Key Takeaways
- MicroStrategy (MSTR) acquired 21,550 bitcoins between December 2 and December 8, 2024, for roughly $2.1 billion.
- This raised the total Bitcoin holdings of Mictrostrategy to 423,650 BTC worth $42 billion.
- The share of MicroStrategy surged over 500%, surpassing the conventional stock market platforms.
MicroStrategy (MSTR) is an American Technology company founded in 1989 by Michael. J. Saylor, Sanju Bansal, and Thomas Spahr specialize in providing software platforms for worldwide businesses. MicroStrategy is the largest company holding Bitcoin since September 2020. Recently they have acquired 21,550 bitcoins for nearly $2.1 billion. This has helped them to receive a yield of 43.2% QTD and 68.7% YTD. This could be a part of their long-term strategy for asset creation and use it as a hedge against inflation.
Moreover, MicroStrategy holds more than 2% of the total Bitcoin supply in circulation, which could be a part of their broader plan to raise $21 Billion for Bitcoin investments. Michael Saylor has consistently voiced the potential of bitcoin signifying the reason for acquiring bitcoin as part of their treasury management strategy.
The Impact of Bitcoin Acquisition on MicroStrategy
MicroStrategy has been the largest corporate holder of Bitcoin for a long, this recent acquisition has made it more stronger. With a market capitalization of 96.14 B USD, the shares of MicroStrategy have surged 520% year-to-date. While it elevates the position of MicroStrategy as a company, it is also a part of its long-term investment strategy. As of December 8, 2024, the Bitcoin yield of MicroStrategy has surged to a mark of 68.7%. This acquisition may help them to get spotted in the Nasdaq 100 index by December 2024. With this, the correlation between the stock price of Microstrategy and Bitcoin’s value has become close. When the price of Bitcoin rises, the MSTR cost also increases. Similarly, the market capitalization of bitcoin has surged from $1.1 billion in 2020 to nearly $100 billion in 2024.
Risks and Challenges
While the acquisition of Bitcoin will benefit the company in the long term, there are come along with significant risks. The stock price of the company is closely tied to the Bitcoin price. This could lead to market volatility and financial instability, especially in a bearish market. A strong bearish market and a decline in the value of Bitcoin would lead to impairment charges, margin calls, and challenges in pooling additional capital for acquiring more. Arguments also arise saying that the company has shifted its attention from its software development. However, the management strongly believes in the potential and futuristic growth of Bitcoin, and its ability to be an asset in the future.
Long-term benefits of MicroStrategy’s Bitcoin holdings
In the long term, MicroStrategy expects to yield significant benefits by enhancing its market position and financial stability.
- Hedge against inflation and devaluation of currency compared to traditional fiat currencies.
- Capital-raising opportunities increase with the rising stock price. The capital can be reinvested into further acquisitions.
- MicroStrategy can diversify its asset base beyond traditional cash reserves. This can reduce the risks associated with market volatility and economic instability.
- Such an acquisition could place Bitcoin as a leader in the corporate crypto market.
- With a consistent rise in Bitcoin’s price, MicroStrategy may benefit from long-term capital gains on its holdings.
Inclusion of MicroStrategy in the Nasdaq-100 Index
MicroStrategy has been trying to be a part Nasdaq-100 and its recent inclusion in 2024 would impact its Bitcoin strategy in several ways:
- Increased Market Liquidity: There could be an increase in Microstrategy’s market liquidity allowing investors to buy and sell shares. This increase in liquidity can lead to a more stable stock price and attract institutional investors.
- Passive Investment Opportunities: This inclusion allows investors like Invesco QQQ Trust ETF, to automatically invest in MicroStrategy.
- More Credibility: Joining the Nasdaq-100 increases its reputation and its profile among investors and analysts.
Microstrategy stock gained a 4% gain after its potential entry to the Nasdaq-100 stock index. The company has gained a 573% in 2024, and an S&P 500’s 29% return. The company expects to benefit by increasing its stock demand, pooling more capital, and being a strong market leader. Experts suggest that this growth will continue as Microstrategy acquires more Bitcoin holdings as part of its long-term growth strategies.
Explore More: How MicroStrategy Uses Convertible Senior Notes To Fund Bitcoin Purchases?
Conclusion
The recent acquisition of 21,550 bitcoins by MicroStrategy places the company as a significant player in the corporate world. The acquisition is largely a result of its long-term strategy and its belief in the value of Bitcoin. This has helped the company to yield significant gains in a bull market, where Bitcoin surged beyond $100k. However, this has significant threats like liquidity issues, market volatility, and shareholder dilution. While these risks exist, MicroStrategy believes in the bright future of Bitcoin, and its performance in the global market.