Cryptocurrencies in the Balance Sheet: Insights from (Micro)Strategy -- Bitcoin Interactions

TL;DR

This study analyzes the relationship between corporate Bitcoin holdings and equity markets, revealing significant co-movements, dominant information flow from BTC to stocks, and implications for dynamic risk management.

Contribution

It provides the first comprehensive analysis of how corporate Bitcoin holdings influence and interact with equity markets using transfer entropy and correlation methods.

Findings

Bitcoin exhibits a beta of 0.62 on average with stocks.

Transfer entropy shows BTC as the main information driver.

Major financial events cause brief feedback from stocks to BTC.

Abstract

This paper investigates the evolving link between cryptocurrency and equity markets in the context of the recent wave of corporate Bitcoin (BTC) treasury strategies. We assemble a dataset of 39 publicly listed firms holding BTC, from their first acquisition through April 2025. Using daily logarithmic returns, we first document significant positive co-movements via Pearson correlations and single factor model regressions, discovering an average BTC beta of 0.62, and isolating 12 companies, including Strategy (formerly MicroStrategy, MSTR), exhibiting a beta exceeding 1. We then classify firms into three groups reflecting their exposure to BTC, liquidity, and return co-movements. We use transfer entropy (TE) to capture the direction of information flow over time. Transfer entropy analysis consistently identifies BTC as the dominant information driver, with brief, announcement-driven feedback from stocks to BTC during major financial events. Our results highlight the critical need for dynamic hedging ratios that adapt to shifting information flows. These findings provide important insights for investors and managers regarding risk management and portfolio diversification in a period of growing integration of digital assets into corporate treasuries.