(Bloomberg) — MicroStrategy Inc. co-founder and Executive Chairman Michael Saylor’s more than $4 billion bet on Bitcoin is profitable again after the value of the largest cryptocurrency exceeded its average purchase price.
(Bloomberg) — MicroStrategy Inc. co-founder and Executive Chairman Michael Saylor’s more than $4 billion bet on Bitcoin is profitable again after the value of the largest cryptocurrency exceeded its average purchase price.
Bitcoin has rallied more than 80% since the start of the year and finally crossed above $30,000 late Monday, a level that’s slightly above the Tysons Corner, Virginia-based company’s average purchase price of $29,803. MicroStrategy may avoid having to take an impairment charge to write down the value of its Bitcoin holdings — which, together with its subsidiaries stood at 140,000 tokens as of April 5 — for the first time in 10 quarters.
Saylor first revealed his Bitcoin purchases in August 2020, saying the digital asset was a better investment for the enterprise-software company’s cash than traditional staples such as short-term Treasuries due to the threat of rising inflation. He has since upped his bet on the digital currency despite its trademark volatility, even borrowing money for a time from the now failed crypto-friendly bank Silvergate to fund its purchases. MicroStrategy’s latest Bitcoin buys occurred as recently as last week.
“MicroStrategy, to some extent, has themselves to thank for their bet flipping into the positive,” said Vetle Lunde, senior analyst at K33 Research. “They have been disciplined in their very clear strategy of acquiring as much BTC as possible, regardless of price, and their latest purchasing spree has coincided with a market in thin liquidity, where the net buyer and seller have a stronger impact.”
Bitcoin wrapped up its best quarterly performance since 2021, with a roughly 72% rally in the first three months of the year. The price tumbled 64% in 2022 amid a series of industry scandals and bankruptcies.
“Given how large their position is, Bitcoin is going to have to rally a lot more for it to be seen as a smart decision,” said Matt Maley, chief market strategist at Miller Tabak + Co. “I don’t mean to poor cold water on their profit, but it’s going to have to trade back towards is all-time highs for it to be considered the kind of great decision Michael Saylor has been touting for several years now.”
Saylor’s decision to make buying Bitcoin part of the company’s strategic focus has made MicroStrategy a popular proxy for investing in crypto. The company’s stock has more than doubled since August 2020, significantly outperforming the S&P 500’s roughly 25% gain during the same period. MicroStrategy shares jumped 5.8% on Tuesday to $330.78 as of 10:10 a.m. in New York.
It’s “very important to note that while they’re currently in the green, they would still face severe losses if they were to sell their BTC due to the poor liquidity in the market at the moment, and due to the massive sellside pressure the behemoth holder would represent,” K33 Research’s Lunde said. “Not that I view MSTR selling as a realistic scenario anytime soon (or ever, who knows).”
–With assistance from Tom Contiliano.
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