MicroStrategy’s Bitcoin Buy Draws Criticism
MicroStrategy, led by bitcoin bull Michael Saylor, has proven to be “reckless” with portfolio management, market analyst says
MicroStrategy’s Michael Saylor | Blockworks exclusive art by axel rangel
key takeaways
- MicroStrategy’s bitcoin — bought for roughly $4 billion — is currently valued at about $2.6 billion
- The company is not a good vehicle for investors seeking crypto exposure, OANDA’s Edward Moya says
MicroStrategy has bought more bitcoin amid crypto market volatility as the company’s leader continues doubling down on the asset — though some market analysts have questioned the decision.
The business intelligence and software company purchased an additional 480 bitcoin (BTC) for roughly $10 million — an average price of $20,817 per bitcoin, according to a Wednesday filing.
MicroStrategy now holds nearly 130,000 BTC ($2.61 billion), which it acquired for about $4 billion at an average price of $30,664.
The company boasts the largest BTC stash of any public company by far; Tesla’s is the second biggest with 42,902 BTC ($862 million).
Bitcoin’s price was about $20,000 at 1:30 pm ET, according to data compiled by Blockworks — down 3.1% from 24 hours ago, placing MicroStrategy 35% in the red on its bitcoin purchases to date.
Morningstar senior research analyst Madeline Hume said MicroStrategy’s latest buy shows the company is comfortable purchasing at a range of price levels.
The company purchased nearly 7,000 BTC last October and November while bitcoin was trading around $60,000, she noted. MicroStrategy CEO Michael Saylor revealed in April he bought an additional 4,167 BTC for roughly $190 million — an average price of about $45,700.
“This buy doesn’t free Saylor from the hot seat as bitcoin’s price continues to trend flat,” Hume told Blockworks. “MicroStrategy still remains nearly $1.4 [billion] underwater on its bitcoin reserves.”
MicroStrategy believes a bitcoin recovery is near
Edward Moya, a senior market analyst for foreign exchange company OANDA, said it’s pretty clear that MicroStrategy is all-in on bitcoin and seeks whatever capital it can to buy the dip.
“The rapid appreciation before last year’s record high and latest demise shows MicroStrategy has failed to capitalize on the way up and to find protection when things got ugly,” he told Blockworks. “Investors looking for crypto exposure should not consider MicroStrategy a good vehicle for that as they have proven to be reckless with their portfolio management.”
Fawad Razaqzada, financial market analyst for StoneX, said the buy signals that Saylor believes the bitcoin downturn is nearing an end and a recovery is coming.
“To some degree, I agree with that viewpoint,” Razaqzada added. “It feels a bit like a gamble though as prices haven’t stabilized to give you confidence that a low is in just yet. I hope that doesn’t scare investors who are holding the company’s stock.”
MicroStrategy’s stock price was $176.46 at 1:30 pm ET, down 5.2% from yesterday’s close, according to Google Finance. The stock has dropped about 68% since the beginning of the year.
Ben McMillan, chief investment officer at IDX Digital Assets, said that though MicroStrategy’s latest buy is small relative to its prior purchases, it is consistent with larger so-called “whale wallets” seeking to value-buy at bitcoin’s current levels.
“This news, however, comes alongside the latest news of the [Three Arrows Capital] restructuring, which potentially means more forced selling of bitcoin,” McMillan added. “So the market is still waiting to see what other big liquidation events might be lurking around the corner.”
A British Virgin Islands court reportedly ordered Three Arrows Capital, a crypto hedge fund firm dogged by insolvency rumors over the past few weeks, to liquidate its assets on Monday.
MicroStrategy’s latest purchase comes after SEC Chair Gary Gensler said Monday in an interview with CNBC that while some cryptoassets are securities, bitcoin is a commodity.
Saylor linked to a video of the interview on Twitter, noting in a subsequent tweet that “bitcoin is the only investment grade currency.”
A MicroStrategy spokesperson did not immediately respond to Blockworks’ request for comment.
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