Why is Microstrategy Buying Bitcoin?

Led by Michael Saylor, MicroStrategy has become synonymous with its aggressive acquisition of Bitcoin. The company’s unconventional approach to corporate treasury management has made headlines and has also sparked fierce debate within the crypto community and financial world.

This article outlines MicroStrategy's Bitcoin strategy and explores the rationale behind the acquisitions. We also discuss MicroStrategy's historical purchases, the company's vision for the world's most popular cryptocurrency and answer the question: how much Bitcoin does MicroStrategy own?

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What is MicroStrategy?

MicroStrategy was co-founded by Michael J. Saylor in 1989, along with Sanju Bansal, and is a public American company headquartered in Virginia. The company has a niche for themselves in the business intelligence (BI) industry by developing software that helps organizations make data-driven decisions. Their software can analyze vast amounts of information, from internal spreadsheets to external data sources, providing valuable insights. MicroStrategy's offerings extend beyond traditional BI, encompassing mobile app development and cloud-based services. MicroStrategy is also a leader in the BI field, enabling businesses to transform themselves into "intelligent enterprises" through data analysis and innovation.

Michael Saylor remains the Executive Chairman and a strong advocate for Bitcoin. Phong Le took over the CEO role in August 2022. Le now manages day-to-day operations, enabling Saylor to focus more on MicroStrategy’s Bitcoin acquisition strategy and promoting Bitcoin’s adoption.

How Much Bitcoin Does MicroStrategy Own?

As of June 20, 2024, MicroStrategy boasts a hefty holding of 226,331 Bitcoins, solidifying its position as the largest corporate holder of the digital asset. This translates to roughly $15 billion at current prices, a significant portion of the company's balance sheet.

A History of Bitcoin Acquisitions

MicroStrategy's foray into Bitcoin began in August 2020, marking a shift in the company's traditional treasury strategy. Since then, they've consistently added to their Bitcoin reserves, making headlines with each significant purchase. Here's a glimpse into their buying history:

• August 2020: MicroStrategy initiates its Bitcoin strategy with a purchase of 21, 454 BTC for $250 million.

• September 2020: The company doubles down, acquiring another 16,796 BTC for $175 million.

• December 2020 & February 2021: MicroStrategy goes on a buying spree, accumulating over 70,784 BTC across several transactions.

• March 2021: The company raises $1.05 billion through convertible note offerings and uses the proceeds to purchase an additional 9,000 BTC.

• June 2021: MicroStrategy raises $500 million and adds another 13,005 BTC to its coffers.

• March 2024: MicroStrategy acquires a further 9,245 BTC.

• June 2024: The company's most recent purchase adds 11,931 BTC to its holdings.

This consistent buying strategy reflects Michael Saylor's firm belief in Bitcoin's long-term potential.

The MicroStrategy Bitcoin Playbook

MicroStrategy's approach to acquiring Bitcoin is well-documented. The company has established a specific playbook for accumulating the digital asset, relying on a combination of debt financing and opportunistic buying.

• Debt financing: MicroStrategy frequently raises capital through convertible note offerings to fund its Bitcoin purchases. Convertible notes enable investors to convert their debt into shares of MicroStrategy stock at a predetermined price. Debt financing enables the company to raise significant funds without diluting existing shareholder ownership.

• Opportunistic buying: MicroStrategy doesn't shy away from market fluctuations. They've been known to capitalize on price dips, viewing them as opportunities to acquire Bitcoin at a discount. This approach has its fair share of critics. Some argue that relying on debt to buy a volatile asset like Bitcoin is risky. MicroStrategy remains committed to its strategy, confident that Bitcoin will significantly appreciate over time.

Michael Saylor's Bitcoin Vision

Michael Saylor is a vocal proponent of Bitcoin, consistently advocating for its adoption as a treasury reserve asset. Here are some key aspects of his vision:

• Bitcoin as a hedge against inflation: Saylor views Bitcoin as a hedge against inflation, similar to gold. He believes that Bitcoin's limited supply (only 21 million Bitcoins will ever be mined) protects its value from inflationary pressures that can erode traditional currencies.

• Store of value: Saylor sees Bitcoin as a superior store of value compared to cash. He argues that Bitcoin's decentralized nature and immutability make it a more secure and reliable way to store wealth over the long term.

• Evolving use case: While acknowledging Bitcoin's current limitations as a medium of exchange, Saylor believes the technology is still evolving. He anticipates advancements in scalability and transaction speeds that will make Bitcoin more practical for everyday use in the future.

Saylor's unwavering belief in Bitcoin's potential is a driving force behind MicroStrategy's aggressive acquisition strategy.

The Road Ahead for MicroStrategy and Bitcoin

MicroStrategy's all-in bet on Bitcoin has generated significant interest and debate. MicroStrategy's success hinges on the long-term trajectory of Bitcoin's price. If Bitcoin's value appreciates substantially, MicroStrategy will be hailed as a visionary leader in corporate treasury management. MicroStrategy's significant Bitcoin holdings would translate to a massive increase in the company's valuation, potentially making them a trendsetter for other companies to follow suit. This scenario could lead to a domino effect, accelerating mainstream corporate adoption of Bitcoin as a reserve asset and reshaping the financial landscape.

If the price experiences a sustained decline, the company's financial health could be at risk. The value of their Bitcoin holdings would decrease, potentially leading to significant losses on their balance sheet. This could also erode investor confidence in MicroStrategy's overall strategy, affecting their stock price and ability to raise capital in the future.

MicroStrategy attempts to mitigate these risks by averaging their purchase price across multiple acquisitions. This strategy aims to lessen the effect of short-term price fluctuations. Additionally, the company holds its cryptocurrency in a secure Bitcoin wallet, demonstrating a long-term commitment to the asset. They are unlikely to be forced to sell in a downturn, potentially enabling them to ride out price volatility.

MicroStrategy's Bitcoin strategy goes beyond price appreciation. The company is also interested in the potential for Bitcoin to transform financial services and traditional financial institutions. By advocating for Bitcoin adoption, they hope to contribute to the development of a more decentralized and secure financial system.

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Conclusion

MicroStrategy's aggressive Bitcoin acquisition strategy reflects a bold vision for the future of finance. While the company's success hinges on Bitcoin's long-term value, their commitment to the asset highlights the growing interest in digital currencies as a potential alternative to traditional investment options. Only time will tell if MicroStrategy's Bitcoin gamble pays off, but their actions have undoubtedly sparked a critical conversation about the future of money and the role of Bitcoin in the global financial landscape.

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Note: Any cited numbers, figures, or illustrations are reported at the time of writing, and are subject to change.