previously undeveloped market that is now gradually being explored in places like the United States, Japan, the United Kingdom, and South Korea.

Since 2018, I have been creating real fund model portfolios so that readers can track my positions.

At the beginning of 2020, I strongly recommended Bitcoin as an investment target and invested myself. I wanted to add some Bitcoin exposure to my model portfolio, but at that time, the brokerage account I used for that portfolio could not purchase Bitcoin or Bitcoin-related securities. I couldn't even buy the Grayscale Bitcoin Trust (GBTC) because it was traded over-the-counter and not listed on a major exchange.

Fortunately, MicroStrategy incorporated Bitcoin into its balance sheet in August 2020. The stock is listed on NASDAQ, and my model portfolio brokerage account can purchase it directly. Therefore, considering the various constraints of the portfolio, I am pleased to have bought MSTR early, and this decision has yielded substantial returns over the past five years.

Later, the brokerage account added the purchasable security GBTC, and of course, also increased the main spot Bitcoin ETF. Nevertheless, I still hold MSTR in that portfolio.

In short, due to investment restrictions, many funds can only hold stocks or bonds with Bitcoin exposure, and cannot hold ETFs or similar securities. The Bitcoin Treasury Company ("Bitcoin Stocks") provides them with an opportunity.

This does not conflict with Bitcoin being a self-custodial anonymous asset for individuals; rather, they complement each other.

Bitcoin stocks, reason two: companies have ideal leverage

The basic strategy for companies adopting Bitcoin as a treasury asset is to hold Bitcoin rather than cash equivalents. However, the first batch of Bitcoin stocks often has a high level of confidence in this idea. Therefore, they not only directly purchase Bitcoin but also buy Bitcoin through leverage.

Publicly listed companies happen to have better leverage tools than hedge funds and most other capital, specifically, they have the ability to issue corporate bonds.

Hedge funds and some other capital typically use margin loans. They borrow money to purchase more assets, but if the value of the assets declines too much relative to the amount borrowed, they will face a margin call. A margin call may force hedge funds to sell assets when prices drop significantly, even if they firmly believe that these assets will recover and reach new highs; being forced to sell quality assets at a low point is a disaster.

In contrast, companies can issue bonds, typically with a term of several years. If they hold Bitcoin and the price drops, they are not forced to sell due to the decline in Bitcoin. This makes them more resilient to volatility than entities relying on margin loans. Of course, there are still bearish scenarios that could force companies to liquidate, but these scenarios would require a longer bear market to occur, making them less likely.

This kind of long-term company leverage is usually better than leveraged ETFs. Since leveraged ETFs cannot use long-term debt and leverage resets daily, volatility often has a negative impact.

If the underlying asset experiences alternating fluctuations of +10% and -10% on trading days, what will happen to a 2x leveraged ETF? Over time, leveraged products will gradually deteriorate relative to the index they track:

Since its establishment, the performance of the 2x leveraged Bitcoin ETF BITU has not truly outperformed Bitcoin, even though the price of Bitcoin has increased during this period. You might expect the 2x leveraged version to significantly outperform, but in reality, it mainly increased volatility without delivering higher returns. Below is the performance chart of BITU since its inception:

The same situation also appears in the long-term history of highly volatile stocks, such as 2x leveraged ETFs in the financial or energy sectors. During periods of volatility, their performance lags significantly behind:

Therefore, unless you are a short-term trader, the effect of choosing intraday leverage is usually poor. Volatility is very unfavorable for leverage.

However, adding long-term debt to assets usually does not present the same issues. Appreciating assets with long-term debt represent a highly attractive combination. Therefore, Bitcoin treasury companies are appealing securities for strong believers in Bitcoin who wish to enhance returns through reasonably safe leverage.

Not everyone should use leverage, but those who choose to do so will naturally want to do it in the most optimized way. There are now various Bitcoin treasury companies with different risk profiles, scales, industries, and jurisdictions, and the real market demand is gradually being met.

Similarly, some securities issued by these companies, such as convertible bonds or preferred stocks, can provide exposure to Bitcoin prices while reducing volatility. Diversified securities offer investors the specific type of exposure they need.

What is the impact of the Bitcoin Treasury Company on Bitcoin?

Now that we know the reasons for the existence of Bitcoin treasury companies and the market gaps they fill for investors, the next question is: Are they beneficial to the Bitcoin network as a whole? Does their existence undermine the value of Bitcoin as a free currency?

First, it is essential to clarify what the theoretical development path of a successful decentralized currency is. What steps need to be taken, and what is the general order?

Therefore, this section will be divided into two parts. The first part is an economic analysis of how a new form of currency becomes popular, specifically analyzing what the path to success might look like. The second part analyzes whether enterprises have facilitated or hindered this path.

Part One: What Will Success Look Like?

"What would a global, digital, sound, open-source, programmable currency look like if it were to circulate from scratch?"

Ludwig Wittgenstein once asked a friend, "Tell me, why do people think it is more natural for the sun to revolve around the Earth than for the Earth to rotate?" The friend replied, "Well, obviously because it seems like the sun revolves around the Earth." Ludwig countered, "Then, what would it look like if the Earth appeared to be rotating?"

——"Wittgenstein's Currency", Allen Farrington, 2020

Bitcoin was born in early 2009. During 2009 and 2010, some enthusiasts mined, collected, tested, bought, and sold Bitcoin, or researched whether they could contribute to or improve it in some way. They were fascinated by the concept of Bitcoin.

In 2010, Satoshi Nakamoto himself described on the Bitcoin forum how to give Bitcoin initial value from scratch:

"As a thought experiment, suppose there is a precious metal that is as scarce as gold, but has the following characteristics:"

The color is dull and dark.

Poor conductivity

The strength is not high, and the ductility or malleability is also poor.

There is no practical or decorative use.

and a special, magical attribute:

Can be transmitted through communication channels.

If it gains any value for some reason, then anyone who wants to transfer wealth over a long distance can buy some for transmission, and the recipient can sell it.

After achieving initial success, Bitcoin faced the challenge of countless competitors emerging from the payment network. Numerous altcoins surfaced, which had similar functionalities, mainly allowing for purchases, transfers, and sales by recipients. The stablecoins launched in 2014 eliminated token volatility through dollar collateral.

In fact, the rise of competitors was the biggest reason I did not buy Bitcoin in early 2010. It was not that I opposed the concept, but rather that I believed this industry was filled with speculative bubbles and could be infinitely replicated. In other words, while the supply of Bitcoin may be limited, its ideology is limitless.

But in the second half of 2010, I noticed one thing: the network effect of Bitcoin was continuously developing. Like communication protocols, Bitcoin greatly benefits from the network effect. The more people using it, the more useful it becomes for others; this is a self-reinforcing cycle. And this is the true meaning of holding Bitcoin. The network effect must continue to grow to surpass this niche and crowded stage.

We can classify currencies into two categories:

The first category is "situational currency," which refers to currency that can solve specific problems but is not widely used in other respects. It is an asset that can be purchased with local currency, transmitted through high slippage (capital controls, payment platform bans, etc.), and sold or exchanged for local currency by the receiver. It has value, but success in this regard does not necessarily lead to broader success.

The second category is "Universal Currency," which refers to currency that is widely accepted in specific regions or industries. It is important that the recipients do not sell or exchange it immediately after receiving it; they will hold it as cash balance and may reuse it elsewhere.

In order for a currency to become a universal currency, the spender must hold it for a long time, and the receiver must be willing to hold it. If a new universal currency is to rise, most people may first view it as an investment because they believe its purchasing power may appreciate, and then be willing to use it as a means of payment. At this point, they do not need to be persuaded to accept it as a means of payment because they have already recognized this asset.

The simple and secure design of Bitcoin (proof of work, fixed supply, limited script complexity, moderate node requirements, and decentralization left by the disappearance of its founder) and the first-mover network effects give it the best liquidity and security, which is why many people want to buy and hold Bitcoin. So far, Bitcoin has achieved tremendous success in this regard: as a secure and portable store of value, users can freely choose to spend or exchange.

A secure, highly liquid, convertible, and portable means of value storage that lies between contextual currency and universal currency. Unlike contextual currency, universal currency is considered a long-term held asset rather than something to be sold or exchanged immediately after receipt. However, unlike universal currency, it has not been widely accepted in most regions, as those who take the time to study it are still in the minority.

This stage takes a long time to complete due to volatility and the existing network effect scale faced by Bitcoin, as people's spending and liabilities are denominated in existing currencies.

If a new currency network with independent units (i.e., not pegged to the credit track of existing currencies, but a system that is completely parallel to central banks) is to develop from zero to large scale, it requires upward volatility. Any appreciating asset with upward volatility will attract speculators, which will inevitably lead to periods of downward volatility. In other words, it would look like this:

At its adoption stage, it is a form of currency that has flaws in the short term. If you receive some Bitcoin and want to use it to pay rent at the end of the month, neither you nor your landlord can afford the possibility of it dropping 20% in a month. The landlord's expenses depend on the network effect of existing fiat currency; she needs to know the value of the rent received from the tenant. And you, as the tenant, need to ensure that you can pay the rent at the end of the month with a currency that does not depreciate rapidly.

Therefore, Bitcoin is mainly seen as an investment in this era. Believers are more likely to be willing to use it for payments. People with specific payment issues (such as capital controls, bans on payment platforms, etc.) are also more likely to use it, although they are increasingly choosing stablecoins with similar liquidity for payments. If you are only using stablecoins for the short term, their centralized nature is not important.

Early Bitcoin supporters tried to persuade Bitcoin holders to use Bitcoin more. I do not believe this is a sustainable practice. Bitcoin will not become popular as a charitable means. In order for it to be able to sustain widespread popularity, it must address the payment gaps that exist in the market for both spenders and receivers. This is not easy in the current adoption phase, especially since every transaction involves capital gains tax, while options like stablecoins can meet short-term spending needs.

Having a sound, liquid, fungible, and portable means of value storage provides holders with advantages that some other assets cannot offer during its adoption phase. They can take Bitcoin anywhere in the world without relying on central counterparties and credit structures. It also allows holders to avoid significant funds erosion through cross-border payments (including recipients banned by platforms). They may not be able to use Bitcoin for payments anytime and anywhere, but in most cases, they can find ways to exchange it for local currency, and in some cases, they can also pay directly with it.

Imagine you randomly have to go to a country. What currency can you bring to ensure you have enough purchasing power without relying on the global credit network? In other words, how can you ensure that you can still transact even if all your credit cards are disabled, even if it means incurring some loss of funds?

The best answer at the moment is usually physical US dollars. If you bring US dollars, even though you may not be able to use them directly, it is easy to find someone willing to exchange them for local currency at a reasonable rate and with sufficient liquidity.

Other answers may include gold and silver as well as euros. Similarly, it is not difficult to find brokers in most countries willing to accept gold, silver, or euros and exchange them at fair local values.

Renminbi, yen, pounds, and some other currencies may also serve as alternatives, but they often face more capital wear. I would place Bitcoin somewhere in the top ten, roughly between 5th and 10th place, especially if you are going to a city center. Most cities have many exchange options available for assistance when needed. Considering that Bitcoin has only been around for 16 years, that is already quite remarkable.

More than 160 other fiat currencies below are very poor currencies outside their own countries, the vast majority are like this.

The US dollar is the most liquid currency in the world today. Smaller and less liquid assets are almost always priced in larger and more liquid assets. People use larger and more liquid currencies as units of account and price their main liabilities in them.

In the past, the dollar was defined by a certain amount of gold. Eventually, the dollar network became larger and more ubiquitous than gold, and the situation reversed: now gold is primarily priced in dollars. Throughout history, Bitcoin may surpass the dollar in this way, but it is currently far from reaching that level. What Bitcoin is priced in during the process is not important; it is an unregistered asset that can be priced in the largest and most liquid currency, and if one day it becomes the largest and most liquid currency, then other things will naturally be priced in it.

Although people can freely price psychologically in any currency, most will quickly price in Bitcoin. Critics describe this as a flaw of Bitcoin; a new decentralized currency asset, in its growth process, has no other path to take other than being priced in existing currencies.

Part Two: How Enterprises and Bitcoin Stocks Integrate with Each Other

As early as 2014, Pierre Rochard wrote a prescient article titled "Speculative Attack."

Speculative attacks in the foreign exchange market refer to borrowing weak currencies to purchase more strong currencies or other high-quality assets. This is one of the reasons why central banks raise interest rates, and some countries may turn to comprehensive capital controls to prevent arbitrage on their poorly managed currencies.

Wikipedia provides an effective definition:

In economics, speculative attacks refer to the sudden selling of unreliable assets by previously inactive speculators, while correspondingly acquiring certain valuable assets (such as currency or gold).

Due to the appreciation characteristics of Bitcoin, various entities will ultimately borrow currency to purchase more Bitcoin. At that time, the price of Bitcoin was slightly above 600 dollars, and the market capitalization was slightly above 8 billion dollars.

Initially, borrowing funds to purchase Bitcoin was a rare occurrence. But now, the Bitcoin network has high liquidity, with a market capitalization exceeding $2 trillion, and billions of dollars in corporate bonds from mainstream capital markets are specifically designated for purchasing Bitcoin.

Today, 11 years later, this phenomenon has become commonplace. Is this good or bad for the Bitcoin network?

According to my observations, there are mainly two types of critics who believe this is detrimental to the Bitcoin network.

The first category of critics are Bitcoin users themselves. Many of them belong to the cypherpunk or libertarian camps. From their perspective, handing Bitcoin over to custodians seems dangerous or at least contrary to the idea of a decentralized network. Some of them refer to corporate Bitcoin treasury supporters as "suit Bitcoin enthusiasts," which I think is a great term. This Bitcoin camp prefers that people manage their own private keys. Some of them further argue that the rehypothecation of major custodians could suppress prices or otherwise diminish the value of Bitcoin as a free currency. While I appreciate the values of this camp, some of them appear to hold a utopian dream, hoping that everyone shares their interest in having complete control over their own money.

The second type of critic is usually someone who has held a negative view of Bitcoin in the past. For years, they have questioned Bitcoin. As Bitcoin has become the best-performing asset and continues to set new highs over the years and multiple cycles, some of them have changed their views, now believing that "the price of Bitcoin may be rising, but its value has already been captured." I place less importance on this camp compared to the first camp. This is similar to the permanent bears in the stock market, who, when their bearish arguments fail to materialize after ten years, say, "The market is up just because the Fed has printed too much money." My response is, "Well, yes, that's why you shouldn't be bearish."

What I want to say to these two camps is: the choice of some large capital to hold Bitcoin does not mean that "libertarian" Bitcoin has suffered any damage. It can still be self-custodied and transferred peer-to-peer as usual. Moreover, as more types of entities hold it, the network becomes larger and less volatile, which also helps to enhance its utility as a peer-to-peer payment currency. It may also provide political cover, helping policymakers to mainstream it. If Bitcoin reaches this scale, the emergence of Bitcoin stocks and the phenomenon of large capital buying Bitcoin will be inevitable.

One skill of the permanent bear market proponents is to adjust the narrative as needed so that they are right no matter what happens. Bitcoin is defined by them as having no reasonable path to success. If Bitcoin remains at a niche level? Then its price appreciation and liquidity will be harmed, see, it has failed! If it is adopted by large entities and governments and continues to grow on a large scale? Then its value has been captured and lost its direction.

But if it is to become massive, widely accepted, and somehow change the world, how could this path not go through businesses and governments?

The price movement of Bitcoin has gone through several major phases.

In the first stage, people mined Bitcoin using their own computers or sent money to Mt Gox to buy Bitcoin, along with other cost-related behaviors of early adopters. This is the early user stage.

In the second phase, especially after the collapse of Mt Gox, buying and using Bitcoin became easier. Domestic exchanges in many countries made it easier for people to purchase Bitcoin than ever before. The first hardware wallets emerged in 2014, making self-custody more secure. This is the stage of retail buyers, where slippage still exists when purchasing, but is decreasing.

In the third phase, Bitcoin becomes sufficiently widespread, has strong liquidity, and possesses a long enough history to attract more institutions. Some entities have established institutional-grade custody services for it, publicly traded companies have begun to purchase Bitcoin, and various ETFs and other financial products have emerged, allowing various funds and custody capital to gain exposure. Some countries, such as the Kingdom of Bhutan, El Salvador, and the UAE, mine or purchase and hold Bitcoin at the sovereign state level. Other countries, like the United States, choose to hold their confiscated Bitcoins instead of selling them directly.

Fortunately, even though enterprises are the main buyers at present, individual investors can still freely purchase Bitcoin in a zero-loss manner.

I heard someone say: "I thought Bitcoin was for the people, a peer-to-peer cash payment, but now it's all held by large corporations." Bitcoin is indeed for the people; anyone with internet access can buy, hold, or transfer it.

This is why I agree with both the views of the cypherpunks and the views of the suit-and-tie Bitcoin enthusiasts. I hope Bitcoin functions as a free currency, which is also a significant reason why I became a General Partner at Ego Death Capital. We provide funding for startups and build solutions for the Bitcoin network and its users. This is also why I support the Human Rights Foundation and other non-profit organizations that fund developers and educators focused on providing financial tools for people in inflationary environments. However, once businesses, investment funds, and even sovereign entities understand Bitcoin, it makes sense for them to purchase Bitcoin, and it is now on their radar.

It is important to remember that most people are not active investors. They do not buy stocks and do not delve into analyzing the differences between Bitcoin and other cryptocurrencies. If they speculate on a certain asset as traders, they are likely to buy at the top and get washed out at the bottom. Their investments are usually passively allocated, rather than chosen by themselves. In the past, this was typically done by pension funds. Nowadays, it is usually done by financial advisors.

In my opinion, it is unreasonable to expect billions of people to actively buy Bitcoin. However, it is reasonable to strive to lower the barriers to entry through technological solutions and educational resources, allowing anyone to choose to engage with Bitcoin.

The best description I've seen is: "Bitcoin serves anyone, but not everyone." In practice, this means that everyone should be guided to understand Bitcoin, but only a portion of people will choose to adopt it.

Summarize key points

The development of Bitcoin monetization is roughly as follows:

Bitcoin was initially a collectible for enthusiasts and those with dreams of change, a new technology that could provide some value to people.

Bitcoin is beginning to serve as a situational medium of exchange and is even being used by pragmatists who originally did not pay attention to it. For example, when funds need to be sent to countries with capital controls, Bitcoin can facilitate transfers when other payment channels fail. When there is a need to receive payments or donations but being banned by major online payment platforms (such as WikiLeaks), Bitcoin can be a great solution.

High volatility, numerous competitors, and various purchasing costs such as capital gains tax hinder the continued growth of Bitcoin as a common medium of exchange. If you pay a merchant who does not hold Bitcoin with Bitcoin, and they automatically convert it to fiat currency, then the benefits of Bitcoin cannot be fully realized.

Bitcoin is more widely regarded as an ideal portable appreciating asset. Unlike other cryptocurrencies, it has achieved decentralization, security, simplicity, scarcity, and scalability, making it a worthwhile asset to hold long-term. Although it is not always easy to buy coffee with it, it has started to rank among the top ten anonymous assets that can be carried and exchanged for local value without barriers during international travel, surpassing the vast majority of fiat currencies.

The Bitcoin network has sufficient liquidity, scale, and durability, attracting active attention from businesses and governments. A large amount of custodial capital is interested in this asset, providing companies and funds with opportunities for indirect exposure to Bitcoin. Meanwhile, Bitcoin continues to exist as an open and permissionless network, which means individuals also continue to use and build it.

If the Bitcoin network continues to expand, they may achieve:

As the Bitcoin network becomes larger, more liquid, and less volatile, its appeal to large sovereign entities will also increase. Initially, Bitcoin was merely an asset for small sovereign fund investments, but it may eventually become a large-scale foreign exchange reserve or means of international settlement. Countries have been trying to build alternative payment methods with closed-source code, but the adoption rate is low and there is a lack of consensus, while this open-source settlement network with a limited supply of independent units is gradually penetrating globally.

Overall, I still believe that Bitcoin is in good shape both technologically and economically, and its adoption path is expanding as expected.