MicroStrategy Nearly Even on Bitcoin Buys After Latest Rally
The broadening of BTC use cases, bank closures could spur MicroStrategy to continue buying more of the asset, industry participant says
JOCA_PH/Shutterstock.com modified by Blockworks
Bitcoin’s price is approaching the average buy-in the largest public holder of bitcoin paid for its massive BTC stash.
Business intelligence firm MicroStrategy held 132,500 bitcoins, as of Dec. 31. The original cost basis for the BTC pile was nearly $4 billion, reflecting an average cost per bitcoin of about $30,137.
The price of bitcoin was about $28,200 at 3 pm ET Monday, up roughly 26% from a week ago.
MicroStrategy’s net loss was $250 million during the fourth quarter of 2022, the company reported in February. Its digital asset impairment charges — which comes into play if the market value of bitcoin decreases below its market-adjusted purchase value — were $198 million during the quarter.
Executives said on an earnings call last month that the firm planned to continue its longtime strategy of buying and holding bitcoin on its balance sheet.
Dan Weiskopf — a co-portfolio manager of the Amplify Transformational Data Sharing ETF (BLOK) — told Blockworks that bitcoin’s price is more relevant to traders than to MicroStrategy co-founder Michael Saylor.
Saylor has made it clear his company will be a strategic longterm bitcoin owner.
“Some investors may mark the moment when MicroStrategy’s 132,500 BTC is at a breakeven level; I don’t think Saylor ever thought that was not a high probability,” Weiskopf told Blockworks. “In fact, I am confident for him it is a short-term mark and only the beginning for what he expects bitcoin will accomplish.”
A MicroStrategy spokesperson did not immediately return a request for comment.
Analysts have been critical of the company in the past about its buying and holding strategy amid market volatility.
Edward Moya, a senior market analyst for foreign exchange company OANDA, said last June that MicroStrategy “has failed to capitalize on the way up and find protection when things got ugly,” adding that the company has been “reckless with their portfolio management.”
The company’s unrealized losses when bitcoin dropped to below $16,000 in November, MicroStrategy’s totaled nearly $2 billion.
New bull indicator
Bitcoin’s rally of late has closed that unrealized gap.
“Microstrategy has survived a crypto ice age and now has an opportunity to take advantage of growing interest in DeFi and all the other crypto protocols with better growth potential,” Moya told Blockworks Monday. “With no true bitcoin ETF coming, Microstrategy is still positioned to attract new investors.”
MicroStrategy’s stock price was $261.50 at 3 pm ET Monday — up about 80% year to date, but down roughly 2% on the day.
Weiskopf said the latest bitcoin price gains have been caused in part by the broadening of BTC use cases — such as bitcoin ordinals — that could spur MicroStrategy to buy even more of the asset.
Marcus Sotiriou, a market analyst at GlobalBlock, said in a research note that bitcoin reaching $28,000 over the weekend signals the start of a new bull trend.
“The recent closures of US banking giants have acted as a catalyst for bitcoin’s price increase,” Sotiriou wrote. “The drawbacks of the banking system are a key proponent for decentralized assets such as bitcoin.”
Morningstar senior research analyst Madeline Hume said MicroStrategy has vowed to add to its bitcoin position while cash flows are in excess of working capital— and while equity raises are feasible.
MicroStrategy’s working capital is negative, Hume said, suggesting additional purchases are unlikely in the short term.
“Across the capital markets, liquidity raises have ground to a halt given the jittery macro environment,” she told Blockworks. “Any additional tactical moves, including a liquidation of some portion of the bitcoin holdings, would depend on the firm’s ability to finance its activities in other ways, including the firm’s ability to borrow.”
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