How Effective is Microstrategy's Bitcoin Strategy?
Bitcoin's overall retreat has come despite last week's announcement by Bitcoin proxy MicroStrategy that it had purchased a record-breaking $5.4 billion worth of the cryptocurrency.
This month, the software maker — rebranding itself as a Bitcoin Treasury — purchased almost $12 billion worth of Bitcoin.
The crypto hedge fund proxy MicroStrategy has reported three large monthly purchases on Mondays, the latest being a record-breaking $5.4 billion acquisition of Bitcoin.
MicroStrategy has acquired 55,500 BTC for ~$5.4 billion at ~$97,862 per #bitcoin and has achieved BTC Yield of 35.2% QTD and 59.3% YTD. As of 11/24/2024, we hodl 386,700 $BTC acquired for ~$21.9 billion at ~$56,761 per bitcoin. $MSTR https://t.co/79ExzXk4UM
— Michael Saylor⚡️ (@saylor) November 25, 2024
An SEC filing shows that between November 18 and 24, the Tysons Corner, Virginia-based company bought 55,500 tokens with money from a $3 billion convertible note offering and common share sales.
MicroStrategy is the largest publicly listed corporation holding Bitcoin, with around $38 billion in the digital currency.
Wall Street is taking notice of MicroStrategy, led by Chairman and Co-Founder Michael Saylor, as he transforms the business software provider into a "Bitcoin Treasury" firm.
The stock has outperformed nearly all major indices this year, with a 500% increase in value.
The $38 billion would be considered cash if handled as such, surpassing the cash and marketable securities owned by all but around twelve corporations in the S&P 500 Index.
Saylor devised a plan to offer convertible debt and more shares after first using company funds to pay for his Bitcoin acquisitions in 2020.
On the assumption that the future value of the shares will exceed the conversion price, lenders in the most recent convertible issuance took a 0% interest rate bet.
Its intentions to seek $42 billion in funding were unveiled last month.
From 2020 to now, MicroStrategy has bought 386,700 tokens or almost 60% of their current worth.
On the other hand, last week, when Bitcoin was close to its all-time high, MicroStrategy announced acquisitions. Because of this, the business bought these new tokens at about $97,862 each, less than their current worth.
If Bitcoin's price falls sharply in 2022, MicroStrategy shares might suffer the same fate as the digital asset.
BRN analyst Valentin Fournier believes that MicroStrategy's Bitcoin strategy won't last forever.
"MicroStrategy played a pivotal role in Bitcoin's push toward $100K last week, but this aggressive buying pace is unlikely to be sustainable over the long term," he said.
Fournier highlights how Bitcoin ETFs faced strong outflows yesterday, with $435 million leaving the market in a single day. Meanwhile, Ethereum experienced modest inflows of $3 million.
"These Bitcoin outflows follow a weekend where the price failed to break above $100K despite MicroStrategy’s significant buying pressure," Fournier explained.
.@MicroStrategy played a pivotal role in #Bitcoin's push toward $100K last week. It's most recent purchase was 55,500 BTC worth $5.4 billion at an average price of $97,862, making the firm the primary driver of the rally, surpassing the combined demand from #ETFs ($3.3 billion)
— BRN (@thebrn_co) November 26, 2024
According to data compiled by tracker Coinglass, over $60 million worth of Bitcoin bullish wagers were sold on Monday.
That is the current reading, although the stall seems just that - a pause at best.
The sell-side has been more pronounced in the days leading up to the near $100,000 milestone.
As a result, Bitcoin is likely to hold off below that level for now, followed by a significant breakout above it.
Over the weekend, traders took advantage of the US crypto outlook to drive Bitcoin close to $100,000, a symbolic and psychological landmark that crypto enthusiasts use to reject sceptics who don't believe digital assets have any inherent worth.
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