Changes in accounting rules transform Bitcoin from a risky venture to a corporate necessity – Bitwise

Bitwise Chief Investment Officer Matthew Hogan says it’s no longer an anomaly for companies to add Bitcoin (BTC) to their balance sheets, but a fast-growing megatrend that could transform the crypto market this year. I believe that.

in recent notes Hougan emphasized to customers that MicroStrategy is gaining attention for its aggressive BTC accumulation strategy. The company has acquired around 257,000 BTC, more than the total amount of Bitcoin mined last year, and plans to raise an additional $42 billion to continue its purchases.

Hougan noted that this trend goes far beyond MicroStrategy. As of January 14, 70 publicly traded companies have Bitcoin on their balance sheets, including big names like Tesla, Block, and Mercado Libre.

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

regulatory changes

The game-changer, Hogan said, is the introduction of ASU 2023-08 by the Financial Accounting Standards Board (FASB). The rules allow publicly traded companies to mark their Bitcoin holdings at market value, allowing them to book profits when Bitcoin prices rise.

Previously, Bitcoin was treated as an “intangible asset,” meaning companies had to write down its value if the price fell, but could not recognize a gain if the price rose.

With lower reputational risk and a more favorable accounting environment, Hogan predicts the number of companies buying Bitcoin will explode. He estimates that the current 70 cases could grow to hundreds or even thousands within the next 12 to 18 months.

Furthermore, Hogan argues that businesses buy Bitcoin for the same reasons as individuals. Some see this as a hedge against a weak dollar, others as a speculative asset to boost stock prices, and others as a signal of innovation to attract customers and talent.

Although the motivations vary, he believes an influx of corporate demand could significantly increase the price of Bitcoin, especially as major companies such as Meta consider entering the market.

Hogan concludes the paper by saying that retail investors don’t need to understand why every company is buying Bitcoin. Instead, you need to ask yourself where this demand is heading and what it means for the market.

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