Penny stocks are looking to leverage the crypto boom.

Microcap Firms Join the Crypto Craze, Following MicroStrategy’s Lead

In an emerging trend, a growing number of microcap and nanocap companies are turning to cryptocurrency, not as a core business model, but as a strategic asset for their balance sheets. This wave of companies is looking to ride the coattails of MicroStrategy (MSTR), the enterprise-software firm that began accumulating Bitcoin as its primary treasury asset, fueling a massive surge in its stock price.

Classover Holdings (KIDZ), a small education technology firm, made waves in early May when it announced plans to raise $400 million by selling shares to invest in Solana. This move caused its stock to skyrocket from $1.15 to more than $7 in just two trading sessions before stabilizing at $3.69.

Classover is just one of the many small firms taking a page from the MicroStrategy playbook. These companies are using cryptocurrency as a tool to grab attention and boost their stock prices. The tactic is relatively simple: announce a plan to purchase digital assets like Bitcoin or Solana, and watch as investors flock to the stock in hopes of riding the crypto wave.

On the heels of Classover’s announcement, GD Culture Group (GDC), with a market cap of around $30 million, revealed plans to sell up to $300 million in shares to buy Bitcoin and TrumpCoin, a meme coin inspired by former President Donald Trump. The announcement triggered a 13% rise in the company’s stock price.

In a similar move, Amber International Holdings (AMBR), a company valued at just under $900 million, announced that it would allocate $100 million to a diverse basket of cryptocurrencies, including Bitcoin, Ethereum, Solana, XRP, Binance Coin, and Sui.

These moves reflect the increasing trend of small companies leveraging the crypto hype to attract attention, much like MicroStrategy did when it pivoted to Bitcoin as its main treasury asset in 2020. Since then, MicroStrategy’s stock has surged over 3,000%, primarily driven by Bitcoin’s price appreciation. Many retail investors now view MicroStrategy as a way to gain exposure to Bitcoin without directly buying the cryptocurrency.

However, unlike MicroStrategy, these smaller companies often lack a well-established business model and long-term vision. For example, Worksport, a truck bed cover manufacturer, saw its stock price spike after announcing plans to invest in Bitcoin and XRP. However, the surge was short-lived, and the stock returned to pre-announcement levels.

The playbook for these microcap firms seems to be simple: find a popular crypto asset, announce a purchase or strategic shift, and watch the stock price increase in the short term. In many cases, the amount these companies propose to invest in cryptocurrencies far exceeds their market value. Classover and GD Culture are perfect examples of this, with plans for multi-hundred-million-dollar allocations despite being worth only a fraction of that amount.

It remains to be seen whether these firms will follow through with their proposed crypto purchases or whether the market’s current reaction is merely a short-term boost. However, as long as the market continues to reward crypto headlines with stock price surges, these small companies are likely to keep hopping on the crypto bandwagon.

There are some firms that are more committed to a long-term crypto strategy. Metaplanet, a Japanese investment firm, has been steadily increasing its Bitcoin holdings since launching its Bitcoin Treasury Operations in April 2024. It now holds 6,796 BTC. Similarly, Semler Scientific, a U.S.-based medical device company, has consistently bought Bitcoin and now holds 3,634 BTC. These companies are taking a more serious approach, with long-term crypto adoption rather than using it solely for short-term stock price boosts.

While the trend of small firms adopting crypto for quick gains continues to grow, it remains to be seen whether any of them will be able to match MicroStrategy’s success or if they are simply riding the current wave of crypto hype. For now, it’s clear that cryptocurrency is becoming a key tool for companies seeking to capture investor attention and boost their stock prices.

About The Author

ctleditor

See author's posts