MicroStrategy’s Aggressive Bitcoin Shopping Spree Could Wrap Up 3-Year Plan in 4 Months

Key Takeaways

• MicroStrategy’s $42 billion Bitcoin purchase plan could be completed in just four months.
• The company has already spent $12 billion of its Bitcoin-buying goal within a single month.
• MicroStrategy’s “infinite money glitch,” which boosts its stock price as Bitcoin rises, is a double-edged sword.

Since beginning its Bitcoin buying spree in 2020, MicroStrategy’s BTC holdings have only ballooned, currently standing at 386,700 BTC worth $37.2 billion.

To further fuel its never-ending appetite, the company recently unveiled its “21/21” plan, which involves raising $42 billion over the next three years for one goal—to buy more Bitcoin.

However, given the rapid pace of its shopping spree, MicroStrategy’s ambitious plan could be over in as little as four months.

A Rapid Fire Bitcoin Buying Spree

In November alone, the company made three major Bitcoin purchases, totaling nearly $12 billion.

On Nov. 11, the firm acquired $2 billion in BTC, followed by another $4.6 billion on Nov. 18.

The largest of these purchases, $5.4 billion, came on Nov. 25. At this pace, MicroStrategy’s $42 billion plan could be exhausted in months, not years.

While this strategy has earned the company both praise and attention, it’s not without its critics.

Bitcoin skeptic Peter Schiff has raised concerns  about the sustainability of MicroStrategy’s approach.

He argues that once the company’s funds to purchase Bitcoin dry up, both the value of BTC and the company’s stock could take a hit.

Schiff warns that the strategy relies heavily on MicroStrategy’s ability to issue shares at a premium, which may not always be possible.

The Infinite Money Glitch: Blessing or Curse?

MicroStrategy’s bold Bitcoin investment strategy has been dubbed the “infinite money glitch”  due to its cyclical nature: as Bitcoin prices rise, so does MicroStrategy’s stock price, allowing the firm to raise more funds and continue its purchasing spree.

This strategy has helped the company’s stock surge to new heights, but the question remains: how sustainable is it?

CEO Michael Saylor has become the face of the strategy, doubling down on the belief that Bitcoin represents a long-term value proposition.

While MicroStrategy’s Bitcoin holdings have generated significant returns during bull markets, the company’s reliance on Bitcoin’s continued growth exposes it to considerable risk.

Alexandr Sharilov, CEO at crypto analytic platform CoinDataFlow, told CCN that MicroStrategy’s aggressive BTC buying spree is bold. However, spending $10 billion within a month is a huge bet, even for a company led by someone as bullish as Michael Saylor:

“It signals unwavering confidence in Bitcoin’s long-term value proposition, but it also amplifies the company’s exposure to market volatility.”

A Double-Edged Sword

Despite the firm’s impressive gains, the volatility of the crypto market presents a major risk.

MicroStrategy has accumulated Bitcoin at an average price of just under $50,000 per coin, meaning the company has seen a near 100% return on its investment.

However, Bitcoin is known for its price fluctuations, and the market could see steep declines.

During bear markets, Bitcoin has experienced sharp retracements of up to 70%, and with the crypto market known for its swings, a downturn could expose MicroStrategy to substantial losses.

The firm’s strategy also raises concerns about the impact on its stockholders.

As a publicly traded company, the performance of MicroStrategy’s stock is tied to its Bitcoin holdings.

Sharp drops in Bitcoin’s value could have significant consequences for the company’s balance sheet and investor confidence, especially if creditors begin to scrutinize its debt obligations.

Sharilov believes that, as a public company, leveraging convertible notes to fund the Bitcoin strategy raises questions:

“While it can be a smart move in a bull market – capitalizing on enthusiasm and potential price surges – it’s a double-edged sword. The 70% retrace during a bear market isn’t just a hypothetical; we’ve seen it before. If Bitcoin tanks, MicroStrategy could face severe balance sheet stress, especially if creditors start scrutinizing their debt.”

Risking Everything on Bitcoin’s Future

MicroStrategy’s bold strategy relies on convertible notes to fund its Bitcoin purchases.

While leveraging this debt in a bull market could yield substantial returns, in a bear market, the risks become much more pronounced. The firm’s approach could push it to the brink if Bitcoin prices fall and the value of its holdings plunges.

Though MicroStrategy weathered the 2022-2023 bear market, the risk of a severe downturn remains.

During that period, Saylor held firm, promising to continue his Bitcoin purchases despite market turbulence.

However, the next major downturn could test the limits of MicroStrategy’s strategy, possibly forcing the company to liquidate assets at a loss. If that happens, it could erode both investor confidence and the company’s stock value.

While MicroStrategy’s Bitcoin bet has paid off handsomely during the current bull market, the company’s future depends on the volatile crypto market.

For a publicly traded firm, the strategy is high-stakes, and if the market turns bearish, it could quickly shift from a financial boon to a potential nightmare.