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MicroStrategy, the business intelligence software company, has been known for its ever-growing portfolio since 2020. The company’s positive stance and love for bitcoin (BTC) have been met with both applause and condemnation, which begs the question: is MicroStrategy’s ever-growing bitcoin portfolio for better or worse?
How much bitcoin does MicroStrategy own?
MicroStrategy made its first bitcoin purchase in 2020. It acquired 21,454 BTC for about $250 million as part of its treasury reserve strategy. The move was first received with skepticism since many financial industry analysts needed to figure out the long-term viability of crypto as a store of value.
The company has since added more crypto to its holdings. As of April 5 this year, the total number of bitcoin holdings held was 140,000, about 0.67% of BTC’s total supply. The assets were acquired for 4.17 billion at an average price of $29,803 per bitcoin.
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Why MicroStrategy invests in bitcoin
When MicroStrategy first ventured into crypto, it issued a release stating that bitcoin was a legitimate investment asset. In addition, it noted that BTC could be superior to cash, making it the central holding in its treasury reserve.
The report further mentioned that the United States dollar would weaken over time hence not an ideal store of value. The past month has seen USD weaken and fall due to the banking crisis, and the currency hit its lowest level amid rising interest rates and inflation. Conversely, bitcoin was seen as a go-to asset during the turmoil, recovering and rising above $30,000 for the first time since June 2022.
According to MicroStrategy executive Michael Saylor, all other forms of commodity money are expensive to maintain, fragile, not fast, and have exorbitant fees. Bitcoin, on the other hand, is better since it’s digital and scarce such that not more than 21 million can be produced; hence the value is bound to go up with time with more demand.
MicroStrategy’s portfolio presents opportunities
By making more bitcoin purchases, MicroStrategy legitimizes the asset and allows similar large companies to do the same. Financial investment decisions are made easier if other companies do the same thing.
Bitcoin cannot further be quickly banned since the investments made by mainstream companies are much more deep-rooted. It would have been easier to ban bitcoin in 2013 when it had barely set off and attracted investor’s attention.
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Governments would find it more difficult to ban an asset in the books of a publicly-traded company such as MicroStrategy. That becomes true when multiple companies hold bitcoin, and the price keeps increasing over the long run. Meanwhile, the more governments ignore making rules and policies on crypto, and the more people adopt crypto, the harder it gets to issue bans on crypto.
Lastly, MicroStrategy’s purchase affects the BTC price. The first reason is the purchase, whereby any time an investor purchases 1/900th of an asset’s supply, the price increases in the short term. Meanwhile, the company’s investment is for the long term; hence as the price grows and new buyers enter the market, there will be fewer BTC and more demand, causing higher prices.
MicroStrategy’s decision could be its doom
The founder of North Rock Digital, Hal Press, criticized the company’s decision to invest in bitcoin. According to Press, the business model is unsustainable, and the company must sell its bitcoin. However, he said the sale would not happen soon and could take a few years.
The idea of taking a software company and levering it to the gills to run a “Bitcoin acquisition strategy” is so comically stupid it’s actually quite funny. Will be so obvious in hindsight. https://t.co/63qjKVvYAv
— Hal Press (@NorthRockLP) April 7, 2023
Others argued that the firm should have made ethereum investments following Press’ criticism. A comparison page tracking the company’s purchase shows the company would have 3.68 million ETH worth $6.623 billion compared to BTC’s $3.746 billion value.
MicroStrategy’s bitcoin bet has paid off handsomely after the bitcoin’s record high in late 2020 and early 2021 and most recently when BTC regained the 30,000 mark last month. However, it was constantly criticized after the prices dropped sharply after the prolonged crypto winter. Investors and analysts have also shown concern over the huge investment in a highly volatile and speculative asset.
Michael Saylor remains very bullish on the bitcoin
Saylor has been a vocal advocate for bitcoin, which has been a motivating factor for the company’s BTC investments. He has continually argued that the token has the potential to outperform traditional assets such as stocks and gold.
In September 2020, he tweeted that bitcoin would grow exponentially, faster, stronger and smarter.
#Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy.
— Michael Saylor⚡️ (@saylor) September 18, 2020
Saylor has then taken a strict stance that the company would not sell any bitcoin holdings in the foreseeable future. However, towards the end of last year, the company sold its bitcoin for “tax benefits” security. The company then bought 2,500 BTC.
Recently, on a podcast, Saylor mentioned,
“If people lose faith in banks, they lose faith in the currency. When they lose faith in the currency, they lose faith in the government. When you lose faith in the bank, the currency, and the government, and someone says, what can you trust? The answer is you can trust bitcoin.”
MicroStrategy executive Michael Saylor
Furthermore, he mentioned that 7% of your wealth is lost yearly if it’s in the bank on a good year and 15% if it’s not a good dollar year. In addition, you lose 99% of your wealth over 90 years in USD.