MicroStrategy Adds 55,500 More BTC To Its Portfolio For $5.4 Billion
Business intelligence firm MicroStrategy has significantly increased its Bitcoin (BTC) purchases this month in response to bullish sentiment following President-elect Donald Trump’s Nov. 5 victory. The company’s recent acquisitions have pushed its total Bitcoin holdings to approximately $38 billion.
Convertible Notes Drive Massive Bitcoin Buying
November 25, co-founder Michael Thaler Announced via social media, MicroStrategy acquired 55,500 BTC for $5.4 billion between November 18 and 24.
The purchase was funded by proceeds from the issuance of $3 billion of convertible notes and the sale of common stock, as detailed at Archive Cooperate with the U.S. Securities and Exchange Commission (SEC).
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Since launching its Bitcoin acquisition strategy in 2020, Saylor has shifted from using company cash to more complex financing models, including selling convertible debt and stock.
The latest convertible notes were issued at zero interest, reflecting the lender’s confidence that MicroStrategy stock will appreciate in future by more than the conversion price.
Jeffrey Park, Portfolio Manager at Bitwise Asset Management, famous Saylor effectively exploited financial arbitrage within the company’s financial structure, allowing MicroStrategy to borrow funds for virtually free.
Sailer disclose Year-to-date, MicroStrategy’s treasury operations have generated a whopping 59.3% Bitcoin return, meaning shareholders have netted approximately 112,125 BTC, or approximately 341 BTC per day.
Saylor said that at a projected price of $100,000 per BTC, this could mean revenue of an impressive $11.2 billion this year, equivalent to about $34.1 million per day.
Analysts warn of risks in leverage strategies
Since its foray into Bitcoin, MicroStrategy has acquired a total of 386,700 tokens, with the average purchase price significantly lower than current levels market value.
The latest acquisition comes at a time when Bitcoin prices are near all-time highs, with the company buying new coins for about $97,862 each, slightly above where they are currently trading.
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However, this leverage strategy has raised concerns among some analysts, particularly in MicroStrategy stock (MSTR) fell 16% last Thursday.
Critics warn that the company’s stock could suffer similar losses if Bitcoin prices fall significantly, recalling the 2022 downturn when the cryptocurrency market experienced significant losses.
TD Cowen analyst Lance Vitanza comments on related risks Leveragenoted, “When you apply leverage to anything, you amplify returns in both the upward and downward directions.” He emphasized that MicroStrategy was a pioneer in applying this leverage strategy specifically to Bitcoin.
At the time of writing, the market-leading cryptocurrency is trading at $95,350, with the price down 1.7% in 24 hours.
Featured images from DALL-E, charts from TradingView.com
