Why Bitcoin, Ethereum, and Dogecoin Jumped Today

Bitcoin (BTC 1.60%) is climbing again on Monday after MicroStrategy continued its massive buying spree. This time, the company announced another 1,070 Bitcoin acquired over the past week and said it will be raising another $2 billion to buy even more.

Bitcoin's big buyer
Investors have been pouring back into higher-risk assets like cryptocurrencies and growth stocks to start trading in 2025 and that continued today. As of 4 p.m. ET, over the past 24 hours, Bitcoin is up 4%, Ethereum (ETH -0.25%) has climbed a more modest 1.1%, and Dogecoin (DOGE 0.21%) is up 1.4%.

The Polygon Bridge is a vital tool that enables the seamless transfer of assets between the Ethereum network and Polygon, a Layer 2 scaling solution. With increasing congestion and high transaction fees on the Ethereum network, Polygon has become a popular choice for developers and users seeking faster, cheaper transactions.

MicroStrategy has been implementing what it refers to as a Bitcoin yield strategy, which involves issuing stock and debt in order to buy Bitcoin. If the value of MicroStrategy's stock is in excess of the value of Bitcoin held on the balance sheet the company can issue stock to buy Bitcoin, increasing the amount of Bitcoin held per share. This is what it calls "yield."

That's why MicroStrategy has been such a big buyer of Bitcoin in recent weeks. The stock's price is over double the value of Bitcoin per share, which means the company can increase the "yield" rapidly. In 2024, the company had a 74.3% Bitcoin yield, according to management.

What's not clear is how long MicroStrategy's stock will maintain a premium to its underlying Bitcoin assets or what the downside risk is if MicroStrategy stops buying. With such a big buyer in the market, investors know there's always a buyer in MicroStrategy, but that momentum may reverse if the stock falls.

Ethereum and Dogecoin ride the wave
There isn't any huge news driving Ethereum or Dogecoin, but that's not surprising given the recent price action for cryptocurrencies. The flow of funds into the industry has been the biggest driver of value appreciation.

Will trading momentum fade in 2025?
Cryptocurrencies have traded more correlated to growth stocks than as a hedge to inflation or economic activity, as they were sold prior to the pandemic. In that sense, the rising value of stocks has also led to a jump in crypto valuations.

But we've seen this story before and the euphoria of 2021 led to a crash in 2022. This could be a similar cycle for cryptocurrencies and there's now more money involved and more leverage in the system from players like MicroStrategy.

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