Home / News / Crypto / ETF / MicroStrategy Eyes $500M Convertible Notes as BlackRock Bitcoin ETF Holdings Surge
4 min read

MicroStrategy Eyes $500M Convertible Notes as BlackRock Bitcoin ETF Holdings Surge

Last Updated March 14, 2024 1:11 PM
Shraddha Sharma
Last Updated March 14, 2024 1:11 PM
By Shraddha Sharma
Verified by Peter Henn

Key Takeaways

  • BlackRock’s Bitcoin ETF (IBIT) has outpaced MicroStrategy’s Bitcoin holdings.
  • MicroStrategy has announced a $500m offering of convertible senior notes to purchase additional Bitcoin.
  • Will the holdings give birth to past market anomalies?

BlackRock’s spot Bitcoin ETF ($IBIT) has surpassed the Bitcoin holdings of MicroStrategy, the largest public BTC holder. The development comes as Bitcoin ETF continues receiving record inflows and MSTR announces a proposed private offering of $500 million of convertible senior notes. 

As mainstream companies purchase BTC in record numbers, what is next in the digital asset market?

MicroStrategy’s Continued Bet on Bitcoin

Michael Saylor-led MicroStrategy continues to adopt Bitcoin as a primary treasury reserve asset. The company recently announced a $500 million offering of convertible senior notes as Bitcoin remains above the $73,000 level.

MicroStrategy plans  to use the proceeds from this offering to purchase additional Bitcoin and for general corporate purposes. MSTR’s announcement reiterates its confidence in Bitcoin’s long-term value and potential as an inflation hedge and digital gold. The loans can be turned into MicroStrategy stock or cash under certain rules at a later date.

They’re only offering these loans to big, professional investors and have rules about how and where they can sell these loans to ensure the legality and fairness of the transaction.

Bitcoin ETF Inflows | Source: Bloomberg
Bitcoin ETF Inflows | Source: Bloomberg

According to Bitcoin Treasuries, MicroStrategy has a Bitcoin holding of 205,000 BTC worth around $15 billion. Approximately 50% of the company’s market cap is made of Bitcoin.  

BlackRock’s Leap in Digital Asset Investments

BlackRock, the world’s largest asset manager and the issuer of Bitcoin ETF IBIT, has reportedly surpassed MicroStrategy’s Bitcoin holdings in just nine weeks.

On March 13, BTC ETF net inflows exceeded $1 billion for the first time as per Bloomberg analysts Eric Balchunas and James Seyffart. IBIT dominated $848 million inflows in a single day. The year-to-date net increase of $11 billion, also indicates positive sentiments towards broader digital assets.

Meanwhile, $IBIT is on the brink of entering the top 100 ETFs by size with over $15 billion in assets.

Overall, the digital asset ETP market also surpassed  the 2021 record in terms of inflows.

After MSTR, BlackRock’s entry into the Bitcoin market represents a significant endorsement of cryptocurrencies.

According to researcher and trader Kashyap Sriram, MicroStrategy’s main business of selling software might be worth around $2.5 billion. He highlights that aspect of the business is not currently making a profit. Despite this, MicroStrategy’s stock is being sold for a 71% premium. He said: “Why does this premium exist? Because arb traders are too scared of a short squeeze.”

Sriram also quotes investor David Einhorn, comparing the situation of MicroStrategy and IBIT to a past scenario with tech companies Palm and 3Com, suggesting that this is another example of market anomalies.

During the dot-com bubble, the market value of Palm’s shares got to a point where it exceeded that of 3Com, its parent company, after the former’s IPO.

Sriram noted : “David Einhorn says markets are broken. And he is absolutely right.”

Einhorn is of the view that value investing has taken a hit.

MSTR/IBIT Command Influence

The ascent of BlackRock’s Bitcoin ETF over MicroStrategy’s holdings marks an evolution of the digital asset market. It reflects a broader trend of growing institutional interest in cryptocurrencies. But, now both the giants command major influence in the Bitcoin market.

So much so that it signifies valuations that some might consider unfair. But the Bitcoin run has been stellar at the start of a bull market, giving birth to several beneficiaries.

Was this Article helpful? Yes No