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MicroStrategy, the business intelligence software company, caused a stir in the cryptocurrency world when it announced its first Bitcoin purchase in August 2020.
Since then, the company has continued to buy more Bitcoin, with the latest acquisition of another 6,455 Bitcoin for about $150 million at an average price of $24,000 per Bitcoin, according to a recent SEC filing.
MicroStrategy increasingly involved in the Bitcoin world
Former CEO of MicroStrategy, Michael Saylor, has been a staunch supporter of Bitcoin and has often touted its benefits on social media and in interviews.
In an interview with CNBC in February 2022, Saylor said:
“I think Bitcoin is the best store of value in existence, and the only thing that will compete with it will be gold and silver.”
Saylor’s confidence in Bitcoin is reflected in the shares of MicroStrategy, which has purchased a total of more than 90,000 BTC, worth more than $4 billion at current prices.
Why is MicroStrategy so bullish on Bitcoin? There are a few reasons. First, the company sees Bitcoin as a store of value, similar to gold. In fact, MicroStrategy’s latest SEC document states that its holdings in Bitcoin are “held as a long-term store of value and not for trading purposes.”
With central banks around the world engaged in unprecedented levels of monetary stimulus in response to the COVID-19 pandemic, many investors are concerned about potential inflation and are turning to alternative assets such as Bitcoin as a hedge against currency devaluation.
Secondly, MicroStrategy sees Bitcoin as a hedge against geopolitical risks.
In a recent tweet, Saylor wrote:
“In the past 12 months we have seen a global pandemic, unprecedented government financial stimulus, a sharp increase in the U.S. money supply, social unrest and political turmoil. The #Bitcoin has emerged as a rational, logical and predictable hedge against these risks.”
With heightened tensions between the United States and China and other geopolitical risks on the horizon, it is easy to see why MicroStrategy sees value in holding Bitcoin as a hedge.
Finally, MicroStrategy sees Bitcoin as a way to generate higher returns than traditional investments. In the company’s latest earnings report, Saylor said:
“We remain focused on our two business strategies: growing our business analytics software business and acquiring and holding Bitcoin.”
Although the company’s software business is profitable, Bitcoin has clearly contributed to MicroStrategy’s recent success. Indeed, the company’s stock price has skyrocketed since it began acquiring Bitcoin, and some analysts speculate that investors are buying MicroStrategy shares as a way to indirectly invest in Bitcoin.
MicroStrategy’s risks in its high exposure to BTC
Owning Bitcoin naturally carries risks, as the cryptocurrency is notoriously volatile.
In fact, MicroStrategy’s latest SEC document warns that “Bitcoin prices could experience significant volatility, including in response to global monetary policies, regulatory actions, and security breaches or market perceptions of such breaches.”
However, Saylor does not seem concerned about these risks, stating in a recent tweet:
“I don’t consider #Bitcoin volatile. I consider fiat currency to be collapsing.”
It is also worth noting that MicroStrategy’s Bitcoin holdings are not without controversy.
Some analysts have criticized the company’s decision to allocate such a large portion of its assets to a single asset; one analyst told a news outlet:
“If companies suddenly start panicking and selling Bitcoin, it will destabilize the market.”
In addition, MicroStrategy’s earnings reports now include a “Bitcoin impact” section, which has led some to speculate that the company’s stock price is now more closely tied to Bitcoin than to its software business.
Despite these criticisms, it is clear that MicroStrategy is betting everything on Bitcoin. With its latest acquisition, the company now holds more than 90,000 BTC, making it one of the largest cryptocurrency holders in the world.
Although the future of Bitcoin is far from certain, for now MicroStrategy’s bet on cryptocurrency is paying off. The company’s stock price has soared over the past year, and its holdings in Bitcoin are now worth billions of dollars.
MicroStrategy’s embrace of Bitcoin is also notable for its potential impact on other companies. Since MicroStrategy announced its first Bitcoin purchase, many other companies have followed suit, including Tesla, Square, and PayPal.
Although it is still relatively rare for companies to hold Bitcoin as a treasury asset, the trend is clearly gaining momentum.
In conclusion, MicroStrategy’s latest acquisition of 6,455 Bitcoin is a clear sign of the company’s continued interest in crypto.
While there are risks associated with holding Bitcoin, MicroStrategy views cryptocurrency as a store of value, a hedge against geopolitical risks, and a way to generate higher returns than traditional investments.
With its large holdings in Bitcoin, MicroStrategy has become one of the most significant players in the cryptocurrency market and its shares are closely watched by investors around the world.