The Nasdaq-listed firm MicroStrategy (MSTR) is continuing to purchase hundreds of millions of dollars worth of Bitcoin (BTC), resulting in its company stock price to gain over 9% on Sep 16. 

MSTR stock recovers to pre-Covid levels after buying Bitcoin 

MicroStrategy first announced the firm is purchasing Bitcoin on Aug. 11, after which its stock price surged by over 10%. 

Now, MSTR price has once again risen in a similar fashion after confirming yesterday that it doubled down on adopting a “Bitcoin standard,” buying over 38,000 BTC worth $425 million at an average price of $11,111. 

“We just had the awful realization that we were sitting on top of a $500 million ice cube that’s melting," CEO Michael Saylor told Coindesk. 

“This is not a speculation, nor is it a hedge. This was a deliberate corporate strategy to adopt a bitcoin standard.”

Chart

MSTR stock price. Source: TradingView.com

Datavetaren, a pseudonymous software engineer, said other companies will follow MicroStrategy. He wrote:

“MicroStrategy is adopting a #bitcoin standard. Other companies will follow. Finally, central banks will follow (Switzerland likely to be the first.) A new gold standard for the digital age. A neutral store-of-value will create more check and balances for governments.”

What are the risks of MicroStrategy’s Bitcoin accumulation strategy?

According to Joe Weisenthal, the host of “What’d You Miss?” on Bloomberg, the revenue of MicroStrategy steadily declined since 2013.

Chart

The revenue of MicroStrategy since 2011. Source: Joe Weisenthal

The company needed new ways to vamp up and gaining exposure to Bitcoin and making BTC its primary treasury asset is quickly becoming one of its major strategies.

Typically, safe-haven assets like gold and real estate are perceived as a hedge against inflation. They are like insurance rather than investment, providing balance to the portfolio.

Bitcoin has the potential to achieve both; it could act as a hedge against inflation and potentially outperform many asset classes over time.

Barry Silbert, the CEO of Grayscale, said the purchase might become the worst or the smartest CEO decision of all time.

There is an enormous amount of risk MicroStrategy is taking to secure such a large holding of BTC. But if BTC explosively grows over the long term, it could be a significant catalyst for the stock. Silbert said:

“This will go down in history as one of the smartest or worst CEO decisions of all time. Case studies and books will be written about it. Either way, it took enormous guts for a public company CEO and I commend him for the courage.”

Don’t celebrate MSTR stock like an ETF

One problematic sentiment around MSTR stock is that some celebrate it as a loophole for an exchange-traded fund (ETF). 

While the company has a large exposure to Bitcoin, Compound Finance’s general counsel Jake Chervinskey said such a loophole is non-existent. He also noted that if the firm continues to buy more BTC, the U.S. Securities and Exchange Commission (SEC) could begin inquiring about it. He said:

“No, there isn't a loophole in the federal securities laws allowing a publicly traded company to convert itself into a bitcoin ETF without SEC approval. The more bitcoin $MSTR buys, the more likely the SEC is to start asking questions that @Nasdaq doesn't want to answer.”


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Crypto analyst says Bitcoin bottom is very close, another correction in BTC likely

Crypto analyst says Bitcoin bottom is very close, another correction in BTC likely

Bitcoin is trading above $67,000 on Sunday after securing support at $65,000. While BTC holds its gains steady, analysts evaluate the price trend of the largest asset by market capitalization and predict a deeper correction in Bitcoin. 

More Bitcoin News

AI tokens could really ahead of Nvidia earnings

AI tokens could really ahead of Nvidia earnings

Amidst other narratives, AI tokens could gather momentum with the upcoming earnings result of NVIDIA next week. The $2.3 trillion company’s stock emerged as a poster child for the crypto AI sector and gains in the stock catalyzed a rally in cryptocurrency tokens. 

More Cryptocurrencies News

Whale rotates capital from WIF to TREMP and BONK, Solana meme coins make comeback

Whale rotates capital from WIF to TREMP and BONK, Solana meme coins make comeback

Lookonchain identified a large wallet investor who rotated capital from Solana based meme coin Dogwifhat to Doland Tremp and Bonk. The two meme coins have added double-digit value to their prices in the past 24 hours, as seen on CoinGecko. 

More Solana News

Crypto political donations surge to $94 million pre election, exceed previous elections by 13%

Crypto political donations surge to $94 million pre election, exceed previous elections by 13%

Crypto industry giants supported political campaigns in the US looking for pro-crypto governance in the US. A Bloomberg report from May 17 shows that crypto donors have spent $94 million in an effort to get pro-crypto regulation in the US. 

More Cryptocurrencies News

Bitcoin: Is BTC out of the woods? Premium

Bitcoin: Is BTC out of the woods?

Bitcoin (BTC) price action in the past two days has confirmed the resumption of the bull run. However, BTC needs to clear a few key hurdles before investors can go all-in. 

Read full analysis

BTC

ETH

XRP