In a significant move that further legitimizes cryptocurrencies in the corporate world, social media giant Reddit announced yesterday that it has added Bitcoin and Ethereum to its balance sheet as part of its treasury reserve strategy.

The announcement came during Reddit’s quarterly earnings call, where CEO Steve Huffman revealed that the company had been quietly accumulating the two largest cryptocurrencies by market capitalization over the past few months.

“We believe strongly in the future of decentralized technologies and their potential to transform how communities interact online,” Huffman stated during the call. “Adding Bitcoin and Ethereum to our treasury reserves reflects our long-term confidence in these assets and aligns with our company’s ethos of embracing innovative technologies.”

While Reddit did not disclose the exact amount invested, sources familiar with the matter suggest the allocation represents approximately 5% of the company’s cash reserves, putting the potential investment in the range of $50-75 million based on the company’s last reported cash position.

Reddit’s Crypto Journey

This treasury decision marks the latest step in Reddit’s evolving relationship with blockchain technology and cryptocurrencies. The platform has long been home to some of the internet’s most active cryptocurrency communities, with subreddits like r/Bitcoin and r/Cryptocurrency collectively hosting millions of members.

In 2020, Reddit introduced “Community Points” – blockchain-based tokens on Ethereum that reward users for their contributions to specific communities. The platform later expanded this initiative by migrating these tokens to Arbitrum Nova, an Ethereum scaling solution, demonstrating its commitment to working through blockchain scalability challenges.

David Moskowitz, blockchain analyst at Digital Asset Research, told our publication: “Reddit’s move from experimenting with blockchain applications to actually holding crypto assets on its balance sheet represents a natural progression for a company that has been deeply intertwined with crypto culture since the early days.”

Following MicroStrategy’s Playbook

Reddit joins a growing list of public companies holding Bitcoin as a treasury asset, following the path blazed by MicroStrategy under CEO Michael Saylor. Since August 2020, MicroStrategy has accumulated billions in Bitcoin, a strategy that has dramatically transformed the business intelligence company.

Other notable companies with Bitcoin on their balance sheets include Tesla, Block (formerly Square), and software company MSTR. However, Reddit becomes one of the first major social media platforms to adopt this approach.

“What makes Reddit’s move particularly interesting is that they’ve diversified across both Bitcoin and Ethereum, rather than focusing exclusively on Bitcoin as we’ve seen with most corporate treasury allocations,” said Jennifer Rosenthal, cryptocurrency strategist at Blockchain Capital. “This suggests they’re taking a more nuanced view of the crypto ecosystem and betting on both store-of-value and utility applications.”

Market Impact and Reaction

Following the announcement, both Bitcoin and Ethereum saw modest price increases of 3% and 4% respectively, as markets had partially anticipated the news following rumors that circulated on Reddit’s own platform earlier in the week.

The crypto community’s reaction has been overwhelmingly positive. Anthony Pompliano, a well-known Bitcoin advocate, tweeted: “Another domino falls. Reddit understands the future of money and is positioning itself accordingly.”

However, some traditional finance analysts expressed caution. James Morton, senior financial analyst at Meridian Investments, commented: “While cryptocurrencies have shown remarkable resilience, they remain highly volatile assets. Reddit’s move introduces additional risk factors that shareholders will need to evaluate carefully.”

Reddit’s stock price rose approximately 7% in after-hours trading following the announcement, suggesting that investors viewed the crypto treasury allocation favorably in the immediate term.

Corporate Treasury Trend Gains Momentum

Reddit’s decision comes amid increased institutional interest in cryptocurrencies as inflation concerns persist despite the Federal Reserve’s aggressive rate hikes throughout 2023.

“Companies with significant cash reserves are increasingly looking for alternatives to traditional cash holdings, especially in an environment where inflation threatens to erode purchasing power,” explained Samantha Yap, founder of YAP Global, a fintech and cryptocurrency communications firm. “Bitcoin, in particular, has been positioned as ‘digital gold’ – a potential hedge against currency debasement.”

The trend of corporate Bitcoin adoption began gaining significant traction in 2020 but faced headwinds during the 2022 crypto market downturn. With Bitcoin prices recovering strongly in 2023 and early 2024, more companies appear to be reconsidering the cryptocurrency as a legitimate treasury asset.

A recent survey by Gartner found that approximately 5% of CFOs at companies with over $1 billion in revenue were considering allocating a portion of their treasury to cryptocurrencies within the next 12-24 months, up from just 1% in 2021.

Regulatory Considerations

Reddit’s move comes at a time when regulatory frameworks around cryptocurrencies remain in flux. The SEC has taken an increasingly active role in cryptocurrency oversight, particularly regarding the classification of certain digital assets as securities.

Legal experts suggest that Reddit likely conducted extensive due diligence before proceeding with the treasury allocation.

“Public companies adding crypto to their balance sheets must consider not just investment potential but also disclosure requirements, accounting treatments, custody solutions, and potential regulatory developments,” said Alexandra Murray, partner at blockchain-focused law firm DLT Law Partners. “The fact that Reddit moved forward suggests they’ve become comfortable with navigating these considerations.”

The company confirmed in its announcement that it has implemented institutional-grade custody solutions for its cryptocurrency holdings, though it did not specify which provider it selected. Leading options in the space include Coinbase Custody, BitGo, and Fireblocks.

What This Means for Reddit’s Future

Industry observers view Reddit’s crypto treasury allocation as potentially signaling broader blockchain integration in the company’s future plans.

“This isn’t just a treasury diversification play – it’s strategic positioning,” said Michael Chen, research director at Digital Asset Insights. “Reddit has a unique opportunity to bridge traditional social media with Web3 applications, and holding these assets directly gives them both financial exposure and deeper operational understanding of the ecosystem.”

The company’s planned IPO, which has been anticipated for several years but repeatedly delayed, could now include a crypto component to its investment thesis. Some speculate that Reddit might even explore accepting Bitcoin for advertising payments or further integrate cryptocurrency options into its premium subscription offerings.

During the earnings call, Reddit CFO Drew Vollero indicated that the company sees multiple strategic benefits beyond potential appreciation: “While we do believe these assets have significant long-term value potential, our decision was equally motivated by our desire to better understand the technology at a fundamental level as we explore potential integration points with our platform.”

Broader Implications for Corporate Crypto Adoption

Reddit’s announcement may encourage other technology companies to consider similar allocations. Social media platforms and technology companies with substantial cash reserves and digital-native user bases could be particularly receptive to such strategies.

“There’s often a first-mover advantage in adopting transformative technologies,” observed Daniel Roberts, editor-in-chief at Decrypt Media. “Reddit’s decision positions them as forward-thinking in the eyes of the crypto community, which includes many influential technology early adopters.”

However, mainstream corporate adoption still faces significant hurdles, including accounting complexity, price volatility concerns, and board-level unfamiliarity with digital assets.

Current U.S. accounting rules require companies to treat digital assets as intangible assets, meaning they must write down the value when prices decline but cannot mark up the value when prices increase unless they sell the assets. This asymmetric treatment has been cited as a deterrent for some corporate treasurers considering Bitcoin allocations.

Looking Ahead

As Reddit prepares for its much-anticipated public offering, its cryptocurrency strategy will likely face increased scrutiny from potential investors, regulators, and the broader market.

“Reddit’s crypto treasury announcement effectively makes their eventual IPO partly a crypto play,” noted financial commentator Laura Shin on her Unchained podcast. “This could attract a different investor profile than a traditional social media offering.”

Whether Reddit’s move represents the beginning of a new wave of corporate crypto adoption or remains limited to a select group of tech-forward companies remains to be seen. What’s clear is that Bitcoin and Ethereum continue to gain legitimacy as corporate treasury assets, gradually moving from the fringe to the mainstream of financial strategy.

For Reddit’s millions of users – many of whom were early cryptocurrency adopters – the announcement validates their long-held belief in the transformative potential of blockchain technology. As one popular post on r/Bitcoin stated hours after the news broke: “Reddit doesn’t just host crypto communities anymore – it’s become part of the community itself.”