Microstrategy's Big Bitcoin Bet: Millions Invested

MicroStrategy, an American software technology firm, has been investing in Bitcoin since August 2020. As of June 2024, the company owns 226,500 bitcoins, with an average purchase price of $35,158 per bitcoin and a total cost of $7.538 billion. The company's Bitcoin holdings have been steadily increasing over the last few years, with significant purchases made in November 2023 and December 2023, totalling $600 million and $615.7 million, respectively. MicroStrategy's Bitcoin investment strategy has paid off, with the company making almost $1 billion in 2024 alone as the price of Bitcoin surged. The company's founder, Michael Saylor, has stated that MicroStrategy will continue to buy and hold Bitcoin, considering it a superior store of value compared to traditional assets.

MicroStrategy's Bitcoin holdings

The company has continuously bought BTC since its founder, Michael Saylor, introduced the Bitcoin strategy in 2020. In November 2023, MicroStrategy bought around $600 million worth of Bitcoin, increasing its holdings by 10% in a single month. By the end of December 2023, the firm's stash totalled 189,150 BTC, worth approximately $8.832 billion as of January 9, 2024.

The company's dedication to Bitcoin is reflected in its CEO Phong Le's statement: "We believe that the combination of our operating structure, bitcoin strategy, and focus on technology innovation provides a unique opportunity for value creation for our shareholders."

The company's Bitcoin investment strategy

MicroStrategy's Bitcoin investment strategy has been a long-term one since the company first purchased Bitcoin in August 2020. The company's founder, Michael Saylor, has stated that MicroStrategy doesn't plan to sell its Bitcoin holdings but will instead continue to buy more. This strategy is based on the belief that Bitcoin will ultimately prove to be a superior store of value and that its limited supply offers the opportunity for appreciation if its adoption increases. Bitcoin is also seen as a hedge against inflation in the long term.

The company has continuously bought BTC since Saylor introduced the Bitcoin strategy, with its last purchase of 3,000 BTC for approximately $155 million announced in February 2024. This purchase was financed by selling the company's Class A shares, demonstrating MicroStrategy's dedication and bullishness on the digital asset. The company's total bitcoin holdings as of June 24, 2024, were 226,500 bitcoins, with an average purchase price of $35,158.00 USD per bitcoin and a total cost of $7.538 billion USD.

MicroStrategy's Bitcoin investment strategy has paid off significantly, with the company making almost nine figures on BTC in 2024 alone. On January 8, 2024, when BTC/USD saw a $3,000 daily candle, the firm netted most of its 2024 returns—around $600 million. As of February 2024, MicroStrategy's Bitcoin investment stood at an unrealized profit worth $4.7 billion, with its Bitcoin portfolio worth $10.8 billion.

The company's stock price, however, has not always moved in tandem with the performance of Bitcoin. While Bitcoin has brought significant returns for MicroStrategy, its stock price has fallen by more than 15% year-to-date as of July 2024. Despite this, the company remains committed to its Bitcoin investment strategy and continues to accumulate the cryptocurrency.

How Bitcoin has impacted MicroStrategy's stock price

MicroStrategy's stock price has been significantly impacted by its investment in Bitcoin. The company's founder, Michael Saylor, has been an outspoken advocate of Bitcoin, and the company has made continuous purchases of the cryptocurrency since 2020. As of June 2024, MicroStrategy owns 226,500 bitcoins, making it the largest corporate holder of Bitcoin. The company has averaged $497 million in revenue over the last three years, but its Bitcoin holdings are worth approximately $4 billion, purchased for $4.53 billion. This has naturally impacted its stock price, with each share equating to owning 0.0129 Bitcoin as of April 2024.

The performance of MicroStrategy's stock price has tracked the price of Bitcoin closely. Since its first Bitcoin purchase in August 2020, the company's shares have followed a similar trajectory to the cryptocurrency's price movements. This close correlation means that investors view MicroStrategy as a proxy for Bitcoin investment. Whenever Saylor comments on Bitcoin, the company's shares tend to rise. For example, in March 2024, MicroStrategy's shares rose 11% after Saylor's comments on Bitcoin's potential to "eat gold" and its upcoming halving process.

MicroStrategy's unique position as a publicly traded company with a significant Bitcoin investment has attracted investors seeking exposure to Bitcoin. Institutions and large entities that face regulatory and compliance challenges in directly purchasing Bitcoin have found MicroStrategy to be an attractive alternative investment option. This has contributed to the rise in the company's stock price, with its shares up 180% in 2024 and a staggering 346% increase in 2023.

However, investing in MicroStrategy comes with additional risks compared to direct Bitcoin purchases. It violates the "not your keys, not your coins" mantra, and the company's large Bitcoin holdings raise concerns about wealth centralisation. As of April 2024, MicroStrategy owned 0.79% of the circulating Bitcoin supply, or 1 in every 127 Bitcoins. This concentration of wealth in a single company contradicts the decentralisation principle that Bitcoin was built upon.

Overall, MicroStrategy's stock price has been positively impacted by its Bitcoin investments, providing investors with an alternative means of exposure to the cryptocurrency. However, the close correlation between the company's shares and Bitcoin's price movements also exposes investors to additional risks and underscores the unique characteristics of Bitcoin as a decentralised asset.

The company's plans for future Bitcoin purchases

MicroStrategy's plans for future Bitcoin purchases are part of its long-term strategy to continue accumulating the cryptocurrency. The company has been buying Bitcoin since August 2020 when it was introduced by its founder, Michael Saylor.

In its latest quarterly report, MicroStrategy stated that Bitcoin, due to its limited supply, offers an opportunity for appreciation in value if its adoption increases. The company also believes that Bitcoin can serve as a hedge against inflation in the long term.

The company's dedication to and bullishness on Bitcoin is underscored by its continuous purchases of the digital asset. As of June 2024, MicroStrategy had purchased a total of 226,500 bitcoins, with an average purchase price of $35,158 USD per bitcoin and a total cost of $7.538 billion USD.

In February 2024, the company announced that it had acquired 31,755 bitcoins in the fourth quarter of 2023, marking the largest quarterly Bitcoin holding increase in the last three years. This purchase brought its total holdings to 190,000 bitcoins at an aggregate purchase price of $31,224 per bitcoin.

MicroStrategy's CEO, Michael Saylor, has stated that the company doesn't plan to sell its Bitcoin holdings but will continue to buy forever. He considers Bitcoin to be the strongest asset, superior to established names like Apple and Google, as well as S&P, real estate, and gold.

The company's Bitcoin strategy has proven successful, with Bitcoin earning the company more than $800 million in 2024. On a single day in January 2024, when BTC/USD saw a $3,000 daily candle, MicroStrategy netted around $600 million.

MicroStrategy's stock price, however, has seen a contrast, with a year-to-date decline of over 15% as of July 2024. Despite this, the company remains committed to its Bitcoin strategy and believes it provides a unique opportunity for value creation for its shareholders.

The performance of Bitcoin against other investments

MicroStrategy, the largest corporate holder of Bitcoin, has invested heavily in the cryptocurrency. As of June 24, 2024, the company owned 226,500 bitcoins, with an average purchase price of $35,158 per bitcoin, totalling a cost of $7.538 billion.

Now, let's take a look at the performance of Bitcoin against other investments:

Bitcoin, the original cryptocurrency, has been on a volatile ride since its creation in 2009. It surged to over $60,000 in 2023, an eightfold increase in 12 months, only to halve in value within a few weeks. This extreme volatility is one of the defining characteristics of Bitcoin and other cryptocurrencies.

Benchmark investment metrics are also useful for comparing the returns of Bitcoin with those of alternative investments. Gold, for example, is often used as a benchmark for measuring Bitcoin returns due to the similarities in their investment strategies.

More sophisticated metrics, such as the Sharpe Ratio, incorporate volatility as an input in assessing the performance of an asset. This ratio also employs a benchmarking strategy, comparing the returns of the asset with the "risk-free rate" earned on government-issued debt.

While Bitcoin's extreme price fluctuations capture headlines, it's important to recognise that its underlying blockchain technology has sparked a revolution in money and finance. This technology has made cross-border transactions more secure, cheaper, and faster, impacting global finance and the way we use money.

Despite its popularity, Bitcoin has faced criticism for its energy consumption, with estimates suggesting that the Bitcoin network consumes as much energy as entire countries. Additionally, the massive amounts of electronic waste generated by specialised mining machines have raised environmental concerns.

In summary, the performance of Bitcoin against other investments can be evaluated using various metrics, each providing unique insights. However, it's important to remember that Bitcoin's price volatility is just one aspect of its broader impact on the world of finance and technology.

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