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MicroStrategy Holds $4.5 Billion in BTC at Profit: What is Michael Saylor’s Strategy?

Published June 29, 2023 11:59 AM
Omar Elorfaly
Published June 29, 2023 11:59 AM

Key Takeaways

  • Microstrategy buys Bitcoin, accumulating BTC worth $4.5 billion
  • The software analytics firm bets its future on BTC by selling shares
  • What happens if BTC fails?

Bitcoin is going through a bit of a gold rush nowadays. Despite regulatory issues with the SEC, major asset management firms such as BlackRock and Fidelity pouring millions of dollars into the digital asset market, and institutional investors are rushing to get a piece of the skyrocketing market.

Microstrategy, a software analytics firm, also one of the biggest holders of Bitcoin, bets its financial future on Bitcoin by investing $347 million more into BTC. The company’s latest BTC spending spree brings its total BTC worth to over $4.5 billion.

But, how is Microstrategy, led by Michael Saylor, financing the purchase? Also, what happens to the company if Bitcoin sees a steep drop in value?

Selling Shares For Bitcoin

Microstrategy is among the list of the biggest holders of Bitcoin around the world. The list also includes the likes of Satoshi Nakamoto, the inventor of Bitcoin, as well as the US and Chinese governments. 

The software analytics company announced  on Thursday that it spent three days purchasing a total of 12,333 Bitcoins, worth approximately $347 million, at an average price of $28,136 per Bitcoin.

The company’s latest purchase brings the sum of Bitcoins held by Microstrategy and its subsidiaries to a total of $4.52 billion, averaging the value of a Bitcoin at y $29,668 per bitcoin, inclusive of fees and expenses.

Microstrategy sold a large sum of class A common stock, valued at $0.001 per share, making a net sum of  $333.7 million from the sale. The company just sold 1,079,170 Shares to finance its latest Bitcoin purchase, among a total of 11,834,000 shares held in the company. 

But, what motivates Microstrategy and Saylor to stake almost 10% of a company worth $4.22 billion on Bitcoin? What happens to the company if Bitcoin crashes?

Bitcoin Is Safe, For Now

As mentioned earlier, the crypto market, specifically Bitcoin, has been gaining a lot of traction on the financial side as of late. BlackRock, the world’s biggest asset firm, managing assets worth trillions of dollars, just applied for a Bitcoin spot ETF with the SEC. As the news broke out about the company’s application, Bitcoin saw an almost immediate $5,000 increase in value. The move resulted in countless financial institutions rushing to keep up with the market hype.

Moreover, a new crypto exchange came out of the woodwork, under the name of EDX Markets. The new exchange is backed by some of the world’s wealthiest corporations, such as Fidelity, Citadel Security, and Charles Schwab.

Proshares even saw a huge increase in their Bitcoin Futures ETF investments as the market shows more and more signs of optimism. 

Jeremy Allaire, co-founder, CEO, and Chairman of Circle, the creator of USDC also says that the market should expect a steady flow of ETF applications to be filed in the coming while.

However, more crucially, regulations and legal challenges have always been the fork in the digital asset market’s side. Seemingly, the US Securities and Exchange Commission (SEC), the regulating body for the trade of digital assets in the US, is accepting of Bitcoin becoming a valid payment option, among other cryptocurrencies. 

Circle’s CEO reports that “Digital stores of value like Bitcoin remain compelling as a hedge instrument in the context of continued persistent inflation and weakening currencies.”

For that very reason, companies such as BlackRock are distancing themselves from any cryptocurrencies that are prone to attacks by the SEC. This is evident when EDX Markets is seen dumping a company such as Paxos, fearing a potential SEC attack against it.

Allaire however pointed out that regulators in the US are narrowing down on creating a clear guideline for a stable digital assets market. 

“In terms of regulatory approvals…progress is being made.”

“You have mature spot markets. You have a mature custody infrastructure that is well structured. You have good market surveillance. Many of the things that have been concerns in the past are being addressed and suggest that these kinds of products are more likely to be approved for investor access.”

Is Bitcoin Worth Risking A $4.2 Billion Dollar Company?

Bitcoin’s volatility is a trend that business tycoons such as Michael Saylor are bound to be aware of. Anyone who’s been keeping up with the cryptocurrency’s news over the past two years will remember how Bitcoin was worth north of $68,000 in November 2021, and around $18,000 just seven months later.

Whether it’s major failures such as FTX or Celsius, or legal drama like the ones Binance and Coinbase are going through, Bitcoin is undoubtedly one of the most volatile currencies out there.

Let’s not forget when Elon Musk had “I am a Bitcoin supporter” in his Twitter bio, which resulted in the token’s currency increasing by 20% in value. Yet the same Musk also warned  investors to “not bet the farm on crypto.”

With that in mind, what is going on in Saylor’s mind? The tech entrepreneur has seemingly invested the majority of his company’s capital in Bitcoin. Granted Bitcoin is witnessing an optimistic period right now. But, realistically, if Bitcoin sees another drop like the ones it already experienced twice in May and November of 2021, Microstrategy would find itself in financial despair.

While it may seem like a huge gamble by Saylor, the market is currently pointing towards a growth trajectory. Saylor’s move might end up being the company’s greatest investment decision since its inception.