Bitcoin at record high: What continues to drive the cryptocurrency hype and treasury companies

Sometimes there are very simple business ideas: Buy Bitcoin and bet that the cryptocurrency will increase in value. And if it works, buy even more. Microstrategy has been doing this since 2020 – chief buyer and crypto guru Michael Saylor has since renamed the former software company Strategy – and holds 597,325 Bitcoin, worth around $73 billion today.

This success is attracting imitators. Relatively unknown companies like MARA Holdings, Twenty One, and Riot Platforms, as well as more well-known firms like Tesla , Gamestop, and the newly founded Trump Media & Technology Group, are pursuing this model, known as the Bitcoin Treasury Strategy . They act as large buyers, speculating that their crypto bet will attract further imitators and become a self-perpetuating strategy.

But why are so many companies now deciding to pursue this monoline strategy, which is obviously highly risky and has little to do with true entrepreneurship? Essentially, it's likely a clear signal from the Trump administration to promote the crypto sector, coupled with initial steps toward a clear regulatory framework. Trump is opening all doors to Bitcoin – and thus also optimizing the wealth creation of his family clan.

The growing interest of institutional investors and the massive inflow into Bitcoin ETFs—the iShares Bitcoin Trust ETF launched by market leader BlackRock recently surpassed the 700,000 Bitcoin mark—are testament to this development. The risk-on environment, with the S&P 500 breaking one record after another, is also helping in this regard.

Of course, speculative elements and market techniques also play a role in short-term performance. Many investors simply buy in the hope that the stock will continue to rise or fear missing out on the next boom. This is known as FOMO, or Fear of Missing Out.

On the regulatory side, there are two legislative initiatives that could significantly improve the legal framework for crypto assets and Bitcoin. They should provide institutional investors with greater legal certainty and reduce their reluctance to invest in Bitcoin.

The FIT21 Act, which has already been passed by the House of Representatives, establishes regulatory jurisdiction, meaning that Bitcoin and other decentralized cryptocurrencies will be regulated by the Commodity Futures Trading Commission (CFTC). The Securities and Exchange Commission (SEC), which was previously highly critical of Bitcoin, remains outside the scope of this regulation. According to the law, crypto exchanges must register with the CFTC. However, if only tokenized (digital blockchain-enabled) securities are traded there, the SEC is responsible.

The second legislative initiative concerns the framework for stablecoins. The so-called Genius Act regulates the legal framework for the issuance of stablecoins, which are characterized by the fact that they can be exchanged 1:1 for US dollars at any time. These coins, ideally with stable value, are currently a significant lubricant for crypto exchanges, as their traders use stablecoins to park exchange profits in liquid form.

The catch, however, is that stablecoins are currently barely regulated. The issuer of the world's most important cryptocurrency, Tether, is even suspected of systematic money laundering. Among other things, the Genius Act stipulates that buyers of stablecoins must undergo a Know Your Customer (KYC) process, i.e., the registration process commonly required for bank accounts, to minimize the risk of money laundering and terrorist financing. Overall, the law should help institutional investors gain more confidence in crypto exchanges and increase liquidity on crypto exchanges. This also helps the Bitcoin price.

All of this leaves the question of what investors actually hope to achieve with Bitcoin. Bitcoin doesn't pay dividends, and the cryptocurrency hasn't yet established itself as a means of payment. However, Bitcoin has proven one thing since its inception: It is a scarce digital asset, and the blockchain, from which Bitcoin cannot be considered separate, has proven incredibly resilient to crises.

Of course, Bitcoin has been stolen from crypto exchanges in the past. However, investors can protect themselves against this by storing Bitcoin directly on the blockchain and not entrusting it to the crypto exchange. In short, many investors assume that Bitcoin is a store of value.

Furthermore, it can be assumed that many investors also consider Bitcoin an insurance instrument. When does the insured event occur? When the global financial system collapses. More specifically, when the US dollar massively loses value because American institutions such as the US Federal Reserve, stock exchanges, and regulatory authorities, which, together with banks and brokers, form the nucleus of the global financial sector, lose their credibility and stability.

We consider this scenario to be extremely unlikely, but to explain Bitcoin's performance, it is enough if enough people can imagine such a development and hedge against it.

There's no question that there's strong evidence that President Donald Trump is abusing his power to inflate the value of his personal cryptocurrency investments. Lack of transparency in reporting makes it impossible to obtain a precise breakdown, but media outlets estimate that Trump and his organization have likely earned several hundred million dollars in profits this way in recent months.

However, these problematic personal entanglements should not obscure the fact that the US , with its crypto policy, could be in the process of expanding its pole position for innovation in this sector. This could trigger a disruptive structural change in the financial sector, for example, if the tokenization of securities gains momentum and this comes at the expense of traditional stocks and bonds and the associated financial infrastructure such as clearing houses and custodians. In such a crypto-friendly environment, investors' willingness to expand their exposure to Bitcoin, Ethereum, and other cryptocurrencies is likely to increase.

Given all the risks associated with crypto investments, it should come as no surprise if Bitcoin reaches further record highs in the coming months.

Cyrus de la Rubia is a guest commentator for manager-magazin.de. However, this column does not necessarily reflect the opinion of the manager magazin editorial staff.