MicroStrategy goes into debt to buy more Bitcoins

Bitcoin hit the record high and came close to a psychological barrier of $20,000. BTC is changing hands at $19,000 at the time of writing, down 1.6% on a day-to-day basis. Bitcoin touched a new all-time high at $19,915 on December 1 and retested $18,100 amid massive leveraged longs liquidation. However, the downside momentum faded, and the price returned to the area above $19,000. 

BTC daily chart

As the pioneer digital asset gained over 500% from the March collapse, many experts warn that the price may be ready for a deep correction before the growth is resumed. 

However, one of the largest Bitcoin holders plans to increase its exposure to the cryptocurrency market by purchasing Bitcoins worth $400 million. A business-intelligence firm Microstrategy intends to finance the investment in the digital asset via selling convertible bonds, according to the company's statement, cited by Bloomberg.

The raised capital will be invested in Bitcoin "pending the identification of working capital needs," however the exact timeframe remains unknown.

MicroStrategy goes wild

The company has been actively buying Bitcoins since August 2020. At that time, MicroStrategy acquired 21,454 BTC at an aggregate purchase price of $250 million, including fees and expenses. At the time of the purchase, BTC was trading above $11,000.

Moreover, the company announced Bitcoin as a Primary Treasury reserve asset and a part of a new capital allocation strategy.

This investment reflects our belief that Bitcoin, as the world's most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash,  said Michael J. Saylor, CEO of MicroStrategy. 

In September, MicroStrategy went on hoarding Bitcoins and spent another $175 million to purchase $16,796 coins. At that time, BTC was trading at around $10,500, while the first batch of purchased Bitcoins was out of the money. 

On December 4, the company paid another $50 million to buy 2,574 BTC at an average purchase price of $19,427, according to a filing to the US Securities and Exchange Commission. 

Thus, in the aggregate, the company spent $475 million to buy 40,824 Bitcoins. Considering that MicroStrategy's BTC investment is worth $775 million at the current exchange rate, the return on investment amounted to 63%.  

Positive side effects of Bitcoin investments

MicroStrategy's stock price has been spiraling higher after the company announced its Bitcoin-oriented investment strategy. At the time of writing, they are trading at $342 from $142 at the beginning of the year. Since the beginning of November, the price has doubled as Bitcoin entered a strong bullish trend.

MSTR, weekly chart

Other institutional investors and high-profile companies followed the lead and transferred part of their wealth to digital assets. Thus, FXStreet previously reported that billionaire flock to the cryptocurrency industry to diversify their portfolio from the traditional safe-havens and become a part of a significant trend in the financial sector. 

The inflow of institutional money is a new driver for the cryptocurrency market and a distinguishing feature that sets it apart from the boom of 2017.