Did MicroStrategy get its bitcoin hoarding strategy wrong?

Did MicroStrategy get its bitcoin hoarding strategy wrong?

MicroStrategy recently made its smallest bitcoin purchase since it began accumulating BTC on its balance sheet, a move that could signal financial difficulties for the enterprise software company.

The company founded by Bitcoin evangelist Michael Saylor disclosed in an SEC filing on September 19, 2022 that it purchased an additional $6 million worth of Bitcoin (301 BTC purchased at an average price of $19,851) using its excess cash.

This purchase brings the total amount of BTC held by MicroStrategy and its subsidiaries to more than 130,000 BTC, acquired at an aggregate purchase price of approximately $3.98 billion and an average purchase price of approximately 30 $639 per token.

The investment is not yielding the expected results so far, leading observers to question the soundness of the strategy employed by the company. Bloomberg reports that MicroStrategy’s latest bitcoin purchase, despite being the smallest since the company began hoarding bitcoins two years ago, is already unfavorable considering the bitcoin price which has traded below $19,000 since the disclosure was made.

The entire 130,000 BTC held by the company is also 38% underwater, as it is currently valued at around $1.5 billion, which means the company is suffering impairment losses of over $100,000. a billion dollars. The company’s stock hasn’t fared any better, while its earnings have also remained flat for more than five quarters.

MicroStrategy Determined to Continue Accumulating Bitcoin

Despite the financial state of its bitcoin bet and the massive criticism from analysts who called it a reckless investment move, the company is determined to continue its bitcoin purchases.

Earlier this month, the company filed an application with the SEC to sell stock for up to $500 million to fund further bitcoin purchases. Last month, Saylor changed his role at the company, from CEO to president, to focus on engineering bitcoin hoarding.

MicroStrategy remains one of the only companies to place itself on a Bitcoin standard, which has earned it trouble with regulators, including the SEC. Either way, Saylor continues to campaign for more companies to adopt the Bitcoin standard, as he sees Satoshi Nakamoto’s cryptocurrency as the only inevitable non-sovereign store of value.

His conviction could also cause the loss of MicroStrategy if the cryptocurrency market continues on its current trajectory. In the meantime, this trajectory does not seem ready to reverse, as cryptos have always shown a strong positive correlation with the stock market, with governments fighting against inflation.

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