Nasdaq-Listed MicroStrategy And Others Wary Of Looming Dollar Inflation, Turns To Bitcoin And Gold
Which Other Publicly-Traded Companies Will Or Have Added Bitcoin To Their Balance Sheets? Nasdaq-Listed MicroStrategy And Others Wary Of Looming Dollar Inflation, Turns To Bitcoin And Gold
“Michael_Saylor / MicroStrategy Is Making A Speculative Attack On The Fed/USD Like Soros/Druckenmiller Did Against The BoE/GBP In 1992, Ejecting It From The ERM.”
“Saylor Has Pulled The Pin And Tossed A Grenade Into The Fed’s Boardroom.” Max Keiser
Is MicroStrategy A De Facto Bitcoin ETF?
Publicly traded business intelligence company MicroStrategy said it will invest $250 million of its excess cash in bitcoin, gold and other “alternative assets” over the next 12 months as a hedge against U.S. dollar (USD) inflation.
* CEO Michael Saylor, who unveiled MicroStrategy’s new capital allocation strategy on a July 28 earnings call, said the weakening USD is no longer a tenable place to park MicroStrategy’s sizable cash reserves. (The firm is sitting on $500 million).
“Bitcoiners Have Declared War On Central Banks And The Global Central Bank System.” Monty Henry
* Near-zero interest rates, infinite helicopter money and the specter of coming inflation are all forces Saylor said are chipping away at the dollar. “It wouldn’t be prudent to continue to hold a large portion of USD” in the current environment, he said.
* While USD yield has effectively gone negative, bitcoin, gold and silver have been gaining strength, even if they may prove more volatile havens, Saylor said. He said bitcoin’s 21 million hard cap bolsters the cryptocurrency’s appeal as an inflation hedge.
* “It makes sense to shift our treasury assets into some investments that can’t be inflated away,” Saylor said.
* Saylor indicated his bitcoin revelation came after his firm sold the domain “Voice.com” to crypto project Block.One for $30 million in July 2019.
MicroStrategy A Cash-Rich Software Company Mints No-Lose Bitcoin Trade
MicroStrategy Inc.’s bet on Bitcoin is paying off — for its bond holders.
When the enterprise software maker issued convertible debt in December with the intention of using the proceeds to add to its Bitcoin pile, the company opened a backdoor for bond investors to play the crypto craze.
To outsiders, the offering seemed “strange” or “a head-slapping moment.” Mature, cash-flow-generating companies rarely tap this corner of capital markets, especially for the risky purpose of funding Bitcoin purchases. Yet those who bought MicroStrategy’s Bitcoin-linked bonds at issuance are sitting pretty — even though the momentum behind the cryptocurrency’s breathtaking rally has broken.
“This is a classic ‘heads I win, tails we tie’ play,” Dave King, portfolio manager of the $2.6 billion Columbia Convertible Securities Fund, said in an interview. “We win if Bitcoin goes up a lot. And if Bitcoin goes down and stays down, we get our money back.”
What King describes can be applied across the convertible-bond asset class. The securities derive a part of their value from the embedded stock option, which tracks with common shares of the company that sold the debt.
MicroStrategy’s widely broadcast bullish bet on Bitcoin in July 2020, detailing a shift in its cash strategy, tied its shares to crypto. So when the price of Bitcoin doubled, so did MicroStrategy’s shares, pushing the convertible deep into the money.
The initial conversion price was $397.99, a level the common stock zoomed past in early January. It now sits above $587. MicroStrategy reports fourth-quarter earnings after the market close on Thursday.
For the crypto purist, the bond’s paper gains might look paltry. For the bond investor, however, there’s certain level of comfort in a Bitcoin play backed by debt: If they don’t trade out of it or convert the securities to stock, they’ll get paid back when the notes mature, assuming the company remains operational.
King estimates the value of the company’s Bitcoin in the range of $800 million to $1.4 billion, assuming proceeds of the convertible offering were used to fund more buying. The midpoint of that range would imply an estimated Bitcoin stash worth around 22% of its $5 billion market capitalization.
“The founder had become a big bull on Bitcoin and invested its very large cash pile in it,” he said. “Even if Bitcoin goes down 30% to 40%, the company still has enough to pay this bond off easily.”
The upsized $650 million offering had other takers. State Street’s SPDR and BlackRock’s iShares exchange traded funds, First Trust’s actively managed ETF, as well as Westwood Management and Lazard Asset Management funds hold the notes, according to data compiled by Bloomberg. King says he is maintaining his position.
The offering is emblematic of the times, according to Craig Manchuck, a portfolio manager of the $5 billion Osterweis Strategic Income fund, who says the firm passed on the bond.
“It’s a barometer of how speculative markets are now,” he said. “There’s a great fear of missing out, like how teenagers feel when they sit out a party. We are just not in the business of investing in Bitcoin.”
3 Reasons Why MicroStrategy Adopted Bitcoin — And Why Others Will Too
The CEO of the company that just bought 21,454 BTC calls it “digital gold,” and the tide will cause the business world to admit the same, say supporters.
MicroStrategy has adopted Bitcoin (BTC) as its reserve currency — and stunned commentators by purchasing over 21,000 BTC on Aug. 11.
The world’s largest publicly-traded business intelligence company has swapped fiat for Bitcoin as its treasury reserve asset, but the reasons behind it suggest that more big businesses will have no choice but to do the same.
Why Did Microstrategy Choose Bitcoin, And Will Others Follow?
In a press release issued on Aug. 11, CEO Michael Saylor went further than most by calling Bitcoin “digital gold.”
With no “ifs” or “buts,” Saylor unreservedly plugged the largest cryptocurrency over both fiat and other traditional safe-haven assets such as gold.
“Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it,” he commented.
That angle closely mimics some of Bitcoin’s foremost proponents, notably Saifedean Ammous, who in his book, “The Bitcoin Standard,” repeatedly explains that so-called “digital scarcity” puts Bitcoin in a separate league to any other form of money which has ever existed.
Like Ammous, Saylor also believes that Bitcoin’s very structure will ensure that its value will only increase with time.
“We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fueled the rise of so many category killers in the modern era.”
Doubts Over Fiat’s Future
Bitcoiners were particularly excited about MicroStrategy because it unashamedly replaced fiat currency for cryptocurrency.
Its purchase of 21,454 BTC for an aggregate price of $250 million late last month may not only be symbolic (given the total 21M BTC) but it also means that the company controls 0.1% of the total Bitcoin supply — something competitors will find increasingly expensive to replicate.
“MicroStrategy bought 0.1% of the Bitcoin supply. Very few companies will be able to copy this strategy,” What Bitcoin Did podcast host Peter McCormack tweeted in response.
For Saylor, there were multiple red flags that swayed him to turn to Bitcoin.
These were “among other things, the economic and public health crisis precipitated by COVID-19, unprecedented government financial stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty,” he said.
Continuing, He Argued That What Began As A Result Of Covid-19 Would Only Cause Further Problems Later On:
“We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.”
Cointelegraph has often reported on the detrimental impact of practices such as quantitative easing, and the voices urging consumers to abandon the fiat system en masse to protect their prosperity in the long term.
For Jason Yanowitz, founder of financial media network BlockWorks Group, Saylor’s reservations will ultimately spark trailblazing from the entire business sphere.
“MicroStrategy’s CEO said they bought Bitcoin to avoid inflation,” he summarized.
“Eventually every public company will do the same.”
This week, Cointelegraph noted that Bitcoin’s value appeared to be tracking central banks’ inflating balance sheets in 2020.
Bitcoin’s “Schelling Point”
Finally, Saylor was highly complimentary about Bitcoin in particular — and did not mention that the company even considered any other cryptocurrencies.
“We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility, and community ethos of Bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value,” he said.
Bitcoin’s eleven-year lifespan has seen it both remain the largest cryptocurrency and fend off multiple concerted efforts to undermine it.
As Ammous and various others often explain, Bitcoin has proven itself via this method — and alternative cryptocurrencies have failed to demonstrate that they can gain Bitcoin’s status and popularity.
Miners’ preference for BTC supports the theory that in the long term, security and market prowess will only increase — Bitcoin’s technical fundamentals remain in a broad uptrend, a result of miners dedicating more and more resources to the network.
MicroStrategy Buying Bitcoin Shows Institutional Investors Seek To De-Risk
Wall Street firms are waking up to the prospect of holding Bitcoin as a hedge against uncertainties in the mainstream equities market.
Bitcoin (BTC) adoption by big-money players is once again on the agenda following the recent $250 million BTC purchase by MicroStrategy. Industry commentators have also stated that corporations plugging into Bitcoin will provide prominent tailwinds to push BTC valuation to new heights.
With the coronavirus pandemic adversely impacting economies around the globe, investors appear to be looking toward safe haven assets.
Indeed, the attention on both BTC and gold is causing a significant coupling of their respective price actions, given that central banks continue to pursue aggressive quantitative easing. With a firm like MicroStrategy hedging with Bitcoin, it appears this pivot might now spread to Wall Street.
Reports of the Trump administration looking to delay the collection of Social Security payroll taxes are also ringing alarm bells in the United States. The likely outcome of this executive order is more money being printed to fund the country’s social security, which consequently means further U.S. dollar debasement.
Well-Established Retail Adoption
Since the start of 2020, the number of addresses holding 0.01 BTC and 0.1 BTC has been climbing steadily, while data from market intelligence platform Glassnode claims the number of “wholecoiners” — wallets with at least 1 BTC — has also increased in 2020, all highlighting a consistent culture of “stacking sats” by various groups of investors.
When the U.S. government sent stimulus payments to the public in April, Coinbase reported a spike in BTC purchase sums to the tune of $1,200 — the exact amount in the checks. The Bitcoin bought with $1,200 at the time is now worth over $1,600, resulting in gains made by BTC over a weakening USD during the period. Even when Bitcoin dipped to $3,800 during the “Black Thursday” market crash, exchanges reported an uptick in retail BTC buying.
Platforms like Square’s CashApp are even taking advantage of the stacking sats culture, with features aimed at automating periodic micro BTC purchases. Studies show that dollar-cost averaging — the practice of dividing total investment across fixed intervals — assures positive returns for Bitcoin investors, irrespective of volatile price action. Thus, the events of 2020 so far suggest that Bitcoin is being viewed as a viable safe-haven asset.
Microstrategy Buys $250 Million In Bitcoin
On Aug. 11, MicroStrategy — the world’s largest business intelligence firm — purchased 21,454 BTC, valued at $250 million. The move saw MicroStrategy swapping cash for BTC as its treasury reserve asset in what industry commentators say could be a watershed event for Bitcoin institutional adoption.
MicroStrategy CEO Michael Saylor echoed the sentiments espoused by many BTC proponents, stating in a press release: “Bitcoin is digital gold — harder, stronger, faster, and smarter than any money that has preceded it.”
Saylor’s comments offer a snapshot of how Bitcoin’s perception on Wall Street appears to be changing. Back in December 2013, when one BTC was worth $520, the MicroStrategy CEO was not sold on its value proposition:
Indeed, 2020 has seen Wall Street figures taking a significant interest in Bitcoin. Billionaire hedge fund investor Paul Tudor Jones revealed back in May that 1% of his total assets in BTC are a hedge against inflation, tipping Bitcoin to become the de-facto leader in the emerging global financial landscape.
Despite dismissing BTC as an investment asset earlier in the year, Goldman Sachs is reportedly looking into client requests for cryptocurrencies in another 180-degree turn.
Brian Kerr, CEO of DeFi banking service Kava Labs, told Cointelegraph that businesses now more than ever need robust risk-management planning: “It’s the job of every corporate’s finance department to manage risk.” He added, “It’s a bit irresponsible of treasury departments if they are not considering Bitcoin to hedge risks of their assets.”
Konstantin Anissimov, CEO of crypto exchange platform CEX.IO, highlighted to Cointelegraph the implications of a listed company investing in Bitcoin:
“What is really important here is that a listed company with strict requirements for financial diligence to the shareholders has taken a substantial position in BTC, announced it publicly (as it should do) and has taken a strong position that this move will not have a detrimental effect to the share price or their corporate social responsibility. If this position was taken by a private business, albeit large, then this would not be such a major pivotal piece of news.”
The Bitcoin purchase announcement also had a positive impact on MicroStrategy stock, as it surged by 12%.
Bitcoin As A Treasury Asset
Back in June 2020, crypto research firm Messari estimated that institutional investors allocating 1% of their capital in Bitcoin could drive the BTC spot price to $50,000. Such a surge will see Bitcoin’s market capitalization reach the $1 trillion mark, similar levels to commodities such as the bullion.
A publicly-listed company like MicroStrategy holding Bitcoin as a marketable investment on its corporate balance sheet certainly falls into that same category of institutional investment.
The move also signals an emerging sense of Bitcoin as a more mature asset than it was in previous years, according to Anissimov. “The market now has a substantial proportion of professional trading houses and institutional investors, which dampens the volatility and increases the liquidity in the market. Regulation is also more mature in certain jurisdictions,” he said.
For Ruben Merre, CEO of crypto hardware wallet NGRAVE, Bitcoin’s improving fundamentals such as the meteoric rise in its hash rate over the years and the spread of trading activity are a testament to its maturity. For Merre, investors see Bitcoin as a way to diversify their investments, as there’s a growing mismatch between the stock market and the economic realities on the ground:
“Stimulus spending has a strong effect on stock market prices and even bubble behavior. Meanwhile, economic growth isn’t fully following the pricing, so there is a mismatch. The risk/reward ratio doesn’t make much sense, you might argue. It’s therefore important for institutional investors to diversify.”
More institutional involvement in Bitcoin will likely enhance the maturity of the asset and improve its overall appeal even further. Corporations also wield considerable lobbying power and push favorable regulations that will trigger more growth in the still-nascent crypto scene.
But the sheer volume of the buying positions associated with big-money investors can also cause a new wave of FOMO in the retail space. Given that new coin distribution decreased after the May 2020 halving, demand may outstrip Bitcoin supply, which should exert upward pressure on the spot price.
Potential For Huge Upside
Another interesting aspect of MicroStrategy’s Bitcoin purchase is that it constitutes a direct exposure to the asset, as Saylor believes Bitcoin has “more long-term appreciation potential than cash.” Usually, institutional interest in BTC involves indirect investment via shares in hedge funds or derivative contracts, so holding Bitcoin either via self-custody or through third-party custodians has not been popular.
However, with improving regulatory clarity, this trend might be due for a change. Back in July, the Office of the Comptroller of the Currency granted approval for federally chartered U.S. banks to provide crypto custody service. The news will see national banks in America join the growing trend of large banks extending their custodial services to cryptocurrencies, thereby helping out the big-money investors, who, by law, must store investment assets with approved third-party custodial platforms.
Direct exposure to Bitcoin does come with certain risks given the intermittent volatility of the largest crypto by market capitalization. However, the potential upside for investors who hold significant positions does exist amid expectations of the spot price setting a new all-time high. As Kerr opined, many believe Bitcoin to represent “a call option on the current financial system in that it may be a sunk cost and go to zero, but the upside is tremendous if it happens.”
Bitcoin is no stranger to a parabolic advance within a bull cycle which usually happens over a few months in contrast to the more measured gains for the likes of gold and silver. For Anissimov, this potential return on investment is providing an enticing incentive for institutional players that are keen on riskier alternatives.
So, most seemingly agree that the influx of institutional money into Bitcoin will cause the spot price to climb further. In a note to Cointelegraph, Nisa Amoils, managing partner at crypto hedge fund Grasshopper Capital, summed up the investment thesis of BTC:
“People are looking for a way to protect their wealth or that of their shareholders. Bitcoin has always served as a great tool for that purpose. It is sound money built for a digital world. The provable scarcity of Bitcoin will lead to a higher US dollar value as demand for the artificially capped supply sees material increases in demand.”
Canadian Software Startup Puts 40% of Cash Reserves Into Bitcoin
An Ottawa-based graphics software firm, Snappa, announced Monday its decision to move a significant amount of its cash reserves into bitcoin, citing concerns of inflation and global economic uncertainty.
* Co-founder Christopher Gimmer told CoinDesk in a private message, “The allocation itself represents 40% of our cash reserves.” The company did not mention the number of bitcoins it currently holds, however, which Gimmer explained was a decision made “for privacy reasons.”
* The initial 40% allocation is only the beginning for the seven-person startup. “We’re still accumulating coins, and we don’t plan on selling anytime soon,” Gimmer told CoinDesk. “If we’re right about where bitcoin is heading then our allocation could get very high.”
* In a blog post, Gimmer explained his company’s belief that traditional savings accounts are inferior to other options for growing cash reserves. “I believe we now have a far superior savings technology available to us,” Gimmer wrote. “That technology is Bitcoin.”
* Gimmer also mentioned the recent decision by MicroStrategy to move $250 million into the leading cryptocurrency, which he described as “fascinating.”
MicroStrategy Board Makes Bitcoin Its Primary Reserve Currency, May Increase Its Holdings Beyond $250M
MicroStrategy has outperformed the Nasdaq since buying BTC. Now, it’s doubling down.
MicroStrategy’s board of directors elected to make Bitcoin (BTC) the company’s primary reserve asset. The United States Securities and Exchange Commission disclosure stated that this may lead to the future expansion of the company’s cryptocurrency holdings beyond the original purchase of 21,454 BTC, equivalent to $250 million:
“Bitcoin serving as the primary treasury reserve asset on an ongoing basis, subject to market conditions and anticipated needs of the business for Cash Assets, including future potential share repurchase activity. As a result of this new Policy, the Company’s holdings of bitcoin may increase beyond the $250 million investment that the Company disclosed on August 11, 2020.”
In the press release that accompanied the company’s original acquisition of Bitcoin, MicroStrategy’s CEO, Michael J. Saylor, was quoted as saying:
“This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.”
The move has already caused a slew of copycats, with smaller companies of every shape making similar announcements. It should be noted that MicroStrategy sold a domain to Block.one in 2019 for $30 million.
Perhaps this gave the company’s leadership an appreciation of the value of cryptocurrency. Some of the world’s biggest institutional investors have a stake in the company. This may demonstrate how much more acceptable Bitcoin has become on Wall Street in the past few years.
Since making its original Bitcoin acquisition a month ago, MicroStrategy has outperformed the Nasdaq composite index.
MicroStrategy’s Now-Bullish CEO Explains Why He Bashed Bitcoin Back In 2013
He was shocked that the comment had been uncovered at all.
Back in 2013, Michael Saylor, CEO of business intelligence giant MicroStrategy, posted a tweet against Bitcoin (BTC), forecasting a grim future for the asset. Fast-forward to 2020, during which Saylor’s company now holds a major bullish position in BTC.
#Bitcoin days are numbered. It seems like just a matter of time before it suffers the same fate as online gambling.
Following the company’s move into BTC, Twitter posts began surfacing showing a 2013 tweet from Saylor in which he compared Bitcoin to the allegedly dying online gambling fad. It may be worth noting thatonline gambling has not died either in the time since the tweet.
Once Saylor tipped MicroStrategy’s hand regarding the BTC acquisition this year, the crypto industry responded to the evolution of his mindset with what Saylor called “kind ribbing.”
“I’m really ashamed to say — I didn’t know I tweeted it until the day that I tweeted that I bought $250 million worth of Bitcoin,” Saylor said of his 2013 anti-Bitcoin tweet.
“Then I discovered the hive mind crypto-Twitter consciousness where, all of a sudden, they all went through all my tweets, they found it, they reminded me of it, they compared it.”
Saylor remembers he loved hopping on Twitter around the 2013 time frame, saying he would often tweet out his opinions on whatever was relevant at the time. In the years following, he decided to tweet more strategically, mostly about aspects pertaining to MicroStrategy, although the 2013 Bitcoin doom-and-gloom tweet remains as an example of his early years on Twitter.
Fresh news shows MicroStrategy upping its Bitcoin holdings even further, now holding 38,250 BTC. The company’s stock (MSTR) posted a 9% rally in tandem with the recent Bitcoin purchase.
‘Other Companies Will Follow’ — MSTR Stock Up 9% After Buying Bitcoin
MicroStrategy stock price jumped once again after announcing it has bought a total of $425 million in Bitcoin to date, but will other companies follow in their footsteps?
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.”
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.
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.”
MicroStrategy CEO Says ‘Bitcoin Scales Just Fine As Store Of Value’
Arguably the biggest Bitcoin adoption move of 2020 turned 78,338 off-chain transactions into just 18 on-chain ones, with MicroStrategy praising scalability.
Bitcoin (BTC) as a store of value “scales just fine,” the CEO of the company that just purchased 38,250 BTC has said.
In a tweet on Sep. 17, Michael Saylor revealed more information about MicroStrategy’s dramatic launch into Bitcoin.
Saylor Praises Bitcoin As A Scalable Store Of Value
Continually making the headlines since its first buy in August, MicroStrategy has now swapped over $400 million of spare capital from USD to BTC.
An interview between Saylor and Morgan Creek Digital co-founder, Anthony Pompliano this week underscored his commitment, having previously been highly skeptical of Bitcoin.
Now, his belief in the technical fundamentals of the network — and its future — is certain. The problem of scaling to meet demand, for example, is a non-issue for Saylor thanks to off-chain transactions.
MicroStrategy’s initial buy-in — 21,454 BTC for $250 million — was a case in point.
“We acquired 21,454 BTC via 78,388 off-chain transactions, then secured it in cold storage with 18 on-chain transactions,” he wrote.
“#Bitcoin scales just fine as a store of value.”
Woo: 2021 May Be The Year Of Microstrategy Bitcoin Trailblazers
Continuing, Saylor described a status quo where on-chain transactions for major investors will remain a rarity:
“If #Bitcoin is treated as a treasury reserve asset, based on our model, 99.98% of all transactions will be off-chain, and assets-at-risk will be in cold storage 99.92% of the time.”
Off-chain transactions via solutions such as the Lightning Network allow Bitcoin transaction volume to increase without adding volume to the blockchain and raising fees to appeal to miners.
In his popular book, The Bitcoin Standard, Saifedean Ammous likewise argues that off-chain activity will become the norm once Bitcoin gains a much larger user base.
That could happen sooner rather than later. Following the Pompliano interview, statistician Willy Woo picked up on Saylor highlighting the world’s 35,000 publicly traded companies that have spare cash reserves of $5 trillion.
“I make out if others follow MicroStrategy’s lead and even just 1% of that capital finds its way into BTC, that’s enough to blow Bitcoin cap to $2T,” he tweeted.
Woo added that given MicroStrategy took six months to approve its shift to Bitcoin, any copycat moves would begin to surface in 2021.
MicroStrategy CEO Seems To Embrace Bitcoin Maximalism
From skeptic to maximalist in seven years.
MicroStrategy’s decision to use Bitcoin as its primary reserve currency has Michael Saylor seemingly favoring the asset over altcoins.
In a Sept. 20 tweet, the business intelligence company’s CEO stated that he considers Bitcoin (BTC) to be a crypto asset network, unlike tokens like Ethereum (ETH) or stablecoins, which he referred to as “crypto-application networks.”
Posting a chart from analytics site Bitcoin Dominance, the CEO claimed that the coin’s dominance “has advanced from a low of 71.05% on December 20, 2017 to 93.57% today.”
When considering network dominance in the crypto industry, I find it clarifying to separate crypto-asset networks like #Bitcoin from crypto-application networks like Ethereum & stablecoins. Bitcoin dominance has advanced from a low of 71.05% on December 20, 2017 to 93.57% today. pic.twitter.com/03cbWVyoLY
However, Saylor is intentionally selective when it comes to this data. Bitcoin Dominance’s figures do not include initial coin offerings or stablecoins, but rather “only includes coins using proof-of-work that are attempting to be money.”
According to CoinMarketCap, which takes stablecoins like Tether (USDT) into account, Bitcoin’s dominance was at a yearly low of 56.67% as of Sept. 13, while Messari shows the metric closer to 59%. Both are far from the 93% dominance Saylor tweeted. Ethereum and DeFi have been driving alt season this year, as the 10 largest DeFi tokens now represent a market cap of roughly $9 billion compared to Bitcoin’s $200 billion.
Though initially claiming “Bitcoin’s days are numbered” in 2013, Saylor has turned bullish on the crypto asset in recent weeks following MicroStrategy’s purchase of $250 million worth of BTC as a reserve currency in August. He announced on Sept. 14 that the firm subsequently bought an additional $175 million of BTC.
“Bitcoin scales just fine as a store of value.”
Saylor isn’t alone in the crypto community in discounting the vast majority of altcoins. Emin Gün Sirer, the creator of the first proof-of-work-based crypto, said in April that Bitcoin maximalists are correct to label “95% of the things out there as scams.”
“They’ve just recycled something that belongs to someone else,” he said.
‘Cash Is Trash,’ So Let’s Bet $425 Million On Bitcoin
MicroStrategy could have gotten rid of its excess cash by paying a big dividend or buying back a ton of stock. Instead, the company made a big digital currency bet.
In volatile markets, you can use cash as offense or defense. MicroStrategy Inc., which recently had half-a-billion dollars in cash sitting around, thinks it can do both.
The company could have gotten rid of its excess cash by paying a big dividend or by buying back much of its stock. Instead, MicroStrategy bet half its total assets on bitcoin. So is this a publicly traded company or is it a hedge fund?
This foray into digital currency puts an old paradox of investing in a new light. As the great financial analyst Benjamin Graham observed long ago, the better a company is at producing goods and services, the more likely it is to pile up more cash than it needs to sustain the business. Why keep that surplus cash locked up and idle when investors could put it to better use elsewhere?
Most shareholders and corporate executives weren’t bothered much by excess cash when it yielded 5% or more. Now that yields are near zero, investors need to pay attention: When cash is trash, the pressure to take unprecedented risks with it is likely to rise.
MicroStrategy, based in Tysons Corner, Va., sells technology that enables businesses to analyze internal and external data. With software and services so cheap to produce and provide, the company keeps piling up cash.
MicroStrategy’s revenues have barely grown over the past decade, from $455 million in 2010 to $486 million last year. Yet the company finished 2019 with $566 million in cash and short-term investments, up from $174 million a decade earlier. Even after shelling out $425 million for bitcoin and $61 million for stock buybacks since August, MicroStrategy still has $53 million in cash.
And the shares had been stagnant for years.
MicroStrategy had been one of the hottest stocks in the technology boom of the late 1990s, returning 567% in 1999. The company lost more than 90% the next year amid a Securities and Exchange Commission investigation into its accounting. MicroStrategy restated its financial results and settled administrative reporting charges, without admitting or denying them.
Three managers, including Chief Executive Michael Saylor, also settled civil accounting-fraud charges with the SEC. The executives didn’t admit or deny the charges; Mr. Saylor disgorged more than $8 million and paid a $350,000 penalty. When we spoke this week, Mr. Saylor, who is still CEO, declined to discuss the case.
MicroStrategy never recovered its lost glory. From its initial public offering in June 1998 through the end of 2019, the stock returned an average of 1.4% annually. Over the same period, the S&P 500 gained 7.2% annualized, including dividends.
But 2020 has been a whole new story. In August, when MicroStrategy announced it had invested $250 million in bitcoin, the stock jumped 9% in a day. A month later, the company declared that it would continue to put most of its excess cash into bitcoin. The stock rose 23% in two days.
At their peak on Oct. 23, the company’s shares had doubled in price since their low in early March.
MicroStrategy’s Mr. Saylor says the primary objective of buying bitcoin isn’t to make the stock go up, but to keep the company’s purchasing power from going down.
Thanks to the Federal Reserve’s immense intervention in the economy, the U.S. monetary supply is soaring—by one measure, up more than 20% this year. Mr. Saylor expects that pace to continue at 10% or 15% annually, not just in the U.S. but globally.
“We realized that cash is trash,” he says, “and we needed either to shrink the capital structure or move our cash into something that is going to float on the flood of liquidity and not sink under the flood of liquidity.”
Of course, even as the monetary supply has doubled since late 2008 the Fed has struggled to lift inflation, as officially measured, anywhere close to 2%. While financial assets have soared and some items in the real economy have become more costly, many others have stayed flat or gotten cheaper.
Because the quantity of bitcoin is limited to 21 million, the digital currency can never be “debased,” Mr. Saylor argues, and is therefore bound to hold its value over the long run.
At this week’s price of about $13,500, MicroStrategy’s 38,250 bitcoins were worth more than $515 million, a third of the stock’s total market value. Bitcoin doesn’t only go up, though. In 2018 it bottomed below $3,200, down roughly 80% from a year earlier. (To be fair, five years ago it was about $300.)
I asked if Mr. Saylor was nervous about putting so much of his company’s capital into such an asset.
“What would I be nervous about?” he shot back. “If I had $500 million in cash, that would make me nervous because I think it would go to zero [in purchasing power] over five years. So what’s my choice? I think bitcoin is better than gold as a store of value.”
He added, “It’s not perfect, there’s risk. But I can’t find anything better, and the option of doing nothing is more risky.”
However, MicroStrategy is no longer just a software company. Now it’s a bitcoin bet. Investors who wish to buy bitcoin could always do so themselves with the proceeds of a dividend or share buybacks. The point of buying a stock is to get a stake in a business, not to take a flier on cryptocurrency.
The MicroStrategy Effect? This Firm Is Helping Businesses Save In Bitcoin
The COVID-19 pandemic and its accompanying monetary policy have caused a surge in demand for bitcoin, and now companies are eying “digital gold” to protect their treasuries from cash depreciation.
Announced Monday, bitcoin financial services firm Unchained Capital has released an “advanced business account” specifically targeting firms that not only want to hold bitcoin but want to handle their own private keys rather than rely on some third-party crypto custodian (in keeping with the ethos of “not your keys, not your bitcoin”).
The impetus to launch this service is straightforward and simple: It is no longer just folks in the crypto sphere who are worried about the printing of money, negative interest rates and the like. Just look at MicroStrategy’s recent moves.
Michael Saylor, founder of the business intelligence company, described bitcoin as “superior to cash” and announced that his publicly traded firm had purchased an additional $175 million of it last week, upping MicroStrategy’s total BTC holdings to around $425 million.
MicroStrategy is blazing a trail that many others are now in line to follow, explained Parker Lewis, head of business development at Unchained Capital.
As well as crypto-native businesses, family offices and investment firms, there is also an emergent crop of interested businesses that are not Bitcoin-centric, Lewis said.
“We have companies that you wouldn’t expect, like your local bakery or your local liquor store that hold bitcoin in treasury,” Lewis told CoinDesk. “They are not Bitcoin-centric businesses, but they hold bitcoin and they hold their own keys; both small and large, like the MicroStrategies of this world.”
As for Saylor, he told CoinDesk the numbers tell the tale.
“This year, the real yield on treasury assets dived to something like -20%. We can expect these assets to yield -10% or less for the years to come,” he said via Twitter DMs. “Corporate treasurers need to keep a reasonably liquid, elastic asset on the balance sheet to ensure the company can meet its obligations to employees, customers, vendors, creditors, etc. Bitcoin is the only asset that meets those requirements that also has a positive real yield.”
In times past it would have been hard to imagine the CEO or chief financial officer of a company wanting to mess around with private keys.
“We make it really simple,” said Phil Geiger, Unchained’s head of marketing. “We hold one key, our clients hold two keys, which means that our clients are really in full control over their bitcoin. With these new business accounts, we have built out a combination of enterprise-level controls for different user types, accounting and so on. But at the base of everything, it’s the Bitcoin protocol.”
This is all fine and dandy, but regulated financial firms see a gray area at best when it comes to crypto custody, and are likely to lean towards the closest thing to the traditional world, a regulated custodian such as BitGo Trust.
“At first blush, that’s entirely logical,” said Lewis. “But I think there will be this push and pull in terms of the way things were, and how they are shifting over to the way things will be. We have this new form of money; do we need to forfeit it to legacy regulation that has existed for 30 or 40 years? Maybe the reality is that the regulations need to change to deliver the best security.”
So if a CFO needs to quickly get their hands on fiat how does that typically work?
“I think this can be tailored to the size of the organization,” said Lewis. “We have relationships with five or six OTC desks as well as being able to trade on exchange.”
Aleksandar Svetski, co-founder of bitcoin savings app Amber, has held 50% of the firm’s treasury in bitcoin for the past year. He pointed to abject conditions around cash and interest rates as a compelling incentive.
“Look at things like negative interest rates,” said Svetski. “What the fuck kind of ‘Twilight Zone’ world do we live in where you now have to pay a bank to hold your money? Of course people are looking for a non-cash alternative. Anyone who isn’t thinking about holding bitcoin now is crazy.”
Now a total of six public companies, MicroStrategy (1st and 2nd), Riot Blockchain, Cypherpunk Holdings, and Grayscale Bitcoin Trust hold Bitcoin in their Treasuries.
What Are YOU Waiting On?
Companies have started to expand their USD-denominated balance sheet and jump into BTC.
Today, there is a lot of green in the crypto market.
In the past 24 hours, nearly $15 billion has been added to the overall crypto market cap.
And all of this has been because of a nice pop up in Bitcoin. Yesterday, the price of BTC jumped to nearly $11,000 and today it surpassed it.
This 5.6% jump in BTC price has been the result of Jack Dorsey’s payments company Square making a $50 million investment in Bitcoin, which represents 1% of its assets.
“Given the rapid evolution of cryptocurrency and unprecedented uncertainty from a macroeconomic and currency regime perspective, we believe now is the right time for us to expand our largely USD-denominated balance sheet and make a meaningful investment in bitcoin,”noted Square in its Bitcoin investment whitepaper.
These 4,709 BTC were purchased over-the-counter over a predetermined 24-hours period to maintain transaction privacy and price slippage. These BTC are stored in its “Subzero”, the open-source Hardware Security Module-backed solution.
The community is super stoked about this, seeing it as a big development that would bring others into the market.
“A big deal,” commented Galaxy’s Mike Novogratz. “It’s not the first guy dancing. It’s the second guy. This is now a movement. Corp balance sheets.”
Novogratz also revealed that Galaxy also “has a lot of BTC on our balance sheet.”
With this, now a total of six public companies viz. MicroStrategy (1st and 2nd), Riot Blockchain, Cypherpunk Holdings, and Grayscale Bitcoin Trust hold Bitcoin in their Treasuries.
Amidst this market euphoria, other companies also revealed that they have also invested in Bitcoin.
eToro CEO divulged that they had BTC in their treasury since 2011 and are “still Hodling.”
Jesse Powell, the founder, and CEO of crypto exchange Kraken, also admitted to it in a roundabout way as he answered a crypto enthusiast asking about when his company would make it to this list.
“You think Kraken hasn’t been accumulating bitcoin over the last 9 years?” Powell said.
While corporations adding bitcoin to their balance sheet is bullish, it is also “overrated,” according to trader and economist Alex Kruger who said, “The function of a corporate treasury is not to *invest*.
Corporate demand for gold as an inflation hedge is minimal. Thus the likelihood of a bitcoin domino effect among corporates is very low.”
But the interesting thing that could happen, if this becomes a trend is “major banks would be forced to have a crypto team on payroll to service corporate clients’ hedging needs,” he added.
The Total Market Cap Of Public Crypto Stocks Has Quadrupled Since January
The combined capitalization of publicly-traded crypto stocks surged from roughly $25 billion in January to around $100B today.
The combined market cap of publicly-listed crypto firms has roughly quadrupled this year while the number of public digital asset firms has increased by 28% over the same period.
A new report from CoinShares estimates that public “cryptocurrency pure play companies” were worth roughly $25 billion at the start of the year, with mining firms and financial service providers representing the lion’s share of value.
While the report notes that 16 digital asset firms have gone public this year — increasing the number of public crypto companies to 57 public companies, the combined capitalization of said firms has skyrocketed to nearly $100 billion.
This year has already seen the greatest influx of public crypto firms out of any calendar year, followed by 2018 with 14. Just three firms went public during 2014, 2016 and 2017 respectively.
The report highlighted the April initial public offering (IPO) of leading U.S.-based centralized exchange Coinbase, describing the offering as “the first true large cap pure play in this sector.”
Amid Coinbase’s April IPO, the capitalization of public digital asset firms surged to a record high of nearly $120 billion. By contrast, the sector’s combined market cap was less than $3 billion at the start of 2020.
The 15 public crypto exchanges now represent 62% of the sector’s combined capitalization at roughly $59 billion, followed by 19 financial services firms with nearly $20 billion and 20 mining companies with $10 billion.
Public mining firms have seen the strongest year-to-date (YTD) gains with 121% on average, followed by crypto financial services companies with 105% and exchanges with just 34%.
The crypto firms that went public in 2016 have enjoyed the largest gains in share price this year, posting an increase of roughly 140% on average. Then 2018’s cohort ranks second by YTD gains with 115% on average, followed by 2017 with approximately 110%, and 2019 with 95%.
2020’s firms are currently up by just 19% on average, with the report suggesting that “most of these companies were already floated at higher valuations.”
CoinShares also notes that the average capitalization of public crypto firms has increased dramatically this year from $1.1 billion in 2019 and 2020 to $3.8 billion.
The liquidity of public crypto stocks has also increased significantly this year, with most shares representing less than $500,000 in daily volume until the end of 2020.
While only two of 23 listed crypto firms were considered liquid at the end of the 2019, the figure jumped to 20 of 41 in December 2020, and 48 of 57 as of July 2021
Bitcoin Hits $11K As Square Exposes $2.3T Corporate Money Pot
Payments company Square’s announcement that it would put some $50 million, or 1% of its assets, into bitcoin has touched off speculation that more corporations might do the same.
Jack Dorsey, the Twitter CEO who also helms Square, is a longtime bitcoin bull, so it wasn’t a huge surprise his company would put some of its corporate liquidity into the cryptocurrency. He’s following the path of MicroStrategy CEO Michael Saylor, who has invested at least $425 million of the company’s assets in bitcoin.
None other than Changpeng “CZ” Zhao, CEO of Binance, the world’s largest cryptocurrency exchange, tweeted a question: “Who’s going to be the 3rd public company to hold #bitcoin in treasury?” Guesses included Twitter, Tesla, Apple, Warren Buffett’s Berkshire Hathaway, even the burger chain Wendy’s.
“It’s a bit surreal to see gigantic corporate entities now going knee-deep in bitcoin,” Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics, wrote to subscribers on Thursday.
One clever, enterprising soul even ginned up a spreadsheet to keep track of the corporate purchases and published it as a new website, bitcointreasuries.org:
Companies in the Standard & Poor’s 500 Index of large U.S. stocks have a combined $2.3 trillion in cash and short-term investments. So a 1% across-the-board allocation to bitcoin would amount to $23 billion of purchases. That’s just over 10% of bitcoin’s total market capitalization, currently about $200 billion.
A big bullish investment thesis for bitcoin is that large institutional investors are on the verge of diving into cryptocurrencies as an asset class, led by money managers like Fidelity Investments that have embraced the new technology and digital-asset markets.
Now it seems like corporate purchases might add to that buying pressure.
Dorsey tweeted out a “white paper” to his 4.7 million followers explaining just how Square had come to buy its bitcoin — noting that the transparency was intended “so others can do the same.”
“To maintain transaction privacy and price slippage on execution, treasury purchased the bitcoin over-the-counter with a bitcoin liquidity provider that we currently use as part of Cash App’s bitcoin trading product,” according to the whitepaper. “We negotiated a spread on top of a public bitcoin index and executed trades using a time-weighted average price (TWAP) over a predetermined 24-hour period with low expected price volatility and high market liquidity, in order to reduce risks associated with cost and pricing.”
Got that, corporate treasurers?
Bitcoin Price Steady As $10B Asset Manager Scoops Up 10,000 BTC
Stone Ridge follows MicroStrategy in going big on BTC as a report puts the indirect cost of Coronavirus at $16 trillion.
Bitcoin (BTC) is winning the battle of the safe havens as another corporate buy-in sees $115 million enter its books.
Asset management giant Stone Ridge confirmed that it made the significant purchase via its spin-off New York Digital Investment Group or NYDIG, which now has over $1 billion in assets under management.
Economist: Fed Must Print $5 Trillion In 2021
“The macro backdrop against the public health backdrop has caused a lot of people to rethink their portfolio composition,” the company’s new CEO, Robert Gutmann, told Forbes on Oct. 13.
Michael Saylor, CEO of MicroStrategy, which purchased $425 million of BTC in August and September, responded:
“As the trillions of dollars on the balance sheets of banks, asset managers, insurance firms, endowments, & family offices begin their migration to the #Bitcoin universe, they will need firms like NYDIG to guide them. $1 billion down, more to go.”
The news comes as a new report warns that the United States Federal Reserve will need to print $5 trillion next year.
Published on Oct. 12, the report by economists Lawrence ‘Larry’ Summers and David Cutler calculates the indirect cost of the Coronavirus to be $16 trillion.
“The total cost is estimated at more than $16 trillion, or approximately 90% of the annual gross domestic product of the US. For a family of 4, the estimated loss would be nearly $200 000,” it summarizes.
“Approximately half of this amount is the lost income from the COVID-19–induced recession; the remainder is the economic effects of shorter and less healthy life.”
Commenting on the findings, David Rosenberg, chief economist at Rosenberg Research & Associates, concluded that the Fed alone would thus need to print $5 trillion of liquidity in 2021.
This would compound the feeling of unease which began with this year’s mass money printing, which has sent U.S. national debt over $27 trillion.
Rosenberg told Twitter followers to buy gold, but for Max Keiser, there is a clear alternative which makes more sense.
“Gold works, but #Bitcoin is THE FASTEST HORSE IN THE RACE,” he wrote in reply to Rosenberg.
Bitcoin hit highs of $11,690 on Tuesday before returning towards $11,400 at press time, still on monthly gains of 10.5% and year-to-date returns of 60%. As Cointelegraph reported, hopes are increasing that the short term will bring further upside, with even $17,000 coming into play should $12,000 be flipped to support.
From V-shaped to K-shaped
For the fiat economy, however, the picture is looking much bleaker, according to new comments from the International Monetary Fund (IMF).
Speaking to CNBC last week, IMF Managing Director Kristalina Georgieva said that the outlook for many countries was now not a V-shaped recovery but a K-shaped one.
“Most countries are going to be faced with uneven recovery and we see in many cases a ‘K,’ with parts of the economy doing really well, and other parts contracting dramatically,” she forecast.
For Keiser, this was a textbook definition of a phenomenon he calls “neofeudalism.” This involves the concentration of more of the world’s wealth closer to the state at the expense of those further away, creating the modern equivalent of lords and peasants.
“The extreme wealth concentration created by Covid becomes permanent. This would be a new Dark Ages,” he tweeted on Wednesday.
“Bitcoin fixes this.”
Billionaire UK Newspaper Owner Calls DeFi Technology ‘Revolutionary’
UK media boss and former banker Alexander Lebedev has revealed he is looking to launch a decentralized finance powered “bank 2.0.”
Alexander Lebedev, the owner of U.K. newspapers Evening Standard and The Independent, along with Russian publication Novaya Gazeta, has spoken glowingly of the potential for cryptocurrency and smart contracts to revolutionize finance.
In an extensive 1800 word opinion piece published in The Independent on October 13, the billionaire predicted blockchain tech will disrupt what he described as a parasitic global banking oligopoly, asserting that “blockchain technologies and smart contracts will make it unnecessary to employ the vast majority of people in the financial sector.”
Although he thinks the current “explosive growth of DeFi platforms is driven by a rapid influx of liquidity” and “cannot continue indefinitely” he says that nevertheless:
“The technologies embedded in this infrastructure open up tremendous opportunities for rebuilding the global financial system.”
Lebedev said that smart contracts allow customers to access financial services “without the participation of an intermediary in the form of the bank itself,” preventing “greedy bankers” from stealing clients’ funds.
Lebedev also revealed he has invested $100,000 into an Estonia-based yield farming protocol as “an experiment” and seemed surprised at the quick returns. He is now looking to establish an “Independent Decentralized Financial Ecosystem” of his own.
The platform will seek to offer “the full range of services of traditional banks,” including “currency exchange, deposits, lending, settlement and cash services, [and] local and international transfers.”
The former banker noted that global regulators are increasingly warming to crypto assets, citing recent moves to recognize stablecoins and security tokens on the part of German, Chinese, Swiss, and U.S lawmakers.
“The next step will be the ‘digitalization’ of real assets, including production facilities, real estate, goods and services, with their holding in distributed ledgers.”
Part of the reason for his belief in the potential of cryptocurrency is that in its current form, Lebedev asserts that the global financial system is “leading the world economy to disaster.”
Lebedev devoted 25 years to banking and purchased Russia’s third-largest private bank, the National Reserve Bank in 1995. He claims to have observed a shift in contemporary banking practices among his competitors toward “pocketing clients’ money.” Lebedev added that thousands of Russian “banksters” have misappropriated “more than $100 million of their clients’ money” since the 1990s.
He said that “billions of people are completely cut off from banking services” due to their reduced access to financial resources, attributing their economic exclusion to the banking class having nothing to steal from them.
“Perhaps we are on the verge of a real revolution in the international financial system, and the end of the bankster.”
Public Companies Hold Almost $7B In Bitcoin In Heads-Up To Grayscale
Grayscale’s $5.1 billion in Bitcoin under management is fast being challenged by firms including CoinShares and MicroStrategy.
Bitcoin (BTC) holdings at public companies topped $6.8 billion this year as newcomers catch up with industry heavyweight Grayscale.
According to monitoring resource Coin98 Analytics, a total of 13 public companies have now invested in Bitcoin.
Putting Grayscale’s “Sun” In The Shade
Asset management giant Grayscale remains the largest BTC player with 449,596 BTC ($5.14 billion) under its control, followed by CoinShares’ 69,730 BTC ($797 million).
MicroStrategy, the firm which made waves when it announced it had moved to adopt a “Bitcoin Standard,” has 38,250 BTC ($437.1 million). In fourth place is Mike Novogratz’s Galaxy Digital, which controls 16,551 BTC ($189.1 million).
In total, the 13 companies have almost 600,000 BTC ($6.86 billion) locked up, a number which is increasing with Grayscale thus far remaining in the lead.
“Grayscale is the sun,” its confident CEO Barry Silbert commented on Coin98 Analytics’ numbers.
For all Silbert’s publicity activities, however, it is MicroStrategy CEO Michael Saylor who has arguably made the biggest impression in cryptocurrency this year. After the purchase, Saylor began giving regular interviews on Bitcoin’s supremacy over fiat currency and continues to be highly active on social media with the same message.
Replying to a tweet by Silbert on Oct. 12, in which he discussed the Bank of England’s perspective on Bitcoin, Saylor said:
“#Bitcoin is the first digital monetary system capable of storing all the money in the world for every individual, corporation, and government in a fair & equitable manner, without losing any of it. If that’s not intrinsically valuable, what is?”
Bitcoin Shows Clear Dollar Divergence
The past month meanwhile has seen Bitcoin diverge from both U.S. dollar strength and VIX volatility, providing new opportunities for investors keen to diversify.
According to a comparison from Cointelegraph Markets and Digital Assets Data, it is stocks in the form of the S&P 500 and gold which now see increasing correlative patterns with BTC.
This has in turn boosted existing anticipation of a clean divergence away from traditional markets — a “decoupling” for Bitcoin paves the way for significant price gains, analysts argue.
JPMorgan Calls Square’s $50M Bitcoin Investment ‘Strong Vote Of Confidence’ For The Cryptocurrency
Square’s recently announced $50 million investment in bitcoin (BTC) is a “strong vote of confidence for the future of bitcoin” and a signal the payments company sees “a lot of potential” for the cryptocurrency as an asset, JPMorgan analysts said in a report dated Tuesday.
* While Square’s $50 million investment pales next to MicroStrategy’s recent $425 million loading up of the cryptocurrency, JPMorgan’s global market strategists wrote that Square is likely to make more purchases.
* Other payment companies will also likely follow in Square’s footsteps or risk getting shut out of a growing segment, the JPMorgan analysts wrote.
* Millennials have been using Square’s Cash App to buy BTC, the researchers noted, and that demand, along with MicroStrategy’s purchases, indicate Q3’s bitcoin demand exceeded supply at a greater level than Q2’s.
* While noting that options contracts to BTC have risen due to how institutional clients prefer to deal with established exchanges like the CME, the JPMorgan strategists said it’s likely retail traffic is driving the surge in options.
* Square’s investment is a strong vote of confidence for the long term because the September sell-off in BTC only partly alleviated what the JPMorgan team described as overbought conditions created during late July/early August. However, an overhang of net long positions could create a headwind for the price of BTC in the near term, the analysts said.
The Next Big Treasure: Corporations Buy Up Bitcoin As A Treasury Reserve
The entry of firms like Square, MicroStrategy and Stone Ridge may open the BTC floodgates and provide “confidence for the rest to follow.”
October is a time for surprises. On Oct. 8, right on cue, mobile payments giant Square, which boasts a market cap of $86.6 billion, announced that it had invested $50 million in Bitcoin (BTC). Five days later, asset manager Stone Ridge Holdings, which manages over $10 billion in assets, disclosed that it had purchased more than 10,000 BTC, worth around $114 million, as part of its treasury reserve strategy.
They both followed MicroStrategy, a Nasdaq-listed asset manager, which made known last month that it had accumulated $425 million in Bitcoin, making BTC the principal holding in its treasury reserve strategy.
Three publicly owned companies, three big BTC purchases — it may be mere coincidence. On the other hand, the Federal Reserve’s balance sheet has ballooned by $3 trillion since the beginning of 2019, while the U.S. dollar has depreciated 70% against BTC — as Stone Ridge founder Ross Stevens noted in the firm’s Oct. 13 press release.
BTC: The New Reserve Asset?
How do the cognoscenti explain it? The U.S. dollar is falling; bond yields are almost non-existent; and gold is underperforming. Liquidity-flush firms have fewer places to put their cash — so they are turning to cryptocurrency.
“We are seeing a new trend emerge where corporations are using Bitcoin as a reserve asset for part or majority of their treasury,” pronounced Anthony Pompliano in his Oct. 15 newsletter. Saifedean Ammous, economist and author of The Bitcoin Standard: The Decentralized Alternative to Central Banking, told Cointelegraph:
“While I would have expected to see such firms take small positions more as a hedge, it speaks volume to the growing credibility of Bitcoin that as soon as they became intrigued by the value proposition, they chose to go with a large allocation.”
“Scrambling For Alternative Investments”
Edward Moya, a senior market analyst at Oanda — a forex trading company — told Cointelegraph that the COVID-19 pandemic has changed the macro backdrop for fiat currencies, adding:
“The Fed, in particular, has clearly signaled an ultra-accommodative monetary stance will remain in place for a few years, and that is making many institutional investors scramble for alternative investments.”
Gold, the traditional safe haven in crisis times, has disappointed recently, and as a result, “Bitcoin has emerged as a favorite diversification play away from bonds and will likely steadily attract new institutional investors,” said Moya. Ammous further added:
“There is the short-term concern about devaluation of the dollar in light of the increased amount of government spending and stimulus in response to the corona panic crisis.”
Paul Cappelli, a portfolio manager at Galaxy Fund Management, told Cointelegraph that “a more sophisticated investor base has come to understand its [BTC’s] value as a non-sovereign, fixed supply, deflationary asset.” Meanwhile, Lennard Neo, head of research at Stack Funds, commented to Cointelegraph:
“These firms probably see Bitcoin as a hedge or insurance against current market conditions. […] With these companies entering the markets, it opens the floodgates and establishes some form of confidence for the rest to follow.”
A Longer-Term Worry
But COVID-19 distress may soon abate, or so one fervently hopes. This leaves “the longer-term critical problem faced by many companies with the diminishing yield they can get on their cash reserves by holding them in banks or treasury bonds,” according to Ammous.
In the past, companies could hold their reserves in government bonds and be reasonably sure of outperforming the consumer price index (CPI) — i.e., inflation. But today, “there seems to be a growing segment of companies that no longer reasonably expect that into the future,” said Ammous.
Indeed, buried within Stone Ridge’s announcement was a call to banks and philanthropies to likewise make Bitcoin a principal component of their treasury reserve strategies.
To that end, Stone Ridge was offering up the services of its New York Digital Investment Group unit, which holds a license from New York State to convert dollars into crypto and back again, along with core custody, financing, and Anti-Money Laundering and Know Your Customer capabilities.
Moya cautioned that BTC remains a risky asset, though that could soon change: “Both Europe and America are struggling with the coronavirus, and investors are widely expecting governments and central banks to continue providing massive amounts of stimulus into the economy. BTC for now remains a risky asset and primarily increases in value when risk appetite is strong.
Eventually, once the dollar resumes a steady downward trend, Bitcoin and other cryptos will attract some safe-haven flows alongside gold.”
Will Square Lead The Way?
Apart from what may or not happen with corporate treasuries, the Square Inc. investment could have reverberations. A $50-million investment in BTC may seem modest for a firm whose market capitalization now surpasses Goldman Sachs’, but most analysts expect that crypto investment will grow.
Square has been bullish on Bitcoin for some years now. Its Cash App service enables users to buy and sell Bitcoin, and some analysts believe other payment firms will now have to facilitate crypto investment in some form — or risk being left behind.
It hasn’t escaped notice, either, that the younger generation, the Millennials, are especially keen on cryptocurrencies such as Bitcoin.
But apart from payment firms, could institutional investors and/or Fortune 500 companies follow Square’s lead as well? “Yes.
This trend has moved from an ‘if’ scenario to a ‘when’ scenario,” according to Cappelli. Institutional investors, too, will have to find new ways to diversify their portfolios and maximize balance sheet returns. Meanwhile, BTC has risen 50% since the beginning of the year.
But only 18.4 million BTC are now in circulation, and supply could be a problem. “With only roughly 2.5 million Bitcoin left to be mined, many institutional investors will look at other cryptocurrencies for better upside potential,” added Moya.
Ease of access and options that meet diligence and compliance standards are also critical, said Cappelli, adding: “Institutions mainly want their digital asset investments to look and feel like other more traditional investments in their portfolio with everything from service providers to reporting.”
It’s helped that over the past three years, many traditional players have entered the space “like Fidelity, NYSE, Bloomberg, the CME, Deloitte, KPMG, etc. They’ve all expanded their offerings to include digital assets and this trend is growing,” Cappelli told Cointelegraph.
This transformation won’t fail for lack of infrastructure, added Neo, who applauded the institutional-grade platforms that have been built by Fidelity and others. “We view education and regulations as among the most significant barriers” that large firms must overcome if they are to adopt crypto into their core businesses.
What Is A Significant Investment Size?
What could be considered a significant crypto investment for a large hedge fund or institutional investor? “Given the volatility and where the asset class stands today, we have consistently recommended a 50 BP (basis point)-to-2% allocation for suitable investors,” answered Cappelli. As Bitcoin and the overall asset class matures, that allocation could grow further.
Moya told Cointelegraph that hedge funds and institutional investors will be more likely to have around 1% exposure to cryptocurrencies. Publicly held corporations, for their part, “will be more interested in creating their own cryptocurrencies, but the regulatory battle that hit Facebook’s Libra project has demotivated many companies.”
He added: “Eventually, a large company will take a decent-sized investment, and that should be enough to force other firms to follow suit.”
A Strictly Limited Supply
Reflecting on the recent public-firm announcements, Ammous told Cointelegraph: “What was most interesting for me about the MicroStrategy and Stone Ridge purchases is that these are not companies that deal with Bitcoin as part of their core business, and yet they chose to place the majority of their corporate reserves in Bitcoin, not just a small fraction.”
“We believe that Bitcoin has the potential to be a more ubiquitous currency in the future,” said Square’s chief financial officer, Amrita Ahuja. “As it grows in adoption, we intend to learn and participate in a disciplined way.”
It was Satoshi Nakomoto’s vision that in times of crisis, governments would never resist the temptation to print more money — even at the risk of debasing their currency — so Bitcoin’s founder wrote into the cryptocurrency’s code a 21-million BTC limit.
No more than that could ever be minted, and that appears to have served Bitcoin well in the time of COVID-19. As Ammous told Cointelegraph, “There seems to be a growing recognition that the strictly limited supply of Bitcoin gives it a good chance at maintaining its value well into the future.”
‘Garbage’ Market Data Is Holding Bitcoin Back: MicroStrategy CEO
MicroStrategy CEO Michael Saylor strongly criticized widely distributed bitcoin markets data as “garbage” and said it severely misrepresents of his own experience with the market’s real liquidity after investing in bitcoin.
In a live interview Tuesday with Hedgeye CEO Keith McCullough, Saylor said bitcoin volume is being reported at a wildly inflated $24.76 billion, referencing the current volume on Apple’s Stocks application. That number is similar to 24-hour bitcoin volume of $20.3 billion reported by CoinGecko.
This data “ships to a billion devices in the world,” Saylor noted, referring to Apple. “It’s garbage.”
“I know for a fact you can’t buy more than $35 million a day without people knowing, so there’s no freaking way there’s $24 billion trading,” Saylor explained, adding that he thinks bad data is “holding back bitcoin.” “It’s just awful.”
Estimates of what volume is “real” are “still all over the map,” said Galen Moore, senior analyst at CoinDesk Research. In January, Moore wrote that, for many cryptocurrency market participants, “data is a marketing tool instead of a revenue source,” and some exchanges are “exaggerating volumes in order to enhance their perceived liquidity.”
In a March 2019 report to the Securities and Exchange Commission (SEC), San Francisco-based Bitwise Asset Management found that approximately 95% of volume reported on popular cryptocurrency data aggregation websites is fake.
“Where can you find something so incredibly compelling that has such bad data around it relative to other assets?” Saylor asked rhetorically.
On a positive note, Saylor said he “love[s] the fact that the data is a little immature” since it represents “the pain and the work of being first or being early.”
Referring to high-quality markets data, Saylor said simply, “The market needs it.”
UK-Listed Firm Mode Putting Up to 10% of Cash Reserves Into Bitcoin
Mode Global Holdings PLC, a London Stock Exchange-listed company, has announced plans to make a “significant purchase” of bitcoin as part of its treasury investment strategy.
* In a press release on Wednesday, the fintech group said it will convert up to 10% of its cash reserves into the cryptocurrency as part of a long-term strategy to “protect investors’ assets from currency debasement.”
* With interest rates in the U.K. at a record low of 0.1%, Mode said it would also seek to diversify away from low-interest money market instruments to maximize the value of returns from its recent initial public offering.
* “Faced with the challenges of COVID-19 and with U.K. interest rates at the lowest level in the Bank of England’s 326-year history, our confidence in the long-term value of bitcoin has only increased,” said Jonathan Rowland, Mode’s executive chairman.
* “Today’s allocation is executed through a modern, forward-looking but prudent treasury management strategy,” he added.
* With the news, the company follows MicroStrategy and Jack Dorsey’s Square in deciding to place a portion of their treasury reserves into bitcoin.
* MicroStrategy put $425 million into bitcoin, according to a series of disclosures, while Square invested $50 million.
* Mode said it recognized the potential of bitcoin as “a reliable store of value and an attractive investment due to the asset’s asymmetric risk/reward attributes and safe haven status.”
* The firm did not disclose a cash value of the bitcoin allocation.
Michael Saylor Claims The Company Will Hold Bitcoin For ‘100 Years’
Microstrategy CEO Michael Saylor plans to hold his Bitcoin for 100 years, describing it as “the world’s best collateral.”
Microstrategy CEO Michael Saylor said he will hold his company’s Bitcoin (BTC) for 100 years, and has no intention of selling it.
On Aug. 11, the business intelligence firm announced it had purchased 21,454 BTC for $250 million. This investment is now worth more than $278 million, representing an 11% increase in two months, and has purchased more Bitcoin since.
In a new interview with Real Vision CEO Raoul Pal, Saylor said the decision to invest $250 million was informed by a discussion between its board of directors and the firm’s investors, auditor and executives. Saylor explained:
“This is not a speculation, nor a hedge. It is a deliberate corporate strategy to adopt the Bitcoin Standard.”
Microstrategy decided to restructure its treasury in response to recent global economic uncertainty, looking to explore assets suited to providing a long-term store of value.
But after considering a variety of options with a 100-year outlook, Saylor decided Bitcoin was the only option. Tax and fees kill almost all other assets, he concluded, and those that aren’t killed are instead crippled because they are controlled by a CEO, government or country.
Bitcoin, on the other hand, is evolving, and over time it gets harder, stronger and faster, Saylor concluded, describing BTC as a “hive of cybernetic hornets protected by a wall of encrypted energy.”
When looking at Ethereum as an alternative to Bitcoin, he told Pal it didn’t compare, as they are “still chasing after functionality.” He explained that “it still has to be proven,” adding:
“There are centralized competitors to it and they’re [Ethereum] not done with the functional architecture yet.”
The fact that Bitcoin is so big, compared with all other cryptocurrencies, is “the market screaming to you there is a winner, […] it’s eating the world.”
Saylor asserted Bitcoin is the world’s best collateral and doesn’t even compare to gold or any other commodities. He told Pal that if you hold $100 million in cash over 100 years, you will lose 99% of it, and if held in gold, you will still lose 85% at best.
Saylor described Bitcoin as performing similar monetary utilities as gold, only better and without the fear of dilution — likening BTC to gold as what steel is to bricks:
“Bitcoin, if it’s not a hundred times better than gold, it is a million times better than gold, and there is nothing close to it.”
With Bitcoin, Saylor argued, “anybody can inspect the fact that I own the Bitcoin in one second,” and yet it can be “sent anywhere in the world for $5.” He added that he could liquidate $100 million BTC on “a Saturday afternoon.”
Saylor told Pal that many people believe he has weak hands, saying “Ya, Saylor’s going to buy it and he’s going to dump it. He’s going to buy it and then buy another company with it. He’s going to buy it until he gets this profit and do whatever.” But in reality, he isn’t going to sell it, explaining that he is in it for the long haul:
“They don’t understand the mindset of long. I’m buying it for the dude that’s going to work for the dude that’s going to get hired by the guy who takes over my job in 100 years.”
Saylor finished the two-hour-long interview by noting that his executives are closely watching developers in the crypto space:
“My whole board is listening to what you guys are saying.”
Abra CEO’s Portfolio Is 50% Bitcoin As Cash Is ‘Becoming Worthless’
Abra’s CEO purportedly increased his holdings prior to Bitcoin touching new 2020 highs.
The co-founder and CEO of major cryptocurrency company Abra is clearly bullish on Bitcoin (BTC).
In an Oct. 23 tweet, Bill Barhydt, CEO of peer-to-peer payments platform Abra, claimed that he has significantly increased his Bitcoin holdings a few weeks ago. According to the CEO, Bitcoin now accounts for 50% of his total investment portfolio.
Barhydt talked about his holdings on an episode of Money Talks. In an Oct. 23 YouTube live stream, Barhydt reiterated his bullish stance on Bitcoin, claiming that “Bitcoin is the single best investment opportunity in the world right now.”
The executive said that Bitcoin’s scarcity is one of the biggest reasons why the cryptocurrency is the best investment option. “As the minting of new Bitcoin approaches zero in the coming years, its value versus fiat will continue to skyrocket in my opinion,” Barhydt said.
“Cash, or government-printed money also called fiat, is actually becoming worthless, while Bitcoin’s value remains constant. There will never be less fiat printed than is now. Cash is only going to get more and more worthless.”
During the live stream, Barhydt also touched upon stablecoins like Tether (USDT) and USD Coin (USDC) as well as central bank digital currencies, or CBDCs. He argued that the issuance of global CBDCs like the digital yuan does not mean that central banks are going to stop printing money.
“It’s the opposite, this actually makes it easier for them to continue their irresponsible behavior of simply printing money at will,” Barhydt said.
Barhydt is known as one of the most prominent Bitcoin bulls. In early October 2020, Barhydt claimed that he has been bullish on BTC price since 2015. Previously, Barhydt called Bitcoin a store of value comparable to gold.
The CEO’s comments follow Bitcoin hitting new highs this year. On Oct. 22, Bitcoin price recorded its new 2020 high of $13,217 in the aftermath of PayPal enabling cryptocurrency purchases.
Subsequently, famous Wall Street investor and billionaire Paul Tudor Jones praised Bitcoin on CNBC’s Squawk Box morning show, stating that he likes Bitcoin “even more than I did then.” The billionaire investor also claimed that holds a “small single-digit investment” in Bitcoin.
MicroStrategy’s Crypto Holdings May Be Paying Off More Than Its Business
With Bitcoin’s rises past $13,700, the company’s BTC holdings are currently worth more than $525M.
Business intelligence firm MicroStrategy’s Bitcoin investment is paying off in a big way, with an estimated $100 million in profit.
According to data published Oct. 27 by independent crypto researcher Kevin Rooke, MicroStrategy has earned more from its Bitcoin (BTC) investment than it did through its actual business for the last three years, from Q1 2017 to Q2 2020.
Rooke’s data shows that the business intelligence firm’s 38,250 BTC holdings — worth roughly $425 million at the time of purchase in August and September — were valued at more than $525 million during the recent price surge to $13,745.
According to the researcher, Microstrategy only earned $78 million in net income from its business operations in the last three and a half years.
“Our recent decision to make Bitcoin our primary treasury reserve asset is the latest example of MicroStrategy’s embrace of virtual technologies,” said CEO Michael Saylor regarding the firm’s most recent quarterly report. “The purchase of $425 million of Bitcoin during the quarter offers the possibility of greater return potential for investors than holding such balances in cash and has increased the overall visibility of MicroStrategy in the market.”
MicroStrategy initially purchased 21,454 BTC in August for $250 million, adopting the cryptocurrency as its primary reserve asset. Following the initial investment, the firm bought an additional 16,796 Bitcoin for $175 million.
Though the company added digital assets to its quarterly financial report for the first time in Q3 2020, it also reported a $14.2 million net loss in income from its business operations. MicroStrategy stated in the future, it would purchase or sell more BTC depending on the Treasury Reserve Policy.
Initially claiming “Bitcoin’s days are numbered” in 2013, Saylor has since turned bullish on the cryptocurrency. In the weeks since MicroStrategy’s initial $425 million investment, he has seemingly embraced a Bitcoin maximalist mindset by calling BTC one of the few “crypto-asset networks.”
Bitcoin Is The Best Treasury Reserve Asset Humanity’s Ever Had
You could easily lose up to 90% of your fiat savings to inflation alone in 100 years, but that would never happen with Bitcoin.
At the time of writing this article, around 3.6% of Bitcoin (BTC) is locked up in long-term holdings by institutional investors.
According to the data, 13 entities have amassed close to 600,000 BTC — about 2.85% of all Bitcoins and worth approximately $6.9 billion.
The list includes MicroStrategy at the top, with close to 38,250 BTC (about $450 million). The second on the list is Galaxy Digital Holdings with 16,651 BTC (about $198 million). The third, with 4,709 BTC, is the payment company Square Inc., founded by Twitter’s CEO Jack Dorsey.
Separately, some companies help their clients invest in BTC. One such company is Grayscale Investments through its GBTC trust, which holds around 450,000 BTC.
With that stated, the amount of Bitcoin that publicly traded companies hold as a reserve is a tiny fraction of the corporate treasuries around the world. Indeed, the actual amount of cash held in reserves is in the trillions of U.S. dollars.
But Consider This: Nine companies in the S&P 500 are sitting on close to $600 billion in cash and short-term investments, and if just 5% (or $30 billion) of that amount is converted into Bitcoin, the price could easily increase fivefold.
Of course, there is the question of where to place Bitcoin in company investment portfolios. The most likely category is “alternative investment.” The need to strike a balance between traditional and alternative investments might reduce the appetite the market might have for the cryptocurrency.
Nevertheless, the potential demand is still huge. As mentioned in a recent report by Fidelity, the alternative investment market grew to $13.4 trillion by the end of 2018, and very little of it was in Bitcoin. It might take converting as little as 5% of that to see the Bitcoin price moon.
Some investment firms have chosen to create entirely separate holding companies for Bitcoin and other crypto assets. For example, Stone Ridge launched New York Digital Investment Group, which today has over $1 billion worth of crypto.
What Drives This Movement?
To understand this phenomenon better, I recently had an enlightening chat with Michael Saylor, the founder of MicroStrategy. In particular, I found his pick of 100 years as the base on which to measure the success or failure of a reserve asset very interesting.
Of course, most companies are founded with the expectation that they are going to be around for quite some time — centuries, preferably. Even for individuals, it still makes sense to look at how investments might change over a hundred years, as a person might amass wealth intended for heirs or even causes that are close to the heart, such as climate change. As Michael Saylor said:
“An excellent way to evaluate any investment is to take $100 million and move it forward a hundred years and ask the question what happens. If I had $100 million worth of currency in any of the largest cities of the world in the year 1900, and I went forward for 100 years, and I put the money into the best bank in the city, I have two types of risks; counterparty risks and inflation risk. Regarding counterparty risk, every major bank in every major city around the world failed in 100 years. And that is a 90% probability you lose everything.”
Of course, the most obvious weakness to spot when considering the performance of any reserve asset in 100 years is inflation. Out of all asset types, fiat currency experiences the most inflation over time. For example, what $5 could buy in the 1920s is far more than what it can in 2020.
According to a website that collects and processes government data for the benefit of the public, the U.S. dollar loses close to 2% of its purchasing power every year.
What About The Other Assets?
While real estate might seem like a great asset to hold as a reserve for the long term, it is susceptible to losing value through things like taxes. More importantly, though, real estate faces risks that come with changes in regulation or public governance.
In the span of 100 years, it is highly likely that a government that respects private property ownership is replaced with one that does not. This has already happened several times around the world in the last century.
Meanwhile, stocks also face risks of poor management and regulation changes. Michael Saylor gave the example of power and water utilities, industries in which highly lucrative companies have become nationalized. We cannot say with conviction that in the next 100 years, internet service providers, for example, aren’t going to be turned into public utilities.
Even gold and other precious metals run into issues when you look at them in terms of 100 years. While they appreciate over time, the logistics of holding them can be stressful.
You could use third-party storage services such as commercial banks, but history has taught us that gold can get lost even there, especially during wartime or political upheavals such as revolutions.
This has also happened several times in the last century. During World War II, large masses of gold were stolen by both state and non-state actors. Similarly, during the Soviet revolution, a lot of privately owned gold was seized by the incoming government.
What About Bitcoin?
As for now, Bitcoin has no counterparty risks. In other words, we don’t have to worry that the actions of a third party are going to lead to a significant loss of the asset’s value. It is also protected from risks that might come from regulation or extreme change in government policy. The holders of Bitcoin are always going to be in complete control of it.
As a peer-to-peer network, the Bitcoin platform gives holders of the asset a level of control that bypasses regulation or the use of state force. Meanwhile, we are almost assured that its value will continue growing over the years, as the supply is determined and the emission rate of new units halves every four years.
The autonomy and increasing scarcity of Bitcoin is most likely going to drive its value up over time, and it would come as no surprise in 100 years to see its price considerably higher than where it is today.
Almost 80% of Square’s Cash App Q3 Revenue Was From Bitcoin
Square’s Cash App has increased Q3 Bitcoin revenue by 1,100% after more than $1.6 billion Bitcoin was purchased by users.
Cash App, the Bitcoin-friendly mobile payments app from U.S. financial services firm Square, has reported Bitcoin (BTC) has overtaken all other revenue sources, making up almost 80% of its entire revenue in the third quarter.
In Square’s third-quarter report, Cash App’s Bitcoin-derived revenue of $1.63 billion in Bitcoin marked a massive increase of more than 1,100% when compared to the same period in 2019.
Bitcoin revenue was by far the largest component of Cash App’s overall revenue generation of $2 billion, with all other revenue streams totaling $453 million, or 22% of the total.
Cash App functions as a broker for Bitcoin purchases, buying it on behalf of the user, and adding a small fee.
The report notes that some of the increased Bitcoin sales were due to the app’s Auto-Invest tool, launched in May this year, which allows users to recurring daily or weekly purchases of stock or BTC.
Bitcoin revenue produced $32 million in gross profit for the third quarter, an increase of 15 times from the previous year’s profit of $2.1 million in the same period.
Square’s total Q3 revenue was more than $3 billion, up 140% from 2019 — of which Bitcoin comprised more than 50%. The total Bitcoin revenue for all of 2019 was $338 million with a gross profit of $5 million.
Hours after the report was released, Square’s share price rose 6% during after-hours trading to sit at $184, eyeing off the previous all-time high of $190 earlier this month. At the same time, Bitcoin rose by a similar amount to hit a two-year high of $15,880.
In the report Square also noted its $50 million Bitcoin (4,709 BTC) investment as a treasury asset, which is now worth $74.8 million. The company’s purchase was based on the belief that “cryptocurrencies are an instrument of economic empowerment and align with the company’s purpose,” adding:
“We expect to hold this investment for the long term.”
Despite Square’s large investment, the company ranks seventh in terms of publicly trading company’s Bitcoin holdings.
Crypto Fund’s Unlikely Strategy: Taking On Bitcoin And S&P 500 Returns
A crypto fund is buying up Bitcoin at a major discount in a high-risk, high-return game. What are the odds of outperforming BTC itself?
Bitcoin has been one of the best-performing assets on the planet since its launch in 2009. The digital coin rose nearly 9 million percent in price between 2010 and 2019. Simply holding or averaging into Bitcoin (BTC) positions yields a certain profit benchmark.
Finding an investment or trading strategy that outpaces Bitcoin’s performance can prove difficult, but a financial fund known as Off The Chain Capital has claimed to do just that. The fund has also outpaced the S&P 500, a popular mainstream financial market index, although the S&P stands as a less formidable opponent in terms of price gains.
“It’s easy to outperform the stock market because if you look at Bitcoin relative to other assets like dollars, gold, stocks and bonds, Bitcoin is sucking in all the value out of those,” Brian Estes, the fund’s founder and chief investment officer, told Cointelegraph. Bitcoin naturally provides greater profit than other mainstream financial assets, such as stocks and gold, he explained, adding: “The hard part is to outperform Bitcoin.”
Estes created Off The Chain Capital in 2016 as a financial fund open only to his friends and family. A number of years later, the fund began letting other members of the public invest, Estes explained. “We have over 90 partners now in the fund,” he noted.
“The reason I decided to open up the fund to outside investors was I finally figured out how to outperform Bitcoin.”
CT: Can you explain how the fund works? Such as what is in the fund and what your mindset regarding that is?
BE: What I figured out was that the best way to outperform Bitcoin is to buy Bitcoin below what other people could buy it at or sell Bitcoin above what the spot market is. We found ways to buy Bitcoin at a discount, and we found ways to buy Bitcoin at spot prices and then sell it for above to people who are willing to pay us a premium for Bitcoin — and that’s pretty much all we do in the fund. So, we’re a value investor in Bitcoin and blockchain assets.
CT: When you buy below and sell above, are you talking more about long-term action or are you talking about short plays?
BE: We don’t trade. Our average holding period is over 12 months, so we’re not traders. We don’t use leverage. We’re not leveraging up the portfolio to outperform Bitcoin. We’re using a traditional, Graham-Dodd, Warren Buffett value method to buy Bitcoin for cheap.
* We’re one of the largest buyers in the world of Mt. Gox bankruptcy claims. So, when you buy a Mt. Gox bankruptcy claim from people who have a claim on the company, our average cost is about $1,000 per claim, and we’re getting almost $3,000 worth of assets.
Those assets inside of a claim are 0.1785 Bitcoin, 0.18 Bitcoin Cash and there’s about $784 of just cash, like currency, in there. When you add all that up, there is about $3,000 worth of value. Like I said, our average cost is about $1,000.
These claims will eventually get paid out over the next few years, and when these claims get paid out, even if Bitcoin doesn’t move, we’re almost tripling our money because we’re buying this Bitcoin at a discount through these claims.
Mt. Gox’s Legacy Lives On
Mt. Gox started as one of the earliest Bitcoin exchanges. The marketplace operated from 2010 to 2014, ultimately ending in disaster. The exchange suffered an infamous hack in which nefarious parties reportedly pilfered roughly 850,000 BTC, leading to the exchange’s demise in 2014.
Fast-forward to 2020, and authorities are still sorting through the rubble and aftermath of the affair. Part of the process has seen victims who lost funds from the Mt. Gox ordeal submit claims for compensation for their losses. Entities such as Off The Chain Capital look to buy these claims for profit, albeit in the form of delayed gratification.
Essentially, due to the red tape involved and legal processes around Mt. Gox, these claims do not pay out right away and have suffered many delays. Mt. Gox rehabilitation trustee Nobuaki Kobayashi oversees the ordeal.
The payout for the claims has seen a number of delays. Kobayashi must provide the courts with a plan of action. Most recently, the proposal’s due date was moved from Oct. 15 to Dec. 15.
In addition to the Mt. Gox claims, Off The Chain Capital employs other strategies, although the firm does not divulge these tactics to the public, Estes explained. Off The Chain Capital is not the only player interested in this type of financial play, however.
Fortress Investment Group stands as another example of a party that has expressed interest in buying Mt. Gox claims.
Buying Mt. Gox claims helps both sides
Buying these claims also helps the victims of the Mt. Gox ordeal. They can receive compensation for their losses sooner, albeit at a discount, through selling their claims.
CT: So, the Mt. Gox claims: The reason you’re getting the discount is because you are not being paid out until the future, correct?
BE: Exactly, yeah. So, we’re giving people liquidity. They have a claim, so they get liquidity, and they get $1,000 per claim. What we get is value. We get $3,000 of value, but we get the illiquidity. So, these are illiquid investments until the Japanese trustee decides to distribute the Bitcoin, Bitcoin Cash and currency out. When that happens, we become liquid. We’re willing to be illiquid for the return — for a three-times return. That’s a good trade-off for us.
It benefits the people selling the claims too because they’ve been sitting on these claims for almost seven years. Most of the people selling these, they have life events that happened to them. They need the money, so they’re happy to sell them and to have someone to sell them to. They’re getting married, having a baby, buying a new house or they wreck their car, and they need liquidity.
CT: Is there any idea of when the claims will be paid out? Will they all be paid out at once, or are they being paid out every couple of months?
BE: On Oct. 15, the Japanese trustee was supposed to update the distribution plan. They postponed it until Dec. 15, so on Dec. 15, we’ll have more clarity. It’s kind of anyone’s guess. Some people are thinking six months, but we’re planning for about two years, hoping that it’ll be a year or less, but it could be another three to four years. No one really knows.
MicroStrategy CEO Explains Why Bitcoin Is ‘A Million Times Better’ Than ‘Antiquated’ Gold
MicroStrategy’s headline-grabbing bitcoin bet was a rational response to a macroeconomy in chaos, said Chief Executive Michael Saylor.
Appearing Tuesday at CoinDesk’s Bitcoin for Advisors virtual conference, Saylor shed new light on one of this year’s biggest cryptocurrency stories: his software company’s recent purchases of $425 million in bitcoin.
That surprise September move by Nasdaq-listed MicroStrategy marked one of the first – and largest – embraces of bitcoin by a mainstream corporation.
In a prerecorded fireside chat with CoinDesk Chief Content Officer Michael Casey, Saylor unpacked MicroStrategy’s bitcoin thought process, why it decided to eschew cash as a treasury reserve and whether gold can reclaim its spot as the marquee store of value in an increasingly digital world.
Saylor’s short answer: Gold can’t. He thinks bitcoin has seized the lead.
Hoarding gold is “an antiquated approach to storing value,” he said. Bitcoin is “a million times better.”
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In Saylor’s telling, MicroStrategy’s bitcoin journey began with the realization its $500 million cash pile was being eaten alive by government money printers.
With recent emergency stimulus inflating the U.S. money supply faster than a Thanksgiving parade balloon, company executives felt compelled to move the treasury reserves away from the dollar.
“What we’re trying to do is preserve our treasury,” he said. “The purchasing power of the cash is debasing rapidly.”
For the last decade or so, the M2 money supply – the sum of physical cash, checking and savings accounts, certificates of deposit and money market funds – grew a modest 5.5%, Saylor noted.
“A rational view of business treasury strategy would be, you had to get more than five and a half percent as your cost of capital in order to hold your purchasing power from 2011 to 2020,” he said.
But when COVID-19 hit this year, tanking the economy, the measures taken to contain the damage swelled M2 by 20%, raising the hurdles for corporate treasurers to preserve that purchasing power. “The cost of capital of every cash treasury or every treasury in the world is now 20%,” Saylor said.
To be sure, U.S. inflation, as measured by the core Consumer Price Index (which excludes food and energy) declined briefly in 2020. But to Saylor, that measure is “irrelevant.”
“If inflation only means a market basket of things with no food and energy in them, then almost by definition I’ve defined a metric which will never go up,” he said.
He pointed to cash holders in inflation-prone countries like Argentina, Brazil and Venezuela. They know all too well their purchasing power takes a hit when money supply expands.
“What if you live in Europe and the United States? It wasn’t obvious. But it needs to become obvious,” Saylor said. “I think people will figure it out.”
Convinced the dollar was no place for MicroStrategy’s excess capital, Saylor said he and his executives began trawling around for a “tangible” asset alternative. “We had to cycle through real estate, bonds, equity, precious metal, derivatives or crypto,” Saylor said.
Of that group, precious metals, particularly gold, has long stood as an enticing store of value, a scarce, safe-haven asset recognized around the world. Not to Saylor. For starters, he balked at the notion that gold is scarce. “Gold is the least abundant of the commodities, but you can still produce gold,” he said.
But he’s also acutely concerned with what he describes as the clashing interests of gold miners and gold bugs. One is trying to capitalize on the market by mining replenishable supply while the other is hoping that access remains scarce, pushing prices up.
“The gold miners are the enemies of the gold holders,” said Saylor. “The gold miners are trying to destroy your value, right?
They’re not trying to help you.”
He predicts an even bigger problem with the gold market: Investors fleeing to bitcoin. Even if they don’t know it yet, Saylor thinks gold investors will eagerly dump the commodity for what he calls a superior store of value. It’s not an if. It’s a when.
“Not a good bet to bet against ingenuity and assume that people will be lazy and ignorant for the next decade, because it’s not likely,” Saylor said.
Citing one analyst’s prediction that Federal Reserve action will keep equities moving upward regardless of the recent election’s outcome, Saylor said the “most aggressive monetary expansion” is probably ahead.
Investors will therefore likely continue treating blue-chip juggernauts from Apple to Amazon as a new kind of safe haven. “They’re desperately grasping at straws,” Saylor said. All those assets are reliant on the fiat currency he sees as crumbling away.
“Equities don’t make a good store of value over the long term, unless the company can raise its prices faster than the rate of monetary expansion, or raise its gross margins faster than the rate of monetary expansion,” he said.
Saylor predicts monopolistic corporations will be the only ones positioned to achieve that kind of price pump. But the politicians won’t let those corporations exercise such power indefinitely, he said. So, back to square one.
“Ultimately you have to find something which you can’t print more of that doesn’t have its fundamental underpinnings tied to a fiat currency, and the only thing that I can find right now is bitcoin,” he said.
Another Mainstream Company SkyBridge Is Seeking Approval To Invest In Crypto
Anthony Scaramucci’s investment firm, SkyBridge, seeks approval from the SEC to invest in crypto.
Investment firm SkyBridge, founded by former Goldman Sachs’ vice president Anthony Scaramucci, is one of the latest companies looking to invest in cryptocurrency.
The company is putting together a hedge fund that includes Bitcoin (BTC) investment, according to a United States Securities and Exchange Commission, or SEC, filing from Friday. The prospectus details:
“The Company may seek to gain investment exposure to certain Investment Funds or Investment Managers which may enter into derivative transactions, such as total return swaps, options and futures. Investments by the Company and/or Investment Funds may also be made in companies providing technologies related to digital assets or other emerging technologies.”
After more than a decade of progress, several mainstream companies and individuals have kicked off a small but notable trend of entrance into crypto investment, particularly Bitcoin. Billionaire Paul Tudor Jones piled into Bitcoin purchases earlier this year. He also recently described how early he feels the investment opportunity still is.
Despite SkyBridge’s interest, it still requires approval from the SEC before moving forward. The prospectus includes:
“Neither the Securities and Exchange Commission (the ‘SEC’), the Commodity Futures Trading Commission (the ‘CFTC’) nor any other U.S. federal or state governmental agency or regulatory authority has approved or disapproved the merits of an investment in these securities or passed upon the accuracy or adequacy of this Prospectus.”
The prospectus included a section describing “digital assets,” in which it briefly explained their uses, risks and other points of consideration. “Digital assets have no intrinsic value other than as a method of exchange and are not based on a tangible commodity, security, contractual right or legal obligation,” the document says.
“The values of digital assets should not be expected to be connected or correlated to traditional economic or market forces, and the value of the investments of Investment Funds in digital assets could decline rapidly, including to zero,” the prospectus says after pointing out the “tremendous price volatility” seen in cryptocurrencies against the norms shown in mainstream investments.
Bitcoin has risen to significant heights in recent weeks and currently sits a mere stone’s throw away from its all-time high.
Corporate Bitcoin Frenzy: Companies Now Hold $15.3 Billion In BTC
Companies now hold over 842,000 BTC, which at the current Bitcoin price of $18,200, is worth $15.3 billion.
As of Nov. 20, companies hold around 842,229 BTC or 4.54% of today’s Bitcoin (BTC) supply, according to the Clark Moody dashboard and data from Bitcointreasuries. This is equivalent to a staggering $15.3 billion at the current price of $18,200.
Public companies and institutional investors are continuously accumulating Bitcoin. The spark that began with MicroStrategy’s ambitious $425 million BTC purchase has led to a broad institutional frenzy around the dominant cryptocurrency.
Why Are Institutions And Companies Acquiring Bitcoin Now?
The demand for Bitcoin from companies and institutions likely comes from its growing reputation as a digital store of value.
Bitcoin is unique in that it can hedge portfolios against inflation, like gold, but has the potential to see exponential growth.
Hedge assets are typically stagnant and demonstrate low volatility over a prolonged period. They are meant to operate as insurance for a diversified portfolio so that when the market dips, the portfolio is protected.
Bitcoin achieves both: it is able to operate as a hedge asset and also expose investors to large growth potential in the long term.
As such, Michael Saylor, the CEO of MicroStrategy, said Bitcoin should not be considered as a payment network nor a currency.
BTC is highly compelling as a store of value, which also does not put it in the crossfire of regulators. Referring to the interview of the United States Securities and Exchange Commission chairman Jay Clayton saying BTC is not a security, Saylor said:
“This is why Bitcoin should be neither a currency, nor a payment network. The principles of humility and harmony dictate that we should allow technology partners to provide for payments, and defer to governments on matters of currency. BTC is a purely engineered Store of Value.”
As long as the perception of Bitcoin from institutions and corporations as an established store of value remains, the demand for BTC would likely remain high.
Savings Technology “Orange Pill” For Companies
Corporations are now holding roughly 4.5% of today’s Bitcoin supply, which is around 18.5 million BTC. This percentage is relatively high considering that BTC has a total fixed supply of 21 million.
When lost or dormant coins are considered, the total supply is estimated to be around 17 million in total.
Companies acquiring Bitcoin as a treasury asset, like MicroStrategy, is particularly optimistic because it shows they are not expecting short-term returns.
Hence, when corporations hold BTC with a low time-preference, it would also result in lower selling pressure over time by decreasing the available supply.
For instance, on Aug. 11, when MicroStrategy announced its initial purchase of $250 million worth of Bitcoin, Saylor said:
“MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.”
The prospect of inflation and consistent liquidity injections from central banks further fuel the medium- to long-term outlook for Bitcoin, which some analysts consider the perfect environment for BTC to shine over time.
Meanwhile, to offset the negative economic impact the pandemic has had on the financial market, regulators are continuing to create relaxed financial conditions. For stores of value, like gold and Bitcoin, such a trend is beneficial heading into 2021.
MicroStrategy Wants To Be In The Bitcoin Business, Not Just An Investor
MicroStrategy executives are on the hunt for blockchain experts who could help the publicly traded firm build a suite of bitcoin data services.
Exactly what those services might be, when they would come online and how they would be monetized are still open questions.
But in a Nov. 16 conference call, Chief Executive Michael Saylor, who spearheaded MicroStrategy’s nine-figure bitcoin allocations this summer, told investors his firm is eager to “leverage” its business intelligence experience in the bitcoin data space.
“There’s an entire exploding universe of intelligence opportunities all wrapped around this kind of unique bitcoin intelligence coming off the blockchain,” he said. “And we’ll explore it all.”
As first reported by The Block, the comments mark a potential expansion by one of the single largest participants in bitcoin’s current bull run: from pure bitcoin investor (and node runner) to a firm also in the business of bitcoin.
To be sure, “we don’t have any one thing that we’re sure makes sense to commercialize yet,” Saylor told investors.
But the company is putting feelers out for new hires nonetheless.
“We’re actively looking to source and recruit some talented folk that have expertise in blockchain that would like to join us on this journey,” said Chief Technology Officer Tim Lang.
Cypherpunk Holdings Becomes 9Th Largest Public Holder Of Bitcoin
Canadian holding company dumped XMR and ETH to fund its acquisition.
Cypherpunk Holdings (CSE:HODL), a privacy-focused Canadian investment company, has upped its stake in Bitcoin (BTC).
The company disclosed Thursday that it has added 72.979 BTC to its reserves since June 30, 2020.
Cypherpunk funded the acquisition by liquidating its holdings of Monero (XMR) and Ethereum (ETH), as well as through partial proceeds from a private placement of $505,000 CAD, or $388,000 U.S., closed on Aug. 27.
With the purchase, Cypherpunk now has 276.479 BTC in its reserves, making it the ninth-largest public Bitcoin holder. At current values, Cypherpunk’s stake in BTC is worth just under $4.8 million.
At the time of writing, at least 14 publicly-traded companies held Bitcoin on their books. Combined, their holdings amount to 66,896.59 BTC, or $1.2 billion. That’s equivalent to roughly 3.2% of Bitcoin’s circulating supply.
Cypherpunk Holdings, which trades on the Canadian Securities Exchange, has several privacy-focused businesses on its books, including Wasabi Wallet and Samourai Wallet. The company also invests in Hydro66, a green cloud infrastructure platform, and smart contract protocol Chia Network.
The company is run by Antanas Guoga, or Tony G, a Lithuanian businessman, politician and former professional poker player.
He now serves as an elected member of the Seimas, the legislative branch of the Lithuanian government. Previously, he served as Member of European Parliament for Lithuania.
It appears that more public companies are converting their cash holdings into Bitcoin as a more suitable store of value. MicroStrategy, which has converted most of its cash holdings into Bitcoin, is the most prominent example of this trend. The company now sits on 38,250 BTC after nearly doubling its holdings over the summer.
Galaxy Digital is the second-largest public Bitcoin holder at 16,402 BTC, followed by Square’s 4,709 BTC.
Guggenheim Fund ($295 Billion Assets Under Management) Reserves Right To Put Up To 10% In Bitcoin Trust!
The $275 billion company has filed an SEC amendment to allocate over $500 million from the Macro Opportunities fund to Grayscale’s GBTC.
An SEC filing on Friday indicates that the next Wall Street institution to take a public position in Bitcoin may also be among the largest yet: the $275 billion financial services firm Guggenheim Partners.
The Guggenheim filing allows the Macro Opportunities fund to purchase GBTC, a publicly-traded Bitcoin investment vehicle from Grayscale, at an indeterminate point in the future.
“The Guggenheim Macro Opportunities Fund may seek investment exposure to bitcoin indirectly through investing up to 10% of its net asset value in Grayscale Bitcoin Trust (“GBTC”),” the filing reads.
According to independent ratings firm Morningstar, the Guggenheim Macro Opportunities fund currently has $5.3 billion in assets under management and sports a four-star rating “based on risk-adjusted returns out of 270 Nontraditional Bond funds.”
Guggenheim describes the overall fund strategy for the institutional-grade shares (ticker: GIOIX) as a product of the investment team’s “highest-conviction ideas.” If the fund were to take the full 10% stake in GBTC, it would be worth north of $500 million.
The filing also notes a long list of potential investor risks associated with cryptocurrencies, which it refers to as “digital assets designed to act as a medium of exchange.” Risks include lack of cryptocurrency exchange regulation, GBTC’s historical “significant premium” to net asset value, and uncertainty regarding tax laws and regulations, among others.
This preparatory move by Guggenheim appears to be part of a cascading series of investments indicating increased acceptance of Bitcoin among major financial institutions.
In August, business intelligence firm Microstrategy purchased nearly 40,000 Bitcoin, leading to a parabolic move in share price. Likewise, financial services firm Square, Inc bought $50 million in Bitcoin in October.
2016: The institutions are coming! 2017: The institutions are coming! 2018: The institutions are coming! 2019: The institutions are coming! 2020: The institutions are here! 2021: Dammit, the institutions bought all the #Bitcoin
Guggenheim CIO Says Bitcoin ‘Should Be Worth’ $400,000
Guggenheim Partners Chief Investment Officer Scott Minerd shocked Bloomberg TV hosts Wednesday afternoon when he said his firm’s fundamental analysis shows bitcoin should be worth $400,000.
* “Our fundamental work shows that bitcoin (BTC, +13.95%) should be worth around $400,000,” said Minerd. “Whoa!” responded one of the hosts.
* That sky-high price target is based on two things, according to Minerd: the asset’s scarcity and its relative value to gold as a percentage of gross domestic product.
* “Bitcoin has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions,” Minerd told Bloomberg TV.
* Guggenheim made the decision to start allocating to bitcoin when the leading cryptocurrency was trading around $10,000, Minerd said.
* Minerd said allocating to bitcoin, given its current price above $20,000, is “a little more challenging.”
* Guggenheim Partners manages more than $230 billion worth of assets.
Coinbase Executed MicroStrategy’s $425M Bitcoin Purchase In September 2020
One of the largest Bitcoin purchases in 2020 took more than five days to complete.
Coinbase, the United States’ largest cryptocurrency exchange, announced that it facilitated one of the largest institutional Bitcoin (BTC) purchases in 2020.
According to an official announcement, Coinbase was selected as the primary execution partner for MicroStrategy’s $425 million purchase of Bitcoin in September 2020.
Brett Tejpaul, head of institutional sales at Coinbase, provided more details about the purchase as well as the company’s aim to facilitate institutional purchases in a Dec. 1 blog post.
“Using our advanced execution capabilities, leading crypto prime brokerage platform, and OTC desk, we were able to buy a significant amount of Bitcoin on behalf of MicroStrategy and did so without moving the market,” Tejpaul said.
According to the post, MicroStrategy chose Coinbase because the platform provides a number of market tools like smart order routing and algorithmic trading tools.
According to a case study on the MicroStrategy trades, Coinbase conducted a series of pre-trade calls with MicroStrategy prior to the $425 million purchase in order to better understand trade execution goals and develop a trading plan.
Following the successful test, Coinbase began to execute the larger trade, involving the “Time Weighted Average Price” algorithm to execute the trade over a period of five days.
Over the course of the trade, MicroStrategy had a 9 am call each day with the Coinbase trading team to start trading and report overnight fills. After completing an initial $250 million investment over a period of five days, MicroStrategy went on to invest an additional $175 million in Bitcoin following the success of the first trade, for a total investment of $425 million.
In The Post, Coinbase Expressed Its Willingness To Help More Institutions Looking To Buy Crypto:
“We hope that this is an inflection point for the cryptoeconomy and look forward to helping more corporate companies and institutions looking to diversify their capital allocation strategies with crypto. Working on an agency basis, clients can be sure our interests are aligned as we seek to find the best prices available in the market.”
Here’s Why Bitcoin Is Like ‘Lebron James,’ According To Microstrategy CEO
MicroStrategy CEO Michael Saylor draws a comparison between Bitcoin and NBA star Lebron James.
In an interview with economist Marc Friedrich, MicroStrategy CEO Michael Saylor said that Bitcoin is not the same as it was in 2015 or 2017. According to Saylor, the arguments against Bitcoin (BTC) that were relevant four years ago are no longer applicable.
How Is Bitcoin Like Lebron?
Bitcoin has grown exponentially since the 2017 peak in terms of infrastructure, fundamentals and adoption. In the past year, institutions have started to increasingly see BTC as a store of value and an inflation hedge.
In 2017, critics said Bitcoin was too volatile and that there was a risk it could drop to zero because it was an asset in a nascent phase. Saylor emphasized that these arguments are less relevant now because BTC has evolved significantly in three years.
Saylor Emphasized That Lebron James Played Basketball From Ages 8 To 18, But He Matured To Evolve Into One Of The All-Time Greats. He Said Bitcoin Went Through A Similar Period, Stating:
“I also thought it was important to address head on the fears and anxieties of the original Bitcoin and the crypto community that have all these tropes, like ‘oh it’s risky, it’s volatile, might go to zero,’ and they are still living in the 2012, 2015, and 2017 timeframe. And what I want to say to them is Lebron James played basketball from age 9 to 18, and he was talented but irratic and volatile. But then he grew up and from age 18 to 28, he destroyed everybody and everything in his way.”
One of the major changes Bitcoin has seen since 2017 is its market structure. Three years ago, retail platforms like BitMEX were the dominant players in the derivatives market.
As Cointelegraph reported, institutional platforms such as the Chicago Mercantile Exchange (CME) have consistently processed volumes similar to leading retail-focused exchanges. As of Dec. 4, the CME BTC futures market has an open interest of $1.14 billion, which is higher than Binance Futures, Bybit, Huobi and BitMEX.
On-chain data also show a considerable increase in institutional growth based on large transactions on the Bitcoin blockchain.
Large BTC Transactions Doubled This Year
According to data from IntoTheBlock, the number of transactions valued at above $100,000 has increased twofold over the past year. This is indicative of the increase in institutional activity on the Bitcoin blockchain, the analysts said.
Considering the noticeable change in volume trends and on-chain data in the past 12 months, the analysts wrote that Bitcoin is seeing high institutional growth. They wrote:
“The number of transactions of over $100,000 recorded on the Bitcoin blockchain on a daily basis has more than doubled from a year earlier. Furthermore, the total volume transferred in these has experienced even larger growth with 6x over the same period.”
Based on a variety of factors, including the fact that there is significant institutional involvement in the Bitcoin market, investors like Saylor remain confident that BTC is evolving into an established store of value and that this is improving its perception with mainstream investors.
MicroStrategy Will Issue $400 Million In Securities To Buy More Bitcoin
Leading business intelligence firm MicroStrategy is doubling-down on Bitcoin, announcing a securities offering to raise $400 million to invest in BTC.
The world’s largest publicly traded business intelligence firm, MicroStrategy has announced plans to invest the proceeds from a $400 million securities offering into Bitcoin.
On Dec. 7, the firm revealed plans to issue $400 million in convertible senior notes — a debt security that can be converted into the issuing company’s shares. The announcement stated:
“Microstrategy intends to invest the net proceeds from the sale of the notes in Bitcoin.”
At current prices, the $400 million would increase the company’s holdings by 20,833, which would bring the firm’s total crypto stash to almost 62,000 BTC.
Microstrategy will pay semi-annual interest to the note-holders until December 2025. The firm also reserves the right to redeem the notes for cash from Dec. 20, 2023.
The announcement states that MicroStrategy may also offer up to an additional $60 million worth of notes to its initial purchasers within 13 days of commencing the offering.
The securities will be issued under Rule 144 of the Securities Act, and will be available to qualified institutional investors only.
In response to MicroStrategy’s announcement, Gabor Gurbacs, the CEO of New York-based investment firm VanEck, suggested the offering is more indicative of a digital asset fund than a publicly listed company:
At what point does a securities offering that raises dollars with the purpose of investing in Bitcoin make a publicly listed company to be a listed fund/investment company?
MicroStrategy made waves in the crypto world during August, when the firm revealed it had adopted Bitcoin as its primary reserve asset after purchasing 21,454 BTC for $250 million. It then purchased a further 16,796 BTC for $175 million the following month. The purchases were made through Coinbase’s OTC and brokerage platform.
Just a few days ago on Dec. 5, MicroStrategy’s CEO, Michael Saylor, announced the firm had purchased a further 2,574 BTC priced at approximately $19,427 each for $50 million, bringing its total crypto holdings up to roughly 40,824 BTC.
At current market value, MicroStrategy’s BTC stash is worth nearly $784 million, meaning the firm is currently up 65% on its $475 million investment.
Citi Downgrades MicroStrategy Stock After Bold Bitcoin Bet
MicroStrategy was downgraded to “sell” from “neutral” on Tuesday.
Shares of MicroStrategy fell on Tuesday after Citibank reportedly downgraded the business intelligence firm over its “disproportionate” Bitcoin focus.
Citi analyst Tyler Radke issued a “sell” rating on MSTR shortly after the company announced it was raising more money to buy Bitcoin (BTC). Radke says CEO Michael Saylor’s “disproportionate focus on bitcoin” puts investors at considerable risk, especially after an “overextended” rally since September.
“MSTR’s bitcoin investment has returned $250M (or worth $26/share or +20% towards stock) since August ’20. While impressive, it pales in comparison to the 172% return in the stock. At the current stock price, our analysis suggests that the market is pricing in much more optimistic valuation scenarios for the core business and Bitcoin.”
MicroStrategy’s share price has been surging since August when the company first announced its Bitcoin play. Many investors view MSTR as an indirect investment in Bitcoin, given the company’s vast digital currency reserves.
On Monday, MicroStrategy revealed plans to allocate another $400 million to its Bitcoin treasuries. To do so, the company plans to issue $400 million in convertible senior notes. As Cointelegraph reported, $400 million would increase the company’s Bitcoin reserves by more than 20,800 BTC.
MicroStrategy is by far the biggest corporate holder of Bitcoin. It currently has 40,824 BTC on its books, worth a combined $769.2 million.
Institutional investors and corporations are turning to Bitcoin as a hedge against inflation and dollar instability. Saylor has likened his company’s cash reserves to a “melting ice cube” as the purchasing power of the U.S. dollar continues to plummet. He believes asset inflation will grow to more than 20% per year.
New Institutional Player — MassMutual Purchases $100M Bitcoin
The investment is reportedly part of the firm’s strategy to take advantage of new opportunities while remaining diversified.
Massachusetts-based insurance firm MassMutual just announced that it has purchased $100 million in Bitcoin for its general investment account.
According to a report from The Wall Street Journal, the company purchased the coins — purportedly 5,470 Bitcoin (BTC) given the current price of $18,279 — through New York-based fund management company NYDIG. MassMutual also reportedly bought a $5 million equity stake in the firm, which holds $2.3 billion in crypto.
The report states that the investment is part of MassMutual’s strategy to take advantage of new opportunities while remaining diversified, providing “measured yet meaningful exposure to a growing economic aspect of our increasingly digital world.”
The purchase comes as major institutional players are adopting Bitcoin for the first time and going longer on crypto investments. In September, business intelligence firm MicroStrategy purchased more than $425 million in Bitcoin as a reserve asset. Earlier this week, the company announced it would invest the proceeds from a $400 million securities offering into Bitcoin as well.
MassMutual reportedly oversees more than $235 billion in its general investment account as of Sept. 30.
MassMutual Bitcoin Purchase Proves Crypto Demand Is Rising, JPMorgan Says
Even a nominal investment from insurance firms and pension funds could be significant for Bitcoin.
MassMutual’s $100 million Bitcoin (BTC) purchase shows that the demand for cryptocurrency will be growing further, according to strategists at major investment bank JPMorgan.
In an investor note on Dec. 11, JPMorgan strategists including Nikolaos Panigirtzoglou reportedly suggested that Bitcoin adoption is now expanding from family offices and wealthy investors to bigger investors like insurance firms and pension funds.
As reported by Bloomberg, the experts said that insurance firms and pension funds are unlikely to invest large amounts in Bitcoin, but even a small shift toward crypto could be significant.
If pension funds and insurance companies in the United States, Euro area, the United Kingdom and Japan allocate 1% of their assets to Bitcoin, Bitcoin demand would grow by an additional $600 billion, the strategists calculated.
This is almost double Bitcoin’s market capitalization, which stands at $356 billion at publishing time, according to data from CoinMarketCap.
JPMorgan strategists wrote, “MassMutual’s Bitcoin purchases represent another milestone in the Bitcoin adoption by institutional investors. […] One can see the potential demand that could arise over the coming years as other insurance companies and pension funds follow MassMutual’s example.”
Massachusetts-based insurance firm MassMutual announced on Dec. 11 that the company bought $100 million in Bitcoin for its general investment account. MassMutual told Cointelegraph that the investment is part of a broad strategy with the goal of achieving “measured yet meaningful exposure to a growing economic aspect of our increasingly digital world.”
MassMutual’s foray into Bitcoin comes amid major institutional player MicroStrategy planning a $400 million securities offering to invest in BTC. MicroStrategy adopted Bitcoin as its primary asset after purchasing $425 million worth of Bitcoin in August and September.
MassMutual’s Bitcoin Buy May Presage $600B Institutional Flood: JPMorgan
JPMorgan analysts have said the recent bitcoin purchases by Massachusetts Mutual Life Insurance Co. are a sign of growing mainstream acceptance for the cryptocurrency.
* “MassMutual’s bitcoin purchases represent another milestone in the bitcoin adoption by institutional investors,” JPMorgan’s strategists said, according to Bloomberg on Monday.
* “One can see the potential demand that could arise over the coming years as other insurance companies and pension funds follow MassMutual’s example,” they added.
* On Thursday, the 169-year old insurance firm announced bitcoin purchases worth $100 million, as well as a $5 million equity stake in NYDIG – a financial services firm focused on bitcoin with $2.3 billion in the asset under management.
* MassMutual’s move suggests insurance firms and pension funds are beginning to look at bitcoin as an investment/reserve asset alongside increased demand from wealthy investors and family offices.
* According to JPMorgan, bitcoin may find an additional demand of $600 billion if pensions insurance firms in the U.S., European Union, U.K. and Japan allocate 1% of assets to the top cryptocurrency.
* Regulatory hurdles, however, may complicate matters for such firms, limiting their participation in the bitcoin market, the strategists said.
If pension funds and insurance companies in the U.S., euro area, U.K. and Japan allocate 1% of assets to Bitcoin, that would result in additional Bitcoin demand of $600 billion, the strategists said. The cryptocurrency’s current market capitalization is about $356 billion, according to CoinMarketCap.
At the same time, traditional investors like insurers and pension portfolios face regulatory hurdles relating to risk levels and liability mismatches, likely limiting how much they can put into Bitcoin, the JPMorgan strategists wrote.
MicroStrategy Completes $650 Million Bond Sale To Finance Next Bitcoin Purchase
The bond sale underscores MicroStrategy’s conviction that Bitcoin is a generational investment opportunity.
MicroStrategy (MSTR), a leading business intelligence firm, announced Friday that it has raised $650 million worth of convertible bonds to finance more Bitcoin (BTC) purchases, underscoring CEO Michael Saylor’s conviction in the flagship digital asset.
The company confirmed Friday that it had sold $650 million worth of convertible senior notes at a rate of 0.750% due in 2025. The interest rate is payable semi-annually on June 15 and December 15 beginning in 2021.
According To The Press Release:
“MicroStrategy intends to invest the net proceeds from the sale of the notes in bitcoin in accordance with its Treasury Reserve Policy pending identification of working capital needs and other general corporate purposes.”
The securities were issued under Rule 144A of the Securities Act of 1933 and will be available to institutional investors only.
The raise was finalized mere days after the company first announced plans to leverage bond proceeds to acquire more Bitcoin. As Cointelegraph previously reported, MicroStrategy was initially targeting a raise of $400 million. At $650 million, the firm can purchase over 36,300 BTC at current prices.
MicroStrategy shocked the world earlier this year when it announced that it would convert most of its balance sheet to Bitcoin. At the time, CEO Michael Saylor said his company was sitting on a “$500 million melting ice cube” of cash.
The company currently sits on 40,824 BTC representing over $734 million. That represents a gain of nearly $260 million from the basis acquisition price.
Wall Street analysts are concerned that MicroStrategy has become overexposed to Bitcoin, whose decade of volatility has kept many institutional investors on the sidelines until only very recently. Citbank recently downgraded MSTR to “sell” from “neutral” because of its “disproportionate” BTC focus.
MicroStrategy may be the largest corporate Bitcoin holder, but it isn’t the only one. On Thursday, Massachusetts-based insurance firm MassMutual announced it had purchased $100 million in BTC for its general investment account, making it one of the largest corporate holders.
Publicly-traded companies like Galaxy Digital (GLXY), Square (SQ) and Hut 8 Mining Corp (Hut-8) have invested between $36 million and $134 million in Bitcoin. Each company is now sitting on significant profits.
After Microstrategy Downgrade, Analysts Recommend Smallcap Crypto-Centric Bank
Motley Fool analysts think this smallcap bank stock might be the next to benefit from Bitcoin’s surge.
Following a Citi report downgrading business intelligence firm Microstrategy’s stock to a “sell” rating, analysts for popular trading website the Motley Fool have recommended a lesser-known bank stock that also has an emphasis on cryptocurrencies.
Last Tuesday, Citi analyst Tyler Radke downgraded Microstrategy (NASDAQ:MSTR) shortly after the firm announced a debt purchase that would bring its Bitcoin holdings up to a nearly $1 billion mark.
The report chided the company, which at points has seen share prices more than triple from $92 yearly lows, for its “disproportionate” focus on bolstering its BTC holdings, and said that the current run is “overextended.”
However, in a recap article today analysts for the Motley Fool suggested the little-known, crypto-focused smallcap Silvergate Capital (NYSE: SI) might be worth a look for traders aiming to capitalize on the next crypto play.
Silvergate — the La Jolla, California-based bank with over $2 billion in assets under management — boasts an impressive list of cryptocurrency firms as clients, including Coinbase, Paxos, Circle, Gemini, and Polychain Capital.
Motley Fool contributors Matt Frankel and Justin Moser noted the banks 21-year streak of profitability, $50 million in BTC on the books, and a lending book featuring primarily commercial mortgages. Both analysts also recommended the bank as a superior investment to spot BTC.
A previous Motley Fool article earlier in the week also called attention to the crypto exchange infrastructure Silvergate has built for its clients, the Silvergate Exchange Network (SEN). SEN operates as a 24-hour intermediary between exchanges and their institutional clients buying and selling cryptocurrencies, as opposed to normal banks which would be limited by normal working hours. SEN has reportedly cleared over $100 billion in volume since inception.
SI currently sits at a 36.69 price-to-earnings ratio, offers a 10.36% dividend, and is up nearly 100% on the year.
Silvergate and Microstrategy aren’t the only publicly-traded blockchain stocks enjoying a surge in investor interest. Mining giant Riot Blockchain is also on a tear after appointing new members to its board.
Ruffer Investment Confirms Massive Bitcoin Buy of $744M
U.K.-based Ruffer confirmed the size of its tremendous bitcoin investment from November in an email to CoinDesk Wednesday.
* “Ruffer’s exposure to bitcoin currently totals around £550m, equivalent to around 2.7% of the firm’s assets under management,” a spokesperson told CoinDesk in an email.
* Based on current exchange rates, £550 million is worth $744.26 million or roughly 45,000 BTC based on November 2020 prices.
* The investment was “primarily a protective move for portfolios” to “act as a hedge” against “some of the risks that we see in a fragile monetary system and distorted financial markets.”
* Ambiguous wording in Ruffer’s initial shareholder memo created uncertainty whether the investment was 2.5% of the multi-strategy fund or 2.5% of the funds total more than $20 billion in managed assets.
Ruffer Investment Used Coinbase To Execute $745M Bitcoin Buy
When Ruffer Investment wanted bitcoin in November it turned to One River Digital who went to Coinbase to hit the “buy” button on a purchase now worth over $745 million, Ruffer representative Jonathan Atkins confirmed to CoinDesk.
In a recent portfolio update, Ruffer alluded to the involvement of the “world’s largest custodian of digital assets” without naming names. “Access to the bitcoin is controlled by multi-layer security protocols,” Ruffer wrote of its cold-storage setup.
A second source confirmed to CoinDesk that Coinbase was the custodian described in Ruffer’s portfolio update. Coinbase Custody announced last month it was storing over $20 billion in customer assets.
The revelation sheds light on how large investors are entering the bitcoin market: namely through trusted partners. Big bets in recent weeks by everyone from MassMutual to Guggenheim are seen as the driving force behind bitcoin’s current price rally. (MassMutual went with NYDIG for its $100 million bitcoin buy.)
As CoinDesk reported Tuesday, Ruffer invested 2.5% of its $27 billion portfolio into bitcoin in November. The following day, One River Digital, a crypto-focused offshoot of volatility hedge fund One River Asset Management, came out of stealth proclaiming it had already brokered $600 in bitcoin and ether for its institutional clients.
Coinbase confirmed on Wednesday that it was conducting trade execution and crypto custody for One River Digital. It declined to comment for this story.
Ruffer owns a stake in One River Digital. Billionaire hedge fund manager Alan Howard does as well. One River Digital did not respond to a request for comment.
The Ruffer revelation shows just how far San Francisco’s Coinbase is reaching into the world of fund management.
Earlier this month, it revealed itself as the “primary execution partner” for MicroStrategy’s $425 million bitcoin purchase in the fall. A case study published by Coinbase explained how the firm pulls off market-swamping allocations without alerting traders.
Coinbase is now readying itself for a Wall Street debut. On Thursday, as bitcoin continued to race past its $20,000 ceiling into new all-time highs, the exchange announced it had confidentially filed for an initial public offering with U.S. regulators.
Ruffer’s bitcoin philosophy
Meanwhile, Ruffer explained in its portfolio update that macroeconomic factors guided the manager’s bitcoin bet.
“The current macroeconomic environment is set up perfectly for an asset that blends the benefits of technology and gold,” Ruffer said, adding:
“Negative interest rates, extreme monetary policy, ballooning public debt, dissatisfaction with governments – all provide powerful tailwinds for bitcoin at a time when conventional safe-haven assets, particularly government bonds, are perilously expensive.”
Ruffer said bitcoin has grown to meet this moment.
“Since 2017, billions of dollars have been invested in the infrastructure needed to support this wave of bitcoin adoption; many of the impediments to institutional investors have been dismantled.”
Ruffer’s analysis was clear: the institutions are here with more on the way; the cypherpunks are fading fast. Wrote the $27 billion mega-manager:
“[Bitcoin] seems set to move from being loved by the anti-establishment to being embraced by the dominant interests of the establishment.”
UK Investment Manager Sells Off Half BTC Holdings After $750M Win
“The economic environment for Bitcoin right now could not be better,” said Duncan MacInnes.
United Kingdom-based Ruffer Investment Management has made more than $750 million from its Bitcoin investment in less than two months, but it has decreased the size of its holdings.
According to a report from British news outlet The Telegraph, Ruffer saw “immediate fireworks” after investing roughly 2.5% of its assets into Bitcoin (BTC) in November 2020, resulting in millions of dollars in gains as the price of the crypto asset rose past $20,000 and on to a new all-time high of more than $42,000 in January.
Rather than HODLing it all, however, the firm reported that it had sold roughly half its BTC holdings.
“The 2.5% allocation we made in November across all our funds, which totalled around $600 million — this has more than doubled so we decided to take out our ‘book cost’ and take $650 million in profits,” said Ruffer co-manager Duncan MacInnes. “We still have around $700 million left in and are currently up by $750 million overall.”
MacInnes said Ruffer was initially skeptical about investing in Bitcoin in 2017 but admitted the circumstances had changed in the last four years, with many people turning to digital solutions accelerated by the pandemic. He said retail investors are “desperate for alternative safe haven assets” and institutions are buying into the crypto asset as well.
“The economic environment for Bitcoin right now could not be better.”
In November 2020, Ruffer called adding Bitcoin to its Multi-Strategies Fund a defensive move against the “continued devaluation” of fiat money. The firm reduced its exposure to gold and invested roughly 2.5% of its assets into BTC.
Ruffer chairman Jonathan Ruffer later called Bitcoin a “seemingly non-sensical asset, but one that makes absolute sense for how we see the world.”
At time of publication, the price of Bitcoin is $36,816, having risen 6% in the last 24 hours.
London Wealth Manager Cashes Out $1B Profit From $600M BTC Buy In November
After profiting $1 billion in less than six months, Ruffer is open to making more Bitcoin trades in the future.
Asset manager Ruffer has taken more than $1 billion in profit from a $600 million Bitcoin investment it made in November 2020.
Speaking to The Times, Hamish Baillie, investment director at the London-based asset management firm, revealed that Ruffer closed out its Bitcoin (BTC) position for more than $1.1 billion in profit during April:
“When the price doubled we took some profits for our clients in December and early January. We actively managed the position and by the time we sold the last tranche in April the total profit was slightly more than $1.1 billion.”
Baillie claimed that Ruffer became one of the first fund managers to buy BTC in what was a rare short-term investment for the company. At the time of the investment, Bitcoin’s price had cleared $15,000 and was pushing up to test the then-all-time highs near $20,000 that had been set in 2017.
The investment director attributed Bitcoin’s late-2020 parabolic price rally to the pandemic lockdown and stimulus payouts in the United States. He said the company sold its holdings partly because younger investors would not be spending as much time trading crypto now that lockdowns are ending.
The firm has moved the profits it made on the BTC trade into other “protective” assets such as inflation-linked government bonds. However, Baillie is confident that major financial institutions, including Ruffer and Goldman Sachs, will continue to buy Bitcoin, stating that another purchase is “certainly not off the menu”:
“If you have a multi-asset strategy then things that behave in different ways are really helpful. There’s no point being multi-asset if all your different assets move with the same dynamics.”
Ruffer is not the only large financial institution that has been dabbling in crypto, with data from Bitcoin Treasuries suggesting that 36 publicly traded companies currently hold BTC on their balance sheet.
Only six, or 16%, of publicly traded firms invested in Bitcoin are currently down on their position, including Nexon, Meitu and Seetee. The top three holders — MicroStrategy, Tesla and Square — are sitting on $5.2 billion worth of BTC between them.
Bitcoin Whale Emerges With $1 Billion, Alan Howard’s Backing
Bitcoin is a ‘convex bet’ says CEO of institution with $600M BTC exposure.
Another mainstream giant unveils its bullish position on Bitcoin.
2020 has been a big year for mainstream Bitcoin (BTC) adoption. One of the most recent entrants to the space is One River Digital Asset Management, a hedge fund headed up by CEO Eric Peters.
The firm expects to own approximately $1 billion in Ethereum (ETH) and BTC by the first half of next year, and has already accumulated roughly $600 million worth of the asset, said a Bloomberg report on Wednesday. Alan Howard, Brevan Howard Asset Management’s co-founder and a known billionaire, is also involved in the endeavor.
Peters’ position on Bitcoin lines up with other players’, who view Bitcoin as a potential gold-like inflation hedge during uncertain economic times. Taking interest rates, money printing, and other factors into account, Peters told Bloomberg:
“There definitely are more risks to this than gold, which has been around for thousands of years, but there’s also way more convexity […] There are very few convex bets that’ll help your portfolio when these macro forces start playing out.”
Peters has boarded a thought leadership train that sees BTC becoming more and more prevalent in the days ahead. He explained:
“There is going to be a generational allocation to this new asset class […] The flows have only just begun.”
One River did not just buy the $600 million in BTC and ETH yesterday, however. According to the article from Bloomberg, Peters completed the purchases in November, sneakily acquiring stacks of the assets without stirring public hype.
Bitcoin’s price recently cracked $20,000, and remains above this level at time of publication.
Institutional Financier deVere CEO Says Bitcoin Will Rise 50% And ‘Possibly Double’ In 2021
Bitcoin’s (BTC) parabolic rally is only just getting started, according to Nigel Green, founder and CEO of the Dubai-based financial advisory firm deVere Group.
In an article that was published to Newsmax on Thursday, Green boldly proclaimed that Bitcoin will have another “record-breaking year” in 2021, with prices set to explode by at least 50% and “possibly double.”
He made the prediction just as Bitcoin peaked above $23,000 on Thursday for the first time ever. The flagship digital currency would go on to trade as high as $23,777 on Bitstamp before experiencing a minor pullback.
Based on current values, Green expects BTC to reach between $34,500 and $46,000 at some point next year.
While acknowledging that Bitcoin won’t go up in a straight line, Green says the influx of institutional investors will lead to a groundswell of consumer interest, creating the perfect storm for price discovery.
“Some of the world’s biggest institutions – amongst them multinational payment companies and Wall Street giants – pile ever more into crypto, bringing with them their enormous expertise and capital, this in turn, swells consumer interest.”
Green’s deVere Group has spent quite a bit of time researching digital assets. Last month, the advisory firm released survey results showing that 73% of respondents are bullish towards cryptocurrencies, up from 68% in 2019. This so-called survey of millionaires underscores an important shift underway within smart-money circles.
Institutional demand has been a primary catalyst behind Bitcoin’s bull market and is one of the main reasons why the current uptrend differs markedly from the blow-off top in 2017.
Another major catalyst is the narrative that Bitcoin is a hedge against inflation and macroeconomic uncertainty — something Green touched upon in his article.
“[…] with governments continuing to support economies and increase spending due to the pandemic, investors are increasingly going to look to Bitcoin as a hedge against the legitimate inflation concern.”
DeVere Group CEO Sold Half of Bitcoin Holdings At Christmas Highs
Nigel Green, CEO of U.K.-based financial advisory firm deVere Group, has said he sold 50% of his bitcoin holdings over Christmas as the cryptocurrency’s price surged to new highs.
* In a blog post late last week, Green said that as bitcoin (BTC, -3.89%) neared $25,000 per coin, he made the decision to sell half his holdings, explaining, “It’s better to sell high and re-buy in the dips.”
* “The steady gains in the price of bitcoin has made the digital currency the top-performing asset of 2020, up over 200%. As such, I felt the time was right for profit-taking,” he said.
* The CEO stressed that his decision to sell was “not due to a lack of belief in bitcoin, or the concept of digital currencies.”
* “I believe that the future of money is cryptocurrencies,” he wrote, adding that the longer-term price trajectory for bitcoin is “undoubtedly upwards.”
* DeVere Group estimates that nearly three-quarters of high-net-worth individuals will be invested in cryptocurrencies before the end of 2022, according to the post.
Investment Firm Jefferies ($51 Billion Assets Under Management) To Buy Bitcoin And Dump Gold
Jefferies is the latest investment company that plans to buy Bitcoin after reducing its gold holdings. It supports the narrative that people are moving their capital from gold into the top digital asset.
An official of the billion dollars investment firm unveils the future plans for purchasing the flagship cryptocurrency. Christopher Wood, the global head of equity strategy at Jefferies, says that the company is buying Bitcoin after dumping some amount of gold. The exposure to cryptocurrency will increase if the top cryptocurrency witnessed a price correction after recording an all-time high value.
Reduction of Gold from Portfolio
According to Wood, it will happen for the first time in years that the firm will add Bitcoin by releasing gold, which represents a 50% portfolio of Jefferies. He said:
“The 50 percent weight in physical gold bullion in the portfolio will be reduced for the first time in several years by five percentage points with the money invested in Bitcoin. If there is a big drawdown in bitcoin from the current level, after the historic breakout above the $20,000 level, the intention will be to add to this position.”
As per the data of Q3, the investment company is holding $51 billion in assets under management. Per the report, the BTC holdings will be transferred into a “long-only global portfolio.”
As per the portfolio, the gold allocation will reduce from 50% to 45% by dedicating a 5% allocation to the top digital currency. 30% allocation of the portfolio is in the “Asia ex-Japan equities,” while 20% is in the mining stocks of gold.
However, Wood claims that gold is not going anywhere, but its adoption would increase because the central banks’ policies will increase inflation.
Over this initiative, market analysts Bruce Ng and Juan Villaverde believe that the flagship cryptocurrency has a lot of potential, and the entry of big institutions in the digital space would push its price value as well as market cap upward.
They draw a scenario that if 10% of the value from government bonds ($30 trillion) goes into both top hedge assets, including Bitcoin and gold, then $3 trillion will add into the market caps of both assets.
“$1.5 trillion going into gold – which is 15% of gold’s market cap (now about $10 trillion). And…$1.5 trillion going into Bitcoin – which is 4.4 times its market cap (now about $338 billion).”
Jefferies’ Wood Cuts Gold Exposure In Favor Of New Position In Bitcoin
Christopher Wood, global head of equity strategy at investment firm Jefferies, cut his exposure to gold for the first time in years in favor of bitcoin, Business Standard reported.
* Wood will be cutting the gold position in his long-only asset allocation for U.S.-dollar-based pension funds to 45% from 50% and initiating a 5% holding of bitcoin (BTC), the report said.
* Wood, while remaining bullish on the yellow metal, said he’ll add more BTC to the fund should the cryptocurrency drop significantly.
* The head of equity strategy had previously refrained from investing in BTC out of a fear of hacking and that it could have been declared illegal due to its sometimes use in nefarious purposes, the publication said.
* The remaining allocations in the fund are a 30% weighting in Asia ex-Japan equities and 20% in unhedged gold mining stocks.
* Wood is looking for a “dramatic cyclical recovery” after the pandemic subsides, Business Standard said.
MicroStrategy Buys The Dip — Now Has More BTC Than US Govt
Michael Saylor announces another $650 million purchase of Bitcoin as it price dips from weekend highs.
Business intelligence company MicroStrategy has added to its Bitcoin (BTC) stash, with a purchase of 29,646 BTC for a total of $650 million, an average of around $21,925 per Bitcoin
CEO Michael Saylor tweeted the news immediately following a pullback in price to $22,247, although it is unclear whether the acquisition coincided with this event.
MicroStrategy announced its intention to buy more Bitcoin earlier this month with a $400 million debt security sale to raise funds for the purchase. The bond sale ultimately brought in $650 million, which has now been used to buy Bitcoin as promised.
The company is now holding a total of 70,470 BTC, bought at an average price per Bitcoin of $15,964. This makes it the fifth-largest individual hodler of Bitcoin, one place ahead of the United States government, which reportedly owns 69,420 BTC.
MicroStrategy started its Bitcoin journey in August with a purchase of 21,000 BTC for $250 million. At the time, the company stated that its intention was to adopt Bitcoin as its primary reserve currency as a hedge against U.S. dollar inflation.
This was followed by further purchases, including a $425 million acquisition in September, which were carried out through Coinbase’s over-the-counter desk.
Most recently, Saylor encouraged fellow billionaire Elon Musk to follow his lead and use BTC to replace the U.S. dollar as Tesla’s primary reserve currency. This would encourage other S&P 500 firms to follow suit, argued Saylor, compounding the benefits of the move.
Scaramucci’s SkyBridge BTC Fund Launches With $25 Million Investment
The ex-White House communications director sees a big move for BTC in the next 5 to 10 years.
Just two days after filing a Form D exemption with the U.S. Securities and Exchange Commission, Anthony Scaramucci’s hedge fund, Skybridge Capital, has launched its proposed Bitcoin (BTC) fund.
In a Dec. 23 interview on the Yahoo Finance channel, Scaramucci claimed that the effective registration with the SEC had now been completed and the fund had been started with $25 million of SkyBridge’s own capital.
The fund will be opened to accredited investors on Jan. 4, with a minimum subscription of $50,000, although Scaramucci claimed that the company was already putting together a “nice book” of preliminary orders.
In the interview Scaramucci claimed that SkyBridge is trying to “democratize the hedge-fund industry,” and that “Bitcoin is still somewhat difficult to buy.”
He followed this by praising Grayscale, which offers a fund providing easy Bitcoin exposure for institutional investors and currently holds over half a million Bitcoin.
However, the SkyBridge fund will be cheaper, he explained, charging an annual fee of 0.75% against Grayscale’s 2%. It will also trade at the net asset value of Bitcoin rather than the 20-30% premium seen with Grayscale, Scaramucci claimed. The fund will rely on Fidelity Digital Assets for custody of the Bitcoin.
Scaramucci pointed out Bitcoin’s attribute as a store of value, and drew a comparison between its current $440 billion market cap and gold’s $10 trillion, saying:
“So, we think there’s a very large move for Bitcoin over the next five to ten years.”
Another NASDAQ-Listed Firm To Invest $100 Million In Bitcoin
Greenpro Capital Believes In the Mass Adoption of Bitcoin
In a statement, the company said it believes in the ongoing mass adoption of Bitcoin by banks, hedge funds, and insurance companies, further adding that it endorses Bitcoin as a reliable store of value.
Towards this end, its CEO CK Lee has instructed Greenpro Capital investment bankers, to in Q1 2021, raise debt of up to $100 million. However, they will also buy digital gold from their cash reserves.
Through strategic management of their balance sheet and a Bitcoin fund—part of their crypto strategy, they can produce “significant future value” for the company.
Other than Bitcoin, Greenpro Capital believes that other top cryptocurrencies like Ethereum provide the opportunity for better returns, helping preserve value, and is an alternative that’s better than holding cash.
Public Companies Holding Bitcoin
According to statistics from Bitcoin Treasuries, more public firms are pouring their funds into Bitcoin. MicroStrategy under the leadership of Michael Saylor, for instance, owns 70,470 BTC.
A few weeks back, they announced another purchase of $650 million, pushing their total to over $1.9 billion of BTC at spot rates, in the process raking over $850 million in profits.
Repeatedly, Saylor believes Bitcoin is a store of value and the underlying network is a new financial layer that will power internet commerce over the years.
In a recent tweet, he seemed to be urging market leaders to tweak their investment strategy, explaining that it was impossible to pursue a corporate vision by investing capital in a currency (USD) that’s collapsing in value. Earlier, he said Bitcoin was the first engineered safe-haven describing the asset as “hope.”
#Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy.
Morgan Stanley Now Holds 10% Stake In Michael Saylor’s MicroStrategy
MicroStrategy’s massive push into Bitcoin is paying off, with shares skyrocketing and huge new investment from Morgan Stanley.
Per a filing with the Securities and Exchange Commission released on Jan. 8, investment bank Morgan Stanley had acquired 792,627 shares in business intelligence firm MicroStrategy. The investment represents a 10.9% stake in a firm that has made massive investments in Bitcoin over the past several months.
The purchase apparently happened on Dec. 31. MicroStrategy has had a colossal month, seeing its shares move from $289 on Dec. 8 to $545 as of Jan. 8.
In August, MicroStrategy took bold steps into crypto, making Bitcoin its primary reserve asset. At the time, CEO Michael Saylor said of the firm’s choice:
“This is not a speculation, nor a hedge. It is a deliberate corporate strategy to adopt the Bitcoin Standard.”
Just weeks ago, MicroStrategy announced a $400 million securities offering with the stated purpose of raising funds to buy more Bitcoin. As of Dec. 21, the firm had stockpiled 70,470 Bitcoin.
At prices as of publication time, MicroStrategy’s BTC stockpile was worth over $2.8 billion.
Institutional investors like Morgan Stanley have warmed up to crypto assets considerably over the past year. Many have attributed Bitcoin’s recent bull market to this institutional uptick, as compared to the retail FOMO that was so critical to BTC’s 2017 highs, which subsequently fell apart.
MicroStrategy Stock Finally Takes A Breather Following Massive BTC-Inspired Rally
MSTR declined by as much as 12.6% on Monday as Bitcoin pulled back sharply from $40K levels.
Shares of MicroStrategy (MSTR), a business intelligence firm with considerable exposure to Bitcoin (BTC), declined sharply on Monday, as profit-taking ensued following a parabolic rally over the past month.
The stock touched an intraday low of $464.51 in New York trading, representing a decline of almost 13%. It would later pare losses to trade around $500 a share. At current values, the company has a total market capitalization of around $4.6 billion. Last week, the stock peaked just below $512, marking a new all-time high.
The broader equity market was also under pressure on Monday, with the S&P 500 Index and tech-heavy Nasdaq each falling more than half a percent.
MSRT’s pullback coincided with a sharp decline in both the price of Bitcoin and the broader crypto markets, as investors took profits following a relentless surge over the past three weeks. Even with the decline, MSRT’s share price has gained a whopping 300% since last summer when CEO Michael Saylor first disclosed the company’s Bitcoin position.
MicroStrategy is the world’s largest corporate holder of Bitcoin, with 70,470 BTC on its books as of Monday, according to industry data.
The firm has been buying up the digital asset on the belief that Bitcoin represents a “dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.”
Despite its dramatic appreciation over the past few months, Bitcoin remains a highly volatile asset.
At the time of writing, BTC was just under $32,000, having declined 20% over the past 24 hours.
Bitcoin Price Bounces Above $32K As MicroStrategy ‘Buys The Dip’ With $10M
A further commitment to its treasury sees MicroStrategy join Grayscale as this week’s big buyer while others keep selling.
Bitcoin (BTC) showed signs of a resurgence on Jan. 22 after a trip below $30,000 produced fresh buyer support.
BTC Price Seals 8.5% Daily Bounce
Data from Cointelegraph Markets and TradingView showed a stronger trading day for BTC/USD on Friday, with daily gains at 8.5% at the time of writing.
The turnaround follows a turbulent 24 hours in which Bitcoin slid to $28,950 — a key level when it comes to support from whales and only its second dip below $30,000 this year.
At the same time, MicroStrategy, well known for its ever-increasing Bitcoin treasury, confirmed that it had purchased 314 BTC to bring its total hoard to 70,784 BTC.
“Microstrategy just bought 314 more #Bitcoin for $10M. @michael_saylor bought the dip,” Twitter-based information resource Documenting Bitcoin summarized, referring to the company’s CEO, Michael Saylor.
The latest buy-in came at an average cost of $31,808 per Bitcoin and joins asset manager Grayscale’s ongoing purchases that defy overall selling action in the past few weeks.
All Eyes On Whales At $29,000
Among other major BTC investors, meanwhile, interest remained focused on the area at just below $30,000.
According to monitoring resource Whalemap, that area is crucial to hold in order to avert a further price dip on BTC/USD, one that could take the pair closer to $20,000.
Thanks To Bitcoin, MicroStrategy Stock Is Up 113% Since Being Downgraded By Citigroup
MSTR stock has surged by roughly 113% since Dec. 8 when it was downgraded by a Citigroup analyst.
On Dec. 8, 2020, Citigroup, one of the largest banks in the world, downgraded MicroStrategy’ss stock (MSTR). Since then, MSTR stock is up 113.27% from $289.45 to $617.31, as the price of Bitcoin (BTC) rallied.
In the same period, the Citigroup stock has declined slightly by 0.63%, from $58.36 to $57.99.
Why Has MicroStrategy Stock Performed So Strongly Despite The Downgrade?
MicroStrategy has been investing its treasury holdings in Bitcoin, making BTC is treasury reserve asset. Currently, it is the biggest public company holder with over 70K BTC worth roughly $2.4 billion at today’s prices.
Moreover, on Dec. 9, 2020, MicroStrategy announced raising $550 million in capital from convertible bonds.
In an official statement, MicroStrategy explicitly said that it intends to invest in Bitcoin with the proceeds of the bond. This is also the statement that is said to have triggered Citi to downgrade MicroStrategy. The statement read:
“MicroStrategy intends to invest the net proceeds from the sale of the notes in bitcoin in accordance with its Treasury Reserve Policy pending the identification of working capital needs and other general corporate purposes.”
At the time, Citigroup analyst Tyler Radke issued a sell rating. He acknowledged that the return on MicroStrategy’s Bitcoin investment has been “impressive,” but said the market is overpricing the core business of the firm. He wrote:
“MSTR’s bitcoin investment has returned $250M (or worth $26/share or +20% towards stock) since August ’20. While impressive, it pales in comparison to the 172% return in the stock. At the current stock price, our analysis suggests that the market is pricing in much more optimistic valuation scenarios for the core business and Bitcoin.”
Since December 2020, however, the price of Bitcoin saw an explosive rally. While the skepticism toward the core business of MicroStrategy could have some merit, BTC saw a rally of over 100% in the last month of the year.
In just December, Bitcoin rallied from $18,319 to over $42,000 on Binance, outperforming most assets in both the stock market and the crypto market.
MicroStrategy remains an important multi-billion dollar business intelligence firm with strong core business.
But as long as the price of Bitcoin continues to increase in the near term, it will likely have a positive impact on the stock price of MSTR.
Michael Saylor, the CEO of MicroStrategy, remains fully confident in the company’s position on Bitcoin, and often buying the price dips. In the fourth quarter financial results for 2020, Saylor wrote:
“Going forward, we continue to plan to hold our bitcoin and invest additional excess cash flows in bitcoin. Additionally, we will explore various approaches to acquire additional bitcoin as part of our overall corporate strategy.”
MicroStrategy Adds To Bitcoin Trove With Another $10M Purchase
* The business intelligence company added 295 BTC (+5.43%) to its hoard, per a Tuesday filing.
* This marks the second $10 million purchase this year, after MicroStrategy bought 314 BTC less than two weeks ago, per CoinDesk’s prior reporting.
* MicroStrategy’s most recent buys were executed at an average price of $33,810, suggesting that it may have accumulated the new coins after the market dropped following a price spike around social media frenzy stirred by Elon Musk’s Twitter account.
* On the company’s earnings call last week, CEO Michael Saylor said his company will “continue to actively manage” its balance sheet and “progressively acquire more bitcoin” at prices “that probably keep going up.”
* MicroStrategy now holds 71,079 BTC, per the filing.
1,400 Sign Up For MicroStrategy’s Corporate Bitcoin-Buying Bootcamp
MicroStrategy, the business intelligence firm that has enjoyed 135% gains on the $1 billion in BTC it purchased last year, is hosting a webinar on corporate Bitcoin strategy.
Leading global business intelligence firm MicroStrategy is hosting an online seminar this week to explain the legal considerations for firms seeking to integrate Bitcoin into their businesses and reserves.
A Feb. 3 tweet from MicroStrategy CEO, Michael Saylor, said that representatives of more than 1,400 firms have already signed up for the event — which is dubbed “Bitcoin for Corporations: Legal Considerations.”
If you are interested in the legal considerations firms face while integrating #Bitcoin into their corporate strategy, you are not alone. We have professionals from more than 1400 firms joining us tomorrow for this discussion. There is still time for your legal team to attend. https://t.co/fid9nrZUfP
The seminar will take place on Feb. 3 and Feb. 4, with five one-hour sessions scheduled for the first day, and twice as many 30-minute sessions slated for the second.
The first day will feature presentations from Saylor, the firm’s president and CFO Phong Le, along with representatives of legal firms specializing in digital assets. The topics discussed will include strategies for incorporating Bitcoin into treasury reserves and related questions regarding the accounting, tax, legal, and auditing considerations for firms who pursue this strategy.
The second day will feature presentations from top crypto exchanges and fund managers, including Coinbase, Binance, Grayscale, and Galaxy Digital.
In August, MicroStrategy made headlines after revealing it had purchased 21,000 BTC for $250 million. The following month, Saylor announced the firm had purchased an additional 16,796 Bitcoin for $175 million, with the firm continuously purchasing roughly 0.19 BTC every three seconds over 74 hours to complete the transaction.
In December, MicroStrategy issued $650 million worth of bonds which were quickly mobilized to purchase 29,646 BTC. The firm purchased an additional 314 Bitcoin for $10 million in late January, and a further 295 BTC for $10 million this week, bringing its Bitcoin reserves up to 71,079 BTC, or 0.38% of Bitcoin’s circulating supply.
While MicroStrategy paid $1.095 billion to accumulate its BTC holdings, current prices value the stash at $2.57 billion — a gain of 135%.
Despite the firm’s rampant Bitcoin accumulation leading to its shares being downgraded by Citigroup on Dec. 8, its stock has since rallied by 113%.
Bitcoin Is the Scarcest Asset, MicroStrategy CEO Saylor Says
Elon Musk made waves with Tesla Inc.’s announcement that it bought $1.5 billion of Bitcoin, but he is far from the first chief executive to use his rainy day fund to invest in the world’s largest cryptocurrency.
“In an expansionary, monetary environment, you want scarce assets,” said Michael Saylor, MicroStrategy Inc.’s chief executive officer, in an interview on Bloomberg Television. “The scarcest asset in the world is Bitcoin. It’s digital gold.”
Saylor has been one of the most ardent supporters of converting company cash to Bitcoin, and said last year that the Federal Reserve’s relaxing of its inflation policy helped convince him to invest the enterprise-software maker’s reserves. Bitcoin advocates point to the 21 million coins that can only ever be mined under the current version of the cryptocurrency’s software.
The Limit Is Expected To Be Reached In 2140.
Musk has flirted with Bitcoin for years and in December posted on Twitter a suggestive image indicating he was tempted by the token. He also inquired about converting “large transactions” on Tesla’s balance sheet into Bitcoin in a Twitter exchange with Saylor. In a series of tweets, Saylor encouraged the billionaire to shift dollars from the EV company to the cryptocurrency.
MicroStrategy holds approximately 71,079 Bitcoins, according to a February filing. The holding are valued at about $3.2 billion based on Monday’s price. Saylor even issued $650 million in convertible bonds to help finance the purchases.
Saylor held a webinar last week on how corporate treasurers should move some cash into the digital coin, which he claims drew over 1,400 firms on the session in legal considerations for integrating Bitcoin into a company’s corporate strategy. On Bloomberg Television Monday, Saylor said that the whole conference attracted about 8,000 firms.
Gold will lose out to Bitcoin in reallocations, Saylor added.
“If we bought gold instead of Bitcoin, we would be down $2 billion. It would have been a disaster,” he said. “Once people start thinking about what they want, which is a non-sovereign, safe-haven store of value, they’re going to realize that Bitcoin does the job of gold better, and you’re seeing all of the institutional flows move out of gold into Bitcoin.”
Bitcoin Is A ‘Masterpiece Of Monetary Engineering’ Michael Saylor Tells Austin Davis
Michael Saylor, CEO of MicroStrategy, applies his training in thermodynamics to Bitcoin in an exclusive interview with Bitcoin pioneer and futurist Austin Davis.
The financial and economic narratives surrounding Bitcoin (BTC) barely scratch the surface of what makes the digital asset so unique, according to Michael Saylor, CEO of MicroStrategy.
In an exclusive interview with Austin Davis for Cointelegraph, Saylor calls Bitcoin “a masterpiece of monetary engineering,” and one that will likely go down in history as the world’s “first engineered monetary network.”
“Once you understand money is monetary energy and you understand Bitcoin is a monetary energy network, then you start to appreciate the fact that it either does or does not respect the laws of thermodynamics. If it doesn’t, it means it has a leak.”
That “leak,” Saylor says, is inflation, something Bitcoin has been mathematically designed to resist.
Saylor gave the interview in front of his now-famous 17th century Spanish Galleon, which was intricately crafted in the 19th century. Saylor described the model as a “work of art,” and one that provides him with added motivation. The fact that such vessels transported gold across the ocean in days of yore is certainly not lost on him.
Bitcoin has become an $850 billion asset following its latest price surge, but that’s only the beginning of its market impact, according to Saylor. He explains why Bitcoin will eventually “subsume gold” to become a $10 trillion asset before reaching $20, $30, $50 and even $100 trillion in value. At that point, Bitcoin will be the “core of the monetary planet.”
Saylor recently pitched Bitcoin to 1,400 corporate executives, where he discussed strategies for incorporating the digital asset into treasury reserves. In his interview with Davis for Cointelegraph, Saylor had a few words of wisdom about what hodlers should do with their Bitcoin if they hope to achieve generational wealth.
“You should buy it and hold it forever,” he opined. “My advice would be to borrow against it tax-free, never take capital gains, never take an operating income.”
Saylor’s outlook reflects his own strategy of perma-hodling the digital asset as part of a deliberate campaign to adopt the Bitcoin Standard. His conviction is not only based on Bitcoin’s underlying technology, but on the rapidly declining value of fiat currency. His now-famous analogy comparing fiat money to a melting ice cube appears to be resonating with his peers.
MicroStrategy Begins Hiring For Bitcoin Data Product
After buying 71,079 BTC, the business intelligence company is building its first bitcoin-related software product.
MicroStrategy is moving to assemble a blockchain analytics team. It would be the first bitcoin-related software product from a company best known for CEO Michael Saylor’s whopping bet on BTC as a reserve asset.
The firm, based in Tysons Corner, Va., put out calls on LinkedIn Friday for a Blockchain Data Analyst and Blockchain Data Engineer, explaining in job postings they will join a team “building an analytics platform with advanced metrics and insights for Bitcoin.”
MicroStrategy hinted last November its interest in building blockchain data products and even stated its intention to hire for them. Executives did not go public then with positions of interest and remained largely mum on program specifics, describing it as a potential data offering at the time.
But Saylor has been vocal about perceived deficiencies in bitcoin‘s data. He declared last October that “garbage” market data was holding bitcoin back. “Where can you find something so incredibly compelling that has such bad data around it relative to other assets?” Saylor said at the time.
For a man who spent much of last week all but pleading for his fellow CEOs to adopt the bitcoin standard, there’s an obvious, and vested, interest in improving upon the “garbage.”
MicroStrategy did not respond to a request for comment by press time.
The dual hirings add a rough picture to what could eventually become a commercialized intelligence offering for digital assets beyond just bitcoin. MicroStrategy wants analysts experienced with public, private and permission blockchains. (Bitcoin’s network is public and permissionless.)
A product would also produce shareable, digestible analytical insights, the listings indicate. MicroStrategy’s new engineer would be responsible for developing software capable of turning troves of data into “visualizations” that can be shared with “broader audiences.”
The job postings position MicroStrategy to capitalize on bitcoin Saylormania through the software intelligence space, which, as is so easy to forget for a company with 71,079 BTC on its balance sheet, is the firm’s longstanding business expertise.
MicroStrategy Files To Offer $600M In Notes In Order To Buy Yet More Bitcoin
The business intelligence firm said it expects to grant initial purchasers of the notes an option to buy an additional $90 million, making the total potential offering $690 million.
MicroStrategy, a business intelligence firm best known for the cryptocurrency it buys rather than for any product it sells, is planning to purchase even more bitcoin.
* Microstrategy on Tuesday said it intends to offer $600 million aggregate principal amount of convertible senior notes due 2027.
* The once-obscure firm, which jumped into the headlines last August for using treasury funds to buy bitcoin (BTC, +0.08%) and has since loaded up on the leading cryptocurrency to the point its holdings are worth more than $3.5 billion, said it intends to use the net proceeds from the note sale to buy even more.
* The Nasdaq-listed company said it expects to grant initial purchasers of the notes an option to buy an additional $90 million, making the total potential offering $690 million.
MSTR was trading down nearly 5% during early trading hours Tuesday.
MicroStrategy Raising $600M…. No, $900M To Buy More Bitcoin
Should the purchase go as planned, the business intelligence firm will hold more than $3.5 billion in Bitcoin as a reserve asset.
Following a Tuesday announcement that MicroStrategy would be planning to buy $600 million in Bitcoin (BTC) through a sale of convertible notes, the business intelligence firm has upped the ante by another $300 million.
MicroStrategy said on Wednesday it would be selling $900 million in convertible senior notes due in 2027 in a private offering to qualified institutional buyers. According to the firm’s estimates, the proceeds of the sale will be roughly $879 million. It added, however, that it could be as high as $1 billion “if the initial purchasers exercise in full their option to purchase additional notes.”
The business intelligence firm said it expected to close the offering on Friday, at which time it would “acquire additional Bitcoin.” With the price of Bitcoin reaching an all-time high of more than $51,000 on Wednesday, MicroStrategy could soon have an additional 19,000 BTC in its coffers.
MicroStrategy’s initial $250-million Bitcoin investment in August 2020 has more than doubled, given the crypto asset’s recent bull run. The business intelligence firm has since purchased 16,796 BTC for $175 million in September 2020, then 29,646 BTC for $650 million through the issuance of bonds in December 2020.
In addition, the firm bought 314 Bitcoin for $10 million in late January, and 295 BTC for $10 million earlier this month.
Should the purchase go according to plan, the business intelligence firm will hold more than $3.5 billion of the crypto asset in its reserves, or roughly 90,000 BTC. This would mean the company would control 0.48% of Bitcoin’s circulating supply.
UK Firm Launches Service For Company Treasuries To Invest In Bitcoin
U.K.-based crypto firm BCB Group is looking to provide corporations with a way to put Bitcoin on their balance sheet by launching a dedicated treasury.
BCB Group, a global digital financial services firm, is planning to help corporations navigate cryptocurrencies like Bitcoin (BTC) by launching a dedicated service.
According to a Feb. 19 announcement, BCB Group has launched BCB Treasury, a new service designed for corporate treasury departments seeking to get involved in Bitcoin à la Tesla.
The new service aims to provide a specific solution enabling access to treasury management for companies willing to invest their capital into Bitcoin and other digital assets. With BCB Treasury, executives can enter, hold, manage, and report on a Bitcoin-focused treasury strategy, the announcement states.
BCB Group founder and CEO Oliver von Landsberg-Sadie said that the launch of BCB Treasury comes in response to growing demand triggered by the recent Bitcoin moves of companies like MicroStrategy and Tesla. The exec said that lots of companies are looking to invest in crypto to hedge against weak fiat currencies:
“We are seeing some powerful signals attracting companies to the digital asset space including the debasement of reserve currencies through unprecedented levels of central bank money supply.”
Last year, BCB Group’s core business BCB Payments received regulatory approval from the United Kingdom’s Financial Conduct Authority.
Headquartered in London, BCB Group is a major European crypto payment services provider, serving some of the world’s largest crypto companies like Coinbase, Gemini, Galaxy Digital, Bitstamp and Kraken. In early February, the firm appointed former Coinbase UK CEO Zeeshan Feroz as an advisor.
Coinbase Has Held Bitcoin On Its Balance Sheets Since 2012
The American exchange is offering services and advice to other private and publicly traded firms that want to hold digital assets in their treasuries.
United States-based cryptocurrency exchange Coinbase has revealed that Bitcoin (BTC) and other crypto assets have been a key component of its corporate treasury since the company’s founding back in 2012.
In a new announcement addressed to other corporate actors, the exchange presented its own experience in managing its treasury position in cryptocurrencies as a solid foundation for advising other private and publicly traded companies about how to deal with their own prospective investments.
In a newly published, highly detailed corporate treasury FAQ, the exchange provides a thorough overview of the kinds of investment, accounting and tax policies that companies would need to consider and adopt if they wish to diversify their treasuries into crypto.
The FAQ is both a general resource that covers all manner of regulatory, auditory, technical and investment questions about crypto from a corporate investment perspective and a pitch for companies to choose Coinbase in particular as a trade executor, consultant and professional custody partner.
The document also provides overviews of Bitcoin’s performance in recent years from a macro perspective, revealing its favorable comparison to other financial assets such as gold and the S&P 500. “Bitcoin’s strong absolute performance compensated investors for its volatility,” the exchange notes.
Risk-adjusted, the asset had a rolling annualized Sharpe ratio of 1.52 over the past five years, taking into account the 2018 bear market.
Corporate investment in cryptocurrencies, notably Bitcoin, has made headlines in recent weeks due to Tesla’s $1.5 billion investment in the asset, which resulted in rumored profits of up to $1 billion.
Notwithstanding this extraordinary windfall, analysts have said that while they expect a ripple effect among corporations following Tesla’s move, less than 5% of publicly traded firms are likely to be confident enough to invest at present, until there is more regulatory clarity.
MicroStrategy To Buy More Bitcoin After $1 Billion Purchase
MicroStrategy Inc., the enterprise software firm that has embraced Bitcoin investing, said it paid an average $52,765 for nearly 20,000 tokens last week after issuing $1.05 billion in convertible bonds.
The company’s latest foray into the cryptocurrency market pushed its total holdings past 90,000 coins at a cost of $2.17 billion, it said in a statement Wednesday. MicroStrategy said it will continue buying Bitcoin using “excess cash” and may issue more debt to finance the purchases. Shares of MicroStrategy jumped as high as 13%.
Bitcoin rebounded from a two-day rout, rising 3.5% to $49,625 as of 11:27 a.m. in New York. MicroStrategy has paid an average price of almost $24,000 for its coins, giving it a gain of about 100%.
Buying Bitcoin doesn’t come without its risks. The tokens can be subject to impairment losses that occur when the price dips below the carrying value at any time since the acquisition.
MicroStrategy reported $70.7 million in cumulative impairment losses as of the end of last year that the company attributed to Bitcoin’s price fluctuations, according to its 10K filing. If MicroStrategy bought its most recent Bitcoin before prices hit a low of $45,000 Tuesday, they could be looking at as much as an $151 million loss based on their average purchase price, according to data compiled by Bloomberg.
The company first announced Bitcoin buys last summer, saying it used corporate cash reserves. MicroStrategy has since issued two rounds of convertible bonds to make additional purchases.
MicroStrategy share have surged more than 400% in the past year.
More Bitcoin! Michael Saylor’s MicroStrategy Just Keeps Buying BTC
Michael Saylor announced MicroStrategy’s acquisition of another $15 million worth of Bitcoin as MicroStrategy continues to dollar-cost-average into BTC.
MicroStrategy’s Bitcoin buying spree shows no signs of slowing after CEO Michael Saylor announced the purchase of another 328 Bitcoin (BTC) on Monday. The acquisition, which was paid for in cash, cost the firm around $15 million and equated to an average coin price of $45,710 at the time of purchase.
The investment takes MicroStrategy’s total Bitcoin holdings to 90,859 coins — a haul worth $4.3 billion based on the current price. The firm has essentially dollar-cost-averaged into Bitcoin over the course of the past five months, leaving the average price of each of its Bitcoin purchases at $24,063 per coin. Saylor tweeted on Monday:
MicroStrategy has purchased an additional ~328 bitcoins for ~$15.0 million in cash at an average price of ~$45,710 per #bitcoin. As of 3/1/2021, we #hodl ~90,859 bitcoins acquired for ~$2.186 billion at an average price of ~$24,063 per bitcoin. $MSTRhttps://t.co/fGH5KacsPI
The firm first acquired Bitcoin in August 2020 when it made an initial $250 million outlay on 21,454 coins. MicroStrategy continued to buy more BTC at various points toward the end of 2020, eventually accumulating over 70,000 coins by the turn of the year.
In February, the business intelligence firm announced that it would raise an additional $900 million for further Bitcoin purchases — a sum that eventually exceeded $1 billion when an additional 19,452 coins were purchased last Wednesday.
MicroStrategy’s total outlay on Bitcoin stands at $2.18 billion, while current coin prices would value the firm’s holdings at $4.3 billion, meaning the firm would have made over $2 billion in five months were it to sell.
However, there is little reason to suggest this will happen any time soon. Saylor previously said buying Bitcoin was one of the firm’s two corporate goals, along with growing its analytics software business.
No More ‘Bitcoin Effect’? Microstrategy Stock Falls By 50% In 17 Days
The excitement around Bitcoin has spilled over beyond spot price, data shows, with MSTR going from above $1,300 to $629 in just 17 days.
The Bitcoin (BTC) price correction isn’t just hurting individual hodlers — the biggest players are suffering in more ways than one.
Data from markets on March 5 revealed that MicroStrategy, which owns over 91,000 BTC, has seen its stock price dive by more than half in just three weeks.
MicroStrategy Keeps Buying BTC
On the day that the company confirmed that it had added another 210 BTC to its reserves at a cost of $10 million, MicroStrategy’s stock hit local lows of $628. At its peak in February, MSTR traded at just over $1,300.
The volatility is a commentary on the ups and downs of Bitcoin in its latest bull run, which has been characterized by wild swings in both directions.
Since beginning to add Bitcoin to its balance sheet in August last year, however, the overall impact on MSTR remains transformative. Prior to the move, it barely traded above $100.
“They now hold 91,064 bitcoin on their balance sheet,” Morgan Creek Digital co-founder Anthony Pompliano commented on the latest buy.
“This may be one of the greatest displays of conviction in public market history.”
MicroStrategy Dismisses Market Uncertainty, Buys Another Bitcoin Dip
The software company added another $10 million in BTC to its war chest.
MicroStrategy, a software company that’s been making headlines for its aggressive Bitcoin purchases, has made another $10 million purchase after Thursday’s market uncertainty.
As announced by CEO Michael Saylor, the company purchased another 205 BTC at an average price of $48,888, spending $10 million in cash to do so. This puts the company’s total Bitcoin holdings at 91,064 BTC worth $4.3 billion. The total cost basis of the BTC is $2,196 billion with an average purchase price of $24,119.
MicroStrategy’s latest Bitcoin purchase is one of its many “symbolic” buys where the company puts a few more million in BTC after every dip. While the software company began putting its existing assets into BTC in 2020, back when Bitcoin traded around $10,000, its latest purchases have yet to break even.
The latest major purchase, funded by a bond offering of $900 million, was done at an average price of $52,700 per BTC. Bitcoin’s price has wavered ever since amid a worsening outlook for risk assets on Wall Street.
Thursday’s buy coincided with a period of heightened tension on markets, as Fed chair Jerome Powell signaled that bankers do not think current conditions require additional intervention. Bond yields have been on a steady and powerful rise in the past weeks, which traditionally signals recovery from a recession and heightened inflation expectations.
This should normally reflect well on stocks and risk assets, but the narrative behind 2020’s unstoppable rise strongly relied on low bond yields and continuous Fed intervention as justification for heightened valuations.
Wall Street tension seems to be having some effect on Bitcoin, though MicroStrategy seems keen to continue on its previous path. Thursday’s purchase is largely symbolic, but the more important indicator is that MicroStrategy did not sell, despite its stock price having fallen 50% since February highs.
Chinese Publicly Listed Company Meitu Buys Bitcoin (BTC), Ether (ETH) Worth $40 Million
Meitu Buys BTC, ETH worth $40 Million.
In an announcement made on March 7, Siming District-headquartered Chinese technology company Meitu announced that it had bought BTC and ETH worth $40 million. For the uninitiated, Meitu has been listed on Hong Kong Stock Exchange since December 2016.
Specifically, Meitu purchased 380 BTC and 15,000 ETH at $47,105, and $1473, respectively.
The first publicly listed Chinese company to buy cryptocurrencies, Meitu’s decision to add the two largest cryptocurrencies to its balance sheet could potentially trigger a domino effect within the Chinese business ecosystem.
It is worthy of note that Chinese regulations on digital currencies are not the most lenient in the world.
Against that backdrop, it makes Meitu’s announcement all the more significant which indicates that other Chinese firms – and Asian businesses in general – could soon enter the fray of institutional investment in digital assets.
In fact, what is worthy of note that in addition to BTC, Meitu has also purchased ETH – something that companies like Square, MicroStrategy, and Tesla are yet to do.
Clearly, the move by Meitu confirms the days of “China bans bitcoin” FUD might be coming to an end for good. It remains to be seen whether the Chinese state or the financial regulator react in any capacity to Meitu’s entry into the crypto landscape.
Could Ethereum Be Institutional Investor’s Next Crypto Play?
While Meitu’s foray into the digital currency industry might be a welcome sign for the institutional interest in digital currencies in Asia, what is more significant is the company’s decision to buy ETH.
A potential narrative could play out where institutional investors that might have missed out on BTC could start accumulating ETH. After all, Ethereum is, by far, the largest smart contract platform in existence that has made booming landscapes such as that of DeFi and more recently, NFT, a possibility.
Interestingly, the rising institutional interest in ETH, along with the continually reducing ETH supply in exchange could very well be the catalysts that propel ether toward price discovery.
Norwegian Investment Firm Allocates $58M To Bitcoin And Crypto Ventures
Aker ASA has created a new subsidiary to hold Bitcoin on its balance sheet and invest in other companies in the crypto space.
Aker ASA, a $6-billion Oslo Bors-listed holding company, is set to begin investing in Bitcoin. According to a press release issued on Monday, Aker has created a new company called Seetee AS whose mission is to invest in Bitcoin (BTC).
The newly formed Seetee will also delve into the Bitcoin mining arena while looking to forge useful partnerships with major players in the crypto space. Indeed, Seetee has reportedly entered into a collaborative agreement with Blockstream.
According to Blockstream chief strategy officer Samson Mow, the Bitcoin infrastructure firm will work closely with Seetee on its BTC mining and sidechain implementation pursuits.
Despite the Norwegian government ending electricity subsidies for BTC miners back in November 2018, Bitcoin mining activity in the country still contributes to a significant proportion of the global hash rate distribution.
Outside China, the country ranks eighth in terms of global monthly hash rate, according to data from the Cambridge Bitcoin Electricity Consumption Index. As previously reported by Cointelegraph, Bitfury signed an agreement with a private equity firm to upgrade the latter’s $35-million BTC mining farm.
The press statement also reveals that the new company will look to pursue investments into other firms in the crypto and blockchain arena.
Aker will provide 500 million Norwegian kroner ($58 million) in initial capitalization for Seetee, with the new company holding all of its liquid investable assets in BTC.
The move marks a significant departure from Aker’s usual investments in the oil exploring and marine biotech sectors. Tweeting on Friday, Seetee revealed that it has already purchased 1,170 BTC.
Commenting On The Rationale For Exploring Bitcoin Investments, Aker CEO Øyvind Eriksen Remarked:
“With the launch of Seetee, the Aker Group makes another move into software and fintech. We are very excited about the industrial opportunities that will be unlocked by Bitcoin and blockchain technology, and want to contribute forcefully to that effort.”
Aker is the latest in a growing list of companies around the world investing in Bitcoin in recent months, from business intelligence outfit MicroStrategy to electronic vehicle manufacturer Tesla — and a Canadian restaurant has even converted its cash reserves to BTC.
Bitcoin On The Balance Sheet? Corporate Buying Might Become A Global Trend
According to Arcane, the new corporate buyers appear intent on keeping the cryptocurrencies for the long term “and see further upside potential in bitcoin.”
Bitcoin and ether (ETH, -1.45%) purchases by companies in Scandinavia and Hong Kong are fueling speculation a wave of non-U.S. corporate treasurers might follow MicroStrategy, Tesla and Square into buying cryptocurrencies, according to a new report by the Norwegian analysis firm Arcane Research.
Hong Kong-listed Meitu, a maker of photo-retouching software, said it bought 15,000 ETH and 379 BTC (+2.64%) in open-market transactions last week. Arcane figures the company paid an average $47,230, well below the current market level of around $57,000.
In addition, on Monday Aker, a Norwegian energy engineering company, added 1,170 BTC to its balance sheet, paying approximately $58 million, at an average price of around $49,600.
According to Arcane, the new corporate buyers appear intent on keeping the cryptocurrencies for the long term “and see further upside potential in bitcoin.” MicroStrategy, led by CEO Michael Saylor and based in Virginia, holds about 91,064 BTC purchased over the past three months, now worth about $5 billion.
Meanwhile the U.S. electric-vehicle maker Tesla, headed by billionaire Elon Musk, bought about $1.5 billion worth of bitcoin in February..
“The first wave, initiated by MicroStrategy, started in the U.S., but now the trend shows signs of turning global,” Arcane wrote.
With bitcoin firmly in a bull run, quadrupling in price last year and nearly doubling in price already in 2021, the sooner a company got into the market, the better a price it got.
Bitcoin Price Sheds 5% After Oracle Corporation Keeps Quiet On $4B BTC Allocation Rumors
Claims that Oracle would announce a 72,000 Bitcoin buy-in on Wednesday were left unsubstantiated by executives as Bitcoin fell from local highs of $57,300.
Bitcoin (BTC) fell $2,000 overnight on March 11 after United States-based multinational Oracle dispelled rumors that it had bought 72,000 BTC.
Data from Cointelegraph Markets and TradingView showed BTC/USD returning to $55,000 on Thursday after hitting local highs of around $57,00.
The previous day had delivered strong performance across cryptocurrency, with bulls eagerly awaiting a retest of Bitcoin’s all-time highs at $58,300.
While the momentum did much to overcome a final band of resistance in place just below that level, it did not last, as an alleged adoption announcement from Oracle failed to materialize.
Starting in February, claims began to surface that the firm planned to buy a huge amount of Bitcoin in a move that would rival top institutional investors Grayscale and MicroStrategy.
Confirmation should have come on Wednesday, social media users added, but an earnings call failed to confirm their suspicions.
In the event, co-founder Larry Ellison did not disclose any Bitcoin-related activity, while signalling that he was bullish on the trading environment for the coming year
“I’m not really ready to disclose our plans as to why I think it’s going to suddenly spike but we expect very, very rapid database growth next year,” he said, quoted by CNBC.
At the time of writing, BTC/USD was continuing to retrace, losing around 2% in an hour and heading towards $54,000.
Reacting, commentators remained unfazed by the anticlimax.
“For those caught in the day to day pricing of Bitcoin, it is a long journey,” entrepreneur Jeff Booth responded:
“The fact that Oracle hasn’t bought ‘yet’ is very bullish and signalling how early it still is.”
Analyst: Amazon market cap could be next for Bitcoin
Taking a longer-term view, one analyst this week described the slowdown in Bitcoin’s bull run at around a $1 trillion market cap as a “back-and-fill process.”
In a tweet, Mike McGlone, senior commodity strategist at Bloomberg Intelligence, argued that once consolidation is over, Bitcoin would rise again — and its next target would be Amazon’s market cap.
“Tesla in Rear View, About $80,000 Bitcoin Eyes Amazon Market Cap — Once Bitcoin’s back-and-fill process around the $1 trillion market cap is complete, we see internet pioneer Amazon.com as a potential next threshold…,” he wrote on Tuesday.
McGlone uploaded a comparative chart highlighting Bitcoin’s low volatility poised to repeat performance from 2017, the year in which BTC/USD grew from $1,000 to just under $20,000.
Philly T-Shirt Company Allocates $1M Of Its Cash Reserves To BTC / ETH
Roughly 30% of the $1 million has already been put toward crypto purchases.
RushOrderTees, a t-shirt printing and embroidering company, intends to buy $1 million worth of crypto with its cash reserves, according to a recent announcement.
“The company has so far purchased $300k in Bitcoin and other cryptocurrencies over the past month and will ramp to $1 million in crypto holdings by the end of April,” a March 12 public statement said.
The move from RushOrderTees is another sign of adoption and a normalization of digital asset investing.
RushOrderTees is a custom shirt and apparel manufacturer based in Philadelphia, PA. They accept orders that range from single unit purchases to large-scale apparel runs. The business even touts a partnership with the NBA’s Philadelphia 76ers, according to the company’s website.
Although Bitcoin (BTC) has had its ups and downs over the years, the asset’s price has soared in recent months, breaking its 2017 record price high near $20,000 in December 2020. BTC has continued blazing an upward trail since then, recently flying past $57,000.
“Bitcoin, cryptocurrencies, and blockchain technology offer an exciting glimpse into the future,” Mike Nemeroff, RushOrderTees’ CEO, said in the statement. “This is our opportunity to be on the cutting edge of something that has the power to change global commerce forever.”
A number of other companies have also converted some of their company’s assets to Bitcoin, with more expected to follow. MicroStrategy has put over $2 billion of capital toward the currency, and Tesla bought $1.5 billion worth of BTC in 2021. Square and MassMutual have also bought Bitcoin in recent months.
Nemeroff is no stranger to the crypto space, as the CEO himself has reportedly bought crypto over the years, the statement included.
Forget Buying The Dip, MicroStrategy Buys $15M of Bitcoin As It Nears the All-Time High
This latest purchase brings the firm’s total bitcoin holdings to around 91,326, bought for an average of $24,214 apiece.
Business analytics firm MicroStrategy has made yet another large bitcoin purchase, buying a further $15 million worth.
* MicroStrategy announced Friday it purchased approximately 262 more BTC at an average price per coin of $57,146, just a little over $1,000 away from the cryptocurrency’s all-time high.
* This latest purchase brings the firm’s total bitcoin holdings to around 91,326, bought for an average of $24,214 apiece.
* At the time of writing, this is equal to around $5.1 billion, compared to the approximate $2.21 billion MicroStrategy paid for them.
* The company’s share price has partly recovered from a month-long downturn, which saw it dip as low as $547.40 on March 5.
* MicroStrategy stock was listed at $763 in pre-market trading today and stands at $803.75 at press time.
Bitcoin Hoard Fuels One of World’s Biggest Crypto Fortunes
It’s the latest corporate strategy for companies from Tesla Inc. to Square Inc.: shift a portion of cash reserves into cryptocurrencies as digital assets become more mainstream.
Still, few have gone as far as MicroStrategy Inc. Eight months after its first investment, the software firm has a Bitcoin holding worth more than $5 billion.
Shares of MicroStrategy have rocketed almost 600% since mid-July, boosting the fortune of founder Michael Saylor, a billionaire until an accounting scandal in 2000.
The chief executive officer is now worth $3 billion, according to the Bloomberg Billionaires Index, joining the ranks of the world’s richest crypto holders, a list that isn’t definitive since some fortunes can’t be identified or verified.
MicroStrategy’s crypto fixation began soon after the pandemic hit when the firm found it had a cash-flow problem: There was just too much of it. After cutting advertising and axing 400 jobs unsuited to home-work, the Tysons Corner, Virginia-based firm was sitting on a cash pile of $550 million with nowhere to put it. Saylor, 56, turned his attention to Bitcoin.
“People still aren’t sure: Are we crazy or are we not crazy?” Saylor said. “The only way to get economic security is to invest in scarce assets that are not going to be debased by the currency expansion. That is the environment that led us to decide we should consider Bitcoin as a treasury reserve asset.”
Not everyone agrees with the strategy.
“Saylor equated Bitcoin to a bank – that’s just ridiculous,” said Marc Lichtenfeld, chief income strategist at the Oxford Club, a financial-research firm that has no stake in MicroStrategy. “When you put your money in a bank, the value of it doesn’t go up or down by 10% a day.”
Saylor has clashed with investors before. In 2000, a shareholder filed a class-action lawsuit against MicroStrategy, alleging it misled investors over the company’s earnings by booking revenue prematurely to inflate profits.
MicroStrategy agreed to restate its revenue figures and Saylor, once dubbed the wealthiest man in Washington, D.C., with a fortune of $7 billion, lost almost all of it in a matter of weeks after shares fell 95%. He and his fellow executives, without admitting or denying the allegations, paid $11 million to the Securities and Exchange Commission in December 2000, including $1 million in fines.
“It’s made us careful and humble and focused,” Saylor said. “Every scar informs you, and I wouldn’t be who I am without having lived through those experiences.”
Saylor has continued to run the analytics software business he founded in 1989, and has overseen annual revenue streams of around $500 million for the last decade, though sales have dipped in recent years.
Michael Saylor MicroStrategy
Michael Saylor speaks virtually during the Bloomberg Crypto Summit on Feb. 25.
Bitcoin’s price has soared in recent months, hitting a record above $58,000 last month as big investors pile in and the asset class matures.
Saylor shrugs off concern about Bitcoin’s volatility and said crypto critics are behind the curve. He said he’s also put his own money into the digital asset, amassing a personal holding worth more than $1 billion.
“If you go back 10 years, how many people agreed that Facebook, Google, Apple and Amazon would own the world?” he said. “Who were the last people to embrace this? Senior members of the establishment.”
Saylor’s appetite to acquire Bitcoin didn’t stop after the company’s first purchase. When the majority of MicroStrategy’s cash reserves were exhausted, Saylor raised a $650 million corporate bond and used it to buy more.
Saylor said he’d rather issue debt against future cash flow now than save up to buy Bitcoin in five years, when he thinks it’ll be pricier.
In February, the company raised another $1.05 billion in a bonds-for-Bitcoin offering, and on March 5 it announced yet more purchases. On Friday, Saylor tweeted that MicroStrategy bought 262 additional Bitcoins for $15 million in cash, bringing the total to about 91,326. The firm’s shares closed down 2.5% to $784 in New York.
The move has resulted in MicroStrategy becoming a dual-purpose company: part software maker, part Bitcoin investor. While the firm has been transparent about this change in regulatory disclosures, juggling two distinct goals isn’t something that investors are accustomed to.
“If you’re a hedge fund and you want to make that kind of a concentrated bet, you’re entitled to do that,” Lichtenfeld said, but “as a software company to make this kind of a bet is completely irresponsible.”
Saylor said the company has been upfront with investors throughout. When MicroStrategy increased its Bitcoin holding, it held a Dutch auction to give shareholders time to sell their stock.
“Everybody had plenty of time to digest the news and decide whether they’re on or off,” Saylor said.
With all the attention he’s attracted, Saylor wants to do more than just defend a radical investment strategy. He’s become something of a global Bitcoin ambassador in recent months, appearing regularly on crypto podcasts and YouTube shows advocating for digital-asset investments.
“This is a really critical point in human history,” he said. “We’ll build a better world on it once people understand it. We’re still very early. This will be the decade.”
Investview Says It Holds More Than $1M In Crypto On Its Balance Sheet
Investview also reported record net income and sales for the month of February.
Financial technology company Investview said it holds more than $1 million in bitcoin (BTC, -9.83%) and other cryptocurrencies on its balance sheet.
* New Jersey-based Investview recorded estimated net income of $1.9 million and gross revenue of $5.5 million for the month of February.
* Both figures were records, the company announced Monday.
* The Venture Market-traded company’s cryptocurrency holdings in BTC and other digital currencies also surpassed $1 million as of Feb. 28.
* Investview is a financial technology company that provides cryptocurrency mining technology as well as financial education tools, content and research.
Asia’s MicroStrategy? Meitu Drops Another $50M On ETH And BTC
Chinese tech company Meitu has dropped another $50 million on ETh and BTC, taking its total holdings up to $90 million.
Chinese tech company Meitu has announced the investment of a further $50 million into Ether and Bitcoin, taking its net spend on crypto up to roughly $90 million this month.
The Hong Kong and China listed company purchased 386.08 BTC for $21.6 million, and 16,000 ETH for around $28.4 million, on March 17. The most recent announcement follows an initial cryptocurrency investment on March 5, in which the company acquired 15,000 ETH for around $22.1 million and roughly 379 BTC for approximately $17.9 million.
In the latest announcement, the company noted that while cryptocurrency is still in its formative stages, it believes that blockchain technology has the potential to be a disruptive force in existing financial and technology industries:
“The Board believes that the blockchain industry is still in its early stage, analogous to the mobile internet industry in circa 2005. Against this backdrop, the Board believes cryptocurrencies have ample room for appreciation in value.”
The company also cited the growing trend of large institutions such as Tesla and Microstrategy accumulating Bitcoin, and the increasing acceptance for cryptocurrency as a form of payment for goods and services in mainstream society, as reasons for the additional purchase.
Meitu went public in 2016 and is listed in China and Hong Kong. The tech company developed MeituPic, an app that lets users edit and retouch photos that is popular in mainland China, Hong Kong and Taiwan.
Following the announcement of its first investment on March 5, Chinese journalist Wu BlockChain suggested it was: “The first Chinese listed company to buy a large amount of Bitcoin.”.
However, it seems unlikely many more publicly listed Chinese companies will announce large crypto purchases in the near future, as the regulatory environment in the country is highly uncertain. China currently accepts Bitcoin as a virtual commodity, but prohibits trading platforms from engaging in exchanging legal tender for virtual currencies or tokens.
Coinbase Handled Trades And Custody For Meitu’s $90M Crypto Investment
Meitu chief financial officer Gary Ngan said the firm would have faced difficulties acquiring crypto on its own as a listed company.
Crypto exchange Coinbase’s institutional custody platform helped execute the purchase and custodying of roughly $90 million of Bitcoin and Ether for Chinese tech company Meitu.
In a blog from Coinbase today, the United States-based crypto exchange said Meitu used its services to execute up to $90 million worth of crypto transactions “across multiple marketplaces with minimal market impact.”
This month, the tech firm purchased 379 Bitcoin (BTC) for roughly $17.9 million and 15,000 Ether (ETH) for $22.1 million, followed by 386.08 BTC for $21.6 million and 16,000 ETH for $28.4 million. Coinbase Custody also provided cold storage for the digital assets, which are now worth more than $94 million.
“Cryptocurrencies are not new but acquiring cryptocurrencies as a listed company, while ensuring the security of the transaction and storage as well as compliance of various regulations and audit requirements, is still like navigating through uncharted waters,” said Meitu chief financial officer Gary Ngan.
Meitu cited institutional players like Tesla and business intelligence firm MicroStrategy acquiring Bitcoin as part of the reason behind its purchase, in addition to the increasing acceptance of crypto as a form of payment for goods and services. The company went public in 2016 and is listed in both Hong Kong and China.
Coinbase has also facilitated MicroStrategy’s multimillion-dollar BTC purchases. The crypto exchange’s institutional custody platform was the primary partner for the firm’s $425-million Bitcoin purchase in September 2020, which was executed over a period of five days.
New Zealand Retirement Fund Reportedly Allocates 5% To Bitcoin
Institutional uptake of BTC is on the rise. KiwiSaver of New Zealand appears to have built up exposure to Bitcoin in October 2020.
KiwiSaver Growth Strategy, a $350 million retirement plan operated by New Zealand Wealth Funds Management, has reportedly allocated 5% of its assets to Bitcoin (BTC), underscoring the steady stream of institutional investors entering the digital asset space.
Bitcoin’s striking similarities to gold were cited as one of the biggest reasons for entering the trade, according to James Grigor, the chief investment officer at New Zealand Funds Management.
“If you are happy to invest in gold, you can’t really discount bitcoin,” he told Stuff, a New Zealand news agency, adding that BTC will be featured in more KiwiSaver products over the next five years.
Grigor explained that his firm purchased Bitcoin for the first time in October when it was valued at $10,000. To execute the trade, New Zealand Fund Management had to change its offer documents to allow for cryptocurrency investments.
Bitcoin’s price peaked north of $61,000 earlier this month, which would give KiwiSaver a 6x return in just five months. Although Bitcoin’s price has moderated over the past week, the pension fund is sitting on hefty BTC profits.
Grigor explained that KiwiSaver is “majority built up through traditional asset classes,” but noted that “other opportunities present themselves.” In the case of Bitcoin, it’s an asset class that could help “give people the best retirement they can get” through its aggressive compounding.
While hedge funds and family offices have been steadily embracing Bitcoin, pension funds are perhaps the slowest to adopt the digital asset class. The growth of institutional onramps could help accelerate the adoption narrative.
In the United States, Grayscale has noted that pension funds are already getting in on digital assets. “The sizes of allocations they are making are growing rapidly as well,” said Michael Sonnenshein, Grayscale’s CEO.
Norwegian Billionaire Ditches Skepticism, Invests In Local Crypto Exchange
Norwegian billionaire investor Øystein Stray Spetalen made a 180° reversal in his opinions about cryptocurrency this month and now part-owns domestic crypto exchange MiraiEx.
Within the same month, Norwegian billionaire investor Øystein Stray Spetalen has gone from dismissing Bitcoin (BTC) as a “nonsense currency” to revealing that he has joined the board of Norway’s top domestic crypto exchange MiraiEx.
Spetalen’s former position was that cryptocurrencies such as Bitcoin should be “immediately” banned by the Norwegian and European authorities due to the destructive effect that mining them has on the environment. In a pre-recorded interview screened at the DNB Invest conference on March 18, he said:
“Bitcoin today consumes as much energy as all of Norway. It is extremely environmentally hostile. The authorities and the EU should ban it immediately. Then you’d cut CO2 emissions considerably […] It’s just nonsense. We’re doing well with the payment systems that are in place today.”
Yet by March 26, in an interview with Norwegian newspaper Finansavisen, Spetalen had changed his tune. “When the facts change, I change,” he said, “I met the MiraiEx founders Thuc and Øyvind the day after the podcast was recorded, early in March, and I realized that I had been wrong.”
Norwegian cryptocurrency exchange and custodian MiraiEx had just raised 5 million kroner ($580,000) in late 2020 to further expand its operations.
Aside from investing in a successful local exchange and joining its board, Spetalen has also apparently now bought Bitcoin, although in a lesser quantity than fellow Norwegian billionaire Kjell Inge Røkke has. Disclosing his unspecified investment in the top cryptocurrency, Spetalen said:
“When I also read that Kjell Inge Røkke had got into Bitcoin, it was quite obvious. I can’t bear to see that Røkke makes money and not me.”
Røkke serves as chairman of the $6 billion industrial holding company Aker ASA, which set up a dedicated unit for investing in projects and companies in the Bitcoin ecosystem in early March of this year. The unit has been initially capitalized with 500 million kroner (~$58.6 million) and plans to keep all its liquid investable assets in Bitcoin.
It has also recently been revealed that the $1 trillion Norwegian Government Pension Fund, also known as the Oil Fund and the world’s largest sovereign wealth fund, indirectly owns almost 600 Bitcoin through its investment holdings.
Chinese Web Firm Meitu Buys $10M More In Bitcoin
The publicly traded app developer has now spent $100 million on bitcoin and ether.
Chinese app developer Meitu said Thursday it purchased 175.6 bitcoin for $10 million, bringing its total holdings of the cryptocurrency to over 940 coins.
* The Hong Kong Stock Exchange-listed company has invested $100 million in bitcoin and ether (ETH, +4.41%) positions since adopting a “cryptocurrency investment plan” in early March.
* The company is part of a broader trend of publicly traded firms diversifying their cash treasury with bitcoin during the coronavirus pandemic.
* Notably, Meitu, which also owns ETH, said it is buying crypto to prep for a “foray into the blockchain industry.”
* Meitu held 31,000 ETH and over 940 BTC Thursday. It has invested roughly the same amount in both cryptos, though the ETH position, at nearly $64 million, was worth more at press time.
HSBC Reportedly Blacklists Microstrategy’s Stock For Investing In Bitcoin
The investment banking giant now reportedly classifies MicroStrategy as a “virtual currency product.”
Buying MicroStrategy stock is reportedly no longer possible for HSBC customers on the bank’s online trading platform — HSBC InvestDirect, or HIDC.
According to a supposed message from the bank to its customers, HSBC has directed users that already own MicroStrategy stock not to buy additional shares.
Twitter user Camiam claimed to have received such a message from the banking giant on March 29:
The MSTR blacklisting appears to be part of the bank’s amended user policy prohibiting users from interacting with cryptocurrencies, with an excerpt from the message reading:
“HIDC will not participate in facilitating (buy and/or exchange) product relating to virtual currencies, or products related to or referencing to the performance of virtual currency.”
According to the alleged HSBC communique, MicroStrategy is a virtual currency product, hence the reason for the blacklisting.
MicroStrategy, a business intelligence and software firm, has pioneered Bitcoin (BTC) adoption among publicly listed companies in the United States.
Since first adding Bitcoin to its balance sheet back in August 2020, the Fortune 500 company now holds over 90,000 BTC, currently valued at about $5.26 billion.
The blacklisting of MSTR is only the latest in HSBC’s recent anti-crypto moves. Earlier in the year, the world’s sixth-largest bank also reportedly blocked customers from moving profits from crypto exchanges to their bank accounts.
Despite banning users from buying MicroStrategy stock, reports of similar prohibitions have yet to emerge for other companies with Bitcoin investment interests.
Indeed, companies with significant Bitcoin investments such as Tesla, Hut 8 Mining and Square, to mention a few, are still listed on the HIDC trading catalog.
HSBC becomes the latest bank to react negatively to MicroStrategy’s Bitcoin involvement. Back in December 2020, Citibank downgraded MSTR over the company’s “disproportionate” focus on the largest cryptocurrency by market capitalization.
MicroStrategy’s Bitcoin investment initially seem to trigger a positive run for the company’s stock price, reaching a 21-year high above $1,200 back in early February. MSTR has since struggled and is now almost 50% down from its 2021 peak.
Neither HSBC nor MicroStrategy immediately replied to Cointelegraph’s request for comments.
MSTR rallied by as much as 10% on Tuesday, just one day after an SEC filing showed that non-employee board members will be paid in BTC.
Shares of MicroStrategy (MSTR) surged to one-month highs on Tuesday as Bitcoin’s (BTC) gravitational pull on crypto proxy stocks continued to strengthen following another record-breaking rally for the digital asset.
Shares of the business intelligence firm touched an intraday high of $770 on the New York Stock Exchange, representing a gain of 10% — the highest level since March 11. At current values, MicroStrategy has a total market capitalization of $7.5 billion.
Even with the latest run-up in price, MSTR remains well below all-time highs reached in early February. The stock peaked at $1,315 on Feb. 8 before pulling back to sub-$1,000 levels.
MSTR’s rally came just as Bitcoin surged above $63,000 for the first time, setting a new all-time high. Although MicroStrategy’s underlying business has nothing to do with Bitcoin or cryptocurrency, the company has become a corporate flagbearer of BTC ever since CEO Michael Saylor decided to convert a large portion of the company’s balance sheet into the digital asset.
The company now holds 91,579 BTC, worth roughly $5.8 billion at the time of publication.
On Monday, a filing with the United States Securities and Exchange Commission revealed that MicroStrategy’s board of directors will receive bonus payments in BTC instead of cash. The modified 8-K form states:
“Going forward, non-employee directors will receive all fees for their service on the Company’s Board in bitcoin instead of cash.”
MSTR wasn’t the only crypto proxy stock to rise on Tuesday. Riot Blockchain (RIOT) rose 10%, and Marathon Digital Holdings (MARA) rallied 6%.
MicroStrategy Announces Bitcoin Bonuses For Board Of Directors Instead Of Cash
Cash is out of the board room and Bitcoin is in as MicroStrategy announces it will pay director bonuses in BTC instead of dollars.
Business intelligence firm MicroStrategy announced on Sunday that its board of directors will now receive bonuses in Bitcoin (BTC) instead of cash.
A modified 8-K form filed with the United States Securities and Exchange Commission revealed MicroStrategy’s decision to dispense with cash bonuses and instead use Bitcoin to compensate those on the company’s board. The modified filing states:
“Going forward, non-employee directors will receive all fees for their service on the Company’s Board in bitcoin instead of cash.”
MicroStrategy has dollar-cost averaged into Bitcoin since the end of 2020, buying small amounts here and there until it eventually accumulated a war chest of over $4 billion worth of BTC.
The 8-K form stated MicroStrategy’s belief that Bitcoin could function as a reliable store of value and commended its open-source nature, which means it isn’t beholden to any one corporate entity.
“In approving bitcoin as a form of compensation for Board service, the Board cited its commitment to bitcoin given its ability to serve as a store of value, supported by a robust and public open-source architecture, untethered to sovereign monetary policy,” states the filing.
The dollar amount of bonuses paid to board members will not change under the new system. Instead, the dollar value of the bonus in question will be converted to Bitcoin at the time of the payment and sent to the director’s wallet. The filing elaborates:
“Under this modified arrangement, the amount of Board fees payable to non-employee directors remains unchanged and will be nominally denominated in USD. At the time of payment, the fees will be converted from USD into bitcoin by the payment processor and then deposited into the digital wallet of the applicable non-employee director.”
Toddler Hodler: 3-Year-Old Bitcoin Educator Interviews Michael Saylor
Three-year-old Lily Knight interviewed Michael Saylor on April 13 about his thoughts on Bitcoin and his plans for the future.
Three-year-old Lily Knight, “the world’s youngest Bitcoin educator,” interviewed billionaire MicroStrategy founder Michael Saylor for her YouTube channel in a video that dropped on Tuesday.
In the interview, Knight noted that Saylor’s accumulation of more than $2 billion worth of Bitcoin since August 2020 had been a “ballsy move.”
The toddler and unconfirmed “hodler” became something of a viral sensation in the crypto space in mid-February after she (aided by her parents) published a video explaining Bitcoin’s dynamics using Skittles candy.
The video caught the attention of Saylor and fellow crypto billionaire Tyler Winklevoss, and both retweeted the video. Winklevoss added that “Lily, a 3-year-old, understands Bitcoin better than most central bankers.”
Knight’s father noted in a Reddit thread that the “ridiculous idea” to interview Saylor came after he had reached out to thank the corporate world’s biggest Bitcoin cheerleader for retweeting the video. Saylor was responsive to the idea.
Her father revealed that the video required a lot of editing, as he had to “plead and bribe” Lily to sit still, as they pre-recorded the questions for the MicroStrategy founder to answer later:
“We recorded her side of the interview and then zoomed with him and played her questions, pausing after each one for him to answer. I wish we could do it live, but she’s so unpredictable at this age .. she just might break out into a Frozen song or something lol Maybe when she’s a little older.”
The first question Lily asked was: “When did you first buy Bitcoin? What convinced you to buy?” Saylor said that he’d been searching for new treasury strategies to preserve shareholder value in March 2020 due to a “gnawing suspicion that the money was broken.” Saylor added that:
“I went on a mad quest to find a solution. And I was delighted to discover Bitcoin, a store of value over long periods of time. So, once I discovered Bitcoin and understood all of its characteristics as a digital monitoring network, I started buying it and I haven’t stopped.”
The young “crypto educator” said that “a lot of people are confused by Bitcoin” and asked Saylor: “What do you think is the biggest misconception?” The billionaire said people often characterize Bitcoin as purely an investment idea or speculative asset; however, he describes it as the “world’s first monitoring network”:
“Bitcoin is the world’s first digital monitoring network, and it’s a technology. And when you start thinking of it as a better technology for money, then you realize that it’s not just a trade. It’s actually a way to think about the world.”
This may have gone over Lily’s head.
She finished up by asking: “What’s next for you?” to which Saylor responded he’s looking forward to doing everything he can to spread Bitcoin to billions of people and also to educate the world on the benefits of Bitcoin.
“And when I get some free time, I’m going to buy myself some more Bitcoin,” he added.
Bitcoin On Balance Sheet Attracts Negative Attention From Anti-Crypto Banks
Having over 90,000 BTC on the balance sheet could see a company’s stock blacklisted by banks that remain crypto detractors.
MicroStrategy’s continuous Bitcoin acquisition has drawn the ire of investment banking giant HSBC. Despite being one of the largest business intelligence firms in the world, HSBC has stated that MicroStrategy is now a “virtual currency product,” a designation akin to the pseudo-Bitcoin exchange-traded fund status attached to the company on account of its sizable Bitcoin (BTC) balance sheet.
Since August 2020, MicroStrategy has embarked on a Bitcoin acquisition spree and now holds more than $5 billion worth of BTC.
Michael Saylor, the company’s CEO, has also become an outspoken Bitcoin proponent. Saylor’s Bitcoin evangelism has included attempts to encourage other publicly listed firms to add BTC to their balance sheet. Indeed, some other companies in the United States have emulated Saylor’s Bitcoin adoption.
With corporate Bitcoin adoption becoming commonplace, the conversation appears to be shifting toward life and annuity companies and sovereign wealth funds to see where the next wave of institutional BTC investment will emerge.
However, for legacy players like HSBC, Bitcoin and cryptocurrencies, in general, remain anathema even if the actions taken thus far appear to be arguably arbitrary.
HSBC Blacklists MicroStrategy Stock
HSBC blacklisted MicroStrategy’s stock, preventing customers of the bank’s online retail trading platform in Canada from acquiring the company’s shares. While HSBC did not respond to Cointelegraph’s request for confirmation on the report, the bank has publicly verified the news using similar statements contained in the original message shared by customers on Twitter.
In the message sent to HSBC InvestDirect customers who already hold MicroStrategy (MSTR) stock, the bank revealed that additional MSTR purchases will no longer be possible on the platform. The communique stated that such customers could hold their current MicroStrategy stock balances or sell their shares.
According to HSBC, the blacklisting was in line with the bank’s crypto restrictions enacted back in 2018. An excerpt from the bank’s policy as contained in the message to HSBC InvestDirect, or HIDC, customers reads: “HIDC will not participate in facilitating (buy and/or exchange) product relating to virtual currencies, or products related to or referencing to the performance of virtual currency.”
Reacting to the news, Stuart Hoegner, general counsel at crypto exchange platform Bitfinex, told Cointelegraph that the decision was a “regressive step” in the context of the growing appeal of cryptocurrencies in the mainstream arena, adding:
“Instead of refusing to participate in products relating to virtual currencies, HSBC should instead focus on delivering optimal services to its customers, many of whom pay high fees and interest rate charges on the bank’s loans and credit card products. In fact, it is blockchain technology’s capacity — by virtue of removing intermediaries — that can enhance levels of inclusion, accessibility and transparency in financial products.”
Making Sense Of It All
In singling out MicroStrategy, HSBC referred to the company as a “virtual currency product,” hence its decision to prevent customers from buying MSTR. However, HDIC lists shares of several companies with significant cryptocurrency involvement including Tesla, Square and Hut 8 Mining, to mention a few.
Elon Musk’s electric vehicle manufacturing giant, Tesla, acquired about $1.5 billion worth of Bitcoin back in February. Hut 8 is a Bitcoin mining establishment, while Square operates Cash App, an avenue for buying BTC that also contributes greatly to Square’s revenue bottom line.
Unlike MicroStrategy, which only holds Bitcoin on its balance sheet while still carrying out its function as a business intelligence firm, some of the tradable stocks on the HDIC platform belong to companies, like Hut 8, that derive value directly from cryptocurrencies.
Commenting on the lack of clarity in HSBC’s decision, Jeffrey Wang, head of Americas at crypto finance provider Amber Group, told Cointelegraph: “It’s a very slippery slope for HSBC. Will they publish a clear set of defined rules for what they deem to be companies that derive value from virtual currencies?”
He questioned further: “Why haven’t they also put this trading restriction on other companies that have publicly disclosed holdings of Bitcoin like Tesla? Will they block trading in Coinbase?” As an HDIC customer, Wang also expressed displeasure at the uneven application of HSBC’s anti-crypto policies, adding:
“I think this is HSBC overstepping its reach on its retail brokerage offering. If a company is lawfully listed on the Nasdaq and is in compliance with any regulatory requirements, the decision to buy this stock should be left up to the end-user and not the brokerage.”
HSBC’s ban on MicroStrategy stock trading becomes even more bizarre, given that customers can still buy exchange-traded funds that contain MSTR on the platform. Indeed. According to ETF.com, 88 ETFs hold MicroStrategy shares.
The MSTR blacklisting is hardly the first negative consequence of MicroStrategy’s Bitcoin investment push. In December 2020, Citibank downgraded the company’s stock citing MicroStrategy’s “disproportionate” focus on BTC.
New Layers Of Legitimacy
HSBC’s action puts the bank firmly in the corner of legacy financial institutions still averse to Bitcoin and cryptocurrency innovation. The move offers the latest indication of the bank’s repudiation of digital currencies following efforts to block customers from repatriating crypto trading profits from exchanges to their bank accounts earlier in the year.
Meanwhile, several major players in the traditional finance arena are increasingly becoming more exposed to Bitcoin and cryptocurrencies as the novel technology gains new layers of legitimacy.
From offering custody services for digital currencies to establishing digital asset exchange platforms, banks across the United States, Europe and Asia are showing a greater appetite for digital currencies.
For Wang of Amber Group, HSBC is holding fast to a shrinking position of being a banking institution that remains averse to cryptocurrencies, telling Cointelegraph:
“I think HSBC will be in the tiny minority — if not the only brokerage — that will restrict its retail investors from buying shares in publicly traded and regulated companies due to exposure to virtual currencies.”
Recently, European investment banking giant Société Générale issued a tokenized security representing one of its structure products — investment packages linked to assets and derivatives — on the Tezos blockchain. The news marked a third consecutive year of a blockchain-related financial product being issued.
In a message to Cointelegraph, Jean-Marc Stenger, managing director of digital capital markets at Société Générale and head of its fintech startup subsidiary, SG Forge, remarked that crypto companies will challenge legacy finance players that are slow to adapt to the emerging digital financial landscape.
Rather than advocate for eschewing digital assets, Stenger identified the advantages held by traditional finance in real-world asset-based tokenization, adding:
“Traditional financial institutions know how to structure regulated digital assets and how to cope with related requirements (investors protection, rules for markets integrity, compliance, KYC, continuity plans). But more importantly, they have origination and distribution capabilities and day-to-day business relationships with their clients.”
While Société Générale’s digital asset offerings are not tied to cryptocurrencies, major U.S. investment banks such as Goldman Sachs and Morgan Stanley are looking to offer their clients exposure to Bitcoin funds.
Amid the continued influx of institutional actors into the Bitcoin space, the question of whether governments will invest in BTC is likely becoming a matter of “when” and not “if.” With insurance companies and pension funds dipping their toes in the Bitcoin pool, sovereign wealth funds appear to be not too far behind.
Nigerian Hotel Becomes Country’s First To Accept Bitcoin Payments
George Residence in Lagos has announced plans to start accepting BTC payments. The company has already converted 50% of its balance sheet to Bitcoin.
A luxury hotel in Lagos, Nigeria will reportedly accept Bitcoin (BTC) as a form of payment and adopt the digital asset as its primary reserve currency as concerns about inflation continue to grip Africa’s largest economy.
George Residence confirmed its intent to begin accepting Bitcoin this weekend, according to 1st News, a Nigerian news publication. George Residence, which offers luxury hotel and premium apartment suites, will accept BTC through Coinvest Africa, a regional cryptocurrency brokerage.
“We have allocated around 50% of our cash reserves to Bitcoin. […] We hope to increase that as time goes on,’’ said ‘Yanju George, the company’s CEO. “Bitcoin is the currency of the future and it is only right that we are strongly positioned so we do not get left behind.”
“Bitcoin permits our guests a faster and more secure way to enjoy the comfort we offer. Our residents desire simplicity, and we are excited to be able to offer that to them.”
Nigeria’s inflation rate has been in the double digits since 2016. Recently, it peaked at 17.33% — the highest since February 2017 — as the economic impacts of COVID-19 and a weakening local currency continue to take their toll.
Inflation is one of the reasons why Nigeria has become the bastion of crypto adoption in Africa. Since 2015, Nigerians have traded over 60,200 BTC on Paxful, a crypto peer-to-peer trading platform, second only to the United States.
The legal status of cryptocurrencies is being disputed in Nigeria after the central bank banned financial services companies from servicing digital currency exchanges. However, Adamu Lamtek, deputy governor of the Central Bank of Nigeria, later clarified that the regulator didn’t ban Nigerians from trading or holding cryptocurrencies.
As Cointelegraph recently reported, the Securities and Exchange Commission of Nigeria is working with the central bank to develop a new legal framework for digital assets.
Genesis’s Corporate Treasury Service Takes Off
Genesis Global Trading released its Q1 report on April 28, with corporates leading trading volumes, accounting for $8 billion in spot trading alone.
Leading full-service cryptocurrency prime broker Genesis Global Trading has seen spot trading treble in the first quarter.
Corporate interest accounted for the biggest slice of trading, with Genesis attributing part of its success to its Bitcoin treasury product “Genesis Treasury”.
The Q1 report released on April 28 revealed the firm had processed $31.5 billion in spot trading volume — a 287% increase from $8 billion in Q4 2020. It also saw $10.5 billion in derivatives trading.
Corporates accounted for $8 billion of the total spot trading volume, an increase of 25% from the previous quarter. The growth of corporate trading to account for the largest share was a significant shift from the passive funds and hedge funds that formerly dominated trading in Q4.
“Much of this surge was attributable to a mix of clients taking positions in Bitcoin for the first time, existing clients adding to their positions, and clients choosing to take a more active approach to manage their exposure.” Genesis wrote.
The crypto broker noted that “numbers were bolstered” due in part to the launch of Genesis Treasury — a service designed for corporates to gain exposure to Bitcoin through accumulation strategies such as equity, liquidity, and yielding returns.
The firm noted interest in the Genesis Treasury followed the broader level of interest from large institutions entering crypto markets such as Tesla and MicroStrategy:
“As corporate clients began buying Bitcoin for their treasuries in Q1, our ratios shifted. The entrance of companies like Tesla, MicroStrategy and Square led to a wave of interest from corporates looking to work together with Genesis Treasury for their own treasury allocation efforts.”
Genesis also posted strong increases in crypto lending in Q1, adding over $20B in new originations, compared to $7.6B originated in Q4, with active loans outstanding increasing to $9B, up 136.4% from $3.8B at the end of 2020.
Cumulative originations increased 94.8% bringing the total up to $40B in originations since the launch of its lending services in March 2018.
“Our loan portfolio increased substantially in value through a combination of new issuance across cash, ETH, and Decentralized Finance (DeFi) assets alongside a significant rise in asset prices across our existing crypto book,” Genesis wrote.
Possible Bitcoin Treasury Adoption As More Companies Cite Inflation Concerns
Bitcoin is likely a topic of conversation among the treasury department of many U.S. companies amid rising inflation.
No fewer than 47 companies have cited the term “inflation” in their earnings calls for Q1 2021.
According to a report by financial market data provider FactSet on Monday, the figure represents the highest number of companies to do so in the last decade.
Earlier in April, the United States Bureau of Labor Statistics released its “Producer Price Index” report showing a 4.2% year-on-year increase in PPI, the highest since September 2011.
While Federal Reserve chairman Jerome Powell continues to argue that current inflation and consumer price index numbers are only temporary, there is a counter-argument that businesses will move to transfer the burden of greater production costs to their consumers.
Meanwhile, companies may also be seeking ways to protect their cash reserves from U.S. dollar debasement following the nearly $6 trillion in stimulus money poured into the U.S. economy over the course of the ongoing coronavirus pandemic.
Back in August 2020, business intelligence outfit MicroStrategy made headlines when it announced its first Bitcoin (BTC) purchase. Michael Saylor’s firm now holds over 90,000 BTC valued at more than $5 billion, with the asset up almost five-fold since August 2020.
On Monday, Tesla announced the sale of $272 million worth of Bitcoin — about 10% of its BTC holdings — in the company’s Q1 financial report. According to Tesla’s Q1 2021 earnings call, the electronic vehicle maker netted $101 million in net profit from the sale.
Tesla first revealed its BTC ownership back in February, announcing that it has purchased about $1.5 billion worth of Bitcoin.
With inflation expected to continue in its upward trajectory at least in the short term, more U.S. companies might convert some of their cash reserves to Bitcoin. This likelihood is despite arguments to the contrary made by treasury experts back in February.
Back in March, Dawn Fitzpatrick, chief investment officer of Soros Fund Management, said that BTC was no longer a fringe asset on account of U.S. dollar debasement.
MicroStrategy Sees Up To 52% Revenue Surge As Saylor Confirms More Bitcoin Buys Ahead
New figures show certain revenue sectors boomed by over 50% in Q1 2021 compared to the same quarter last year.
MicroStrategy, the company which owns over 91,000 Bitcoin (BTC), saw an astounding surge in revenues in Q1, its latest figures confirm.
In a press release on April 30, CEO Michael Saylor revealed that the company’s success had gone far beyond its Bitcoin profits.
Saylor: Hodling BTC creates “substantial value”
MicroStrategy has continued to hit the headlines for its flatly bullish position on Bitcoin and its future, adding to its reserves regardless of sentiment or price.
Its advocacy has seemed to endear it to a new sector of clientele — nine months after beginning to convert its cash reserves to BTC, sales of its products and services have also boomed.
“Product licenses and subscription services revenues for the first quarter of 2021 were $31.3 million, a 52.3% increase, or a 49.8% increase on a non-GAAP constant currency basis, compared to the first quarter of 2020,” the press release states.
Total revenues for Q1 were just over $122 million, representing a 10.3% increase over the same period in 2020.
“MicroStrategy’s first quarter results were a clear example that our two-pronged corporate strategy to grow our enterprise analytics software business and acquire and hold bitcoin is generating substantial shareholder value,” Saylor commented.
He said that the company was “still happy” with its approach to BTC acquisition, adding that it would be adding to its already substantial reserves.
“We will continue to acquire and hold additional bitcoin as we seek to create additional value for shareholders,” he concluded.
As Cointelegraph reported, the company’s stock price has experienced volatility this year, something which has echoed Bitcoin’s own price discovery.
Bulls have “nothing to worry about”
The numbers are a familiar boon for Bitcoin bulls, who have been left hanging this week as rumors of major corporate buy-ins from the likes of Facebook went unsubstantiated.
This combined with equally familiar ranging price action has hit enthusiasm in some quarters, while analysts argue that there is nothing to be bearish about.
“So far, so good for Bitcoin. Still nothing to worry (about),” popular trader Michaël van de Poppe summarized to Twitter followers on Thursday.
An accompanying chart highlighted resistance beginning at $55,000 for the largest cryptocurrency to overcome as altcoins began to accelerate their own gains.
At the time of writing, BTC/USD traded at around $54,700, having come full circle over the past 24 hours which included a drop below $53,000.
Largest Latin American eCommerce Platform Adds $7.8M Bitcoin To Its Treasury
The purchase makes the eCommerce platform the 36th publicly traded company to add Bitcoin to its balance sheet.
Mercado Libre, the largest e-commerce platform in Latin America, has announced to the U.S. Securities and Exchange Commission (SEC) that it acquired $7.8 million in Bitcoin in the first quarter of 2021. It stated in the report:
“As part of our treasury strategy this quarter we purchased $7.8 million in Bitcoin, a digital asset that we are disclosing within our indefinite-lived intangible assets”.
The purchase makes the Argentinean company the first large Latin American company to acquire Bitcoin for its treasury and sees it join an exclusive club of companies such as MicroStrategy and Tesla, which have previously announced to the authorities the holding of BTC within their assets.
Just last week major Japanese game developer Nexon announced it had purchased 1,717 BTC for it’s balance sheet at a cost of roughly $100 million. Mercado Libre’s announcement makes it the 36th publicly listed company to hold Bitcoin according to Bitcoin Treasuries. Mercado Libre trades on Nasdaq as MELI.
The Accountants Say Bitcoin Can’t Play With The Unicorns
A company holding such digital assets can — for the most part — only write down their value. It’s unfair. Just look at those risky startup investments.
Bitcoin Lovers, Cry Foul!
Accounting firms are restricting corporations from holding the cryptocurrency as assets even as they give free rein to venture capital firms — such as SoftBank Group Corp. — to invest in equally risky and volatile unicorns.MicroStrategy Inc. and Elon Musk’s Tesla Inc. own Bitcoin but they are exceptions. One survey found that only 5% of finance executives plan to invest in Bitcoin this year.
That mindset is getting in the way of the broader adoption of Bitcoin and other cryptos because companies holding such digital currencies bear an accounting risk: big asset write-downs.
This is happening even though there are no official guidelines under the Generally Accepted Accounting Principles (GAAP) over how companies should account for digital assets. Accountants are operating out of a consensus among auditors — in their “non-authoritative” voice as they try to define the new era in a new report — that cryptos are not considered cash, or financial instruments, but “indefinite-lived intangible assets” because they “lack physical substance.”
In general, intangible assets tend to be related to a company’s activities and operations — marketing, customer relations, technological skills, or artistic expressions, says Allen Huang, accounting professor and associate dean at the Hong Kong University of Science and Technology’s business school.
Classifying Bitcoin as such is a stretch. However, that’s where it is now as accountants try to fit crypto into existing categories.
And, as an intangible asset, Bitcoin’s book value can go only one way: down.
If a company bought Bitcoin at $60,000, and the fiscal quarter ended with the crypto at $35,000, its investments will have to be impaired and written down to $35,000 per coin. The converse, however, is not true. A chief financial officer can’t write up her firm’s investments if the price goes back up to $60,000. She can do that only when the company sells the coins. This makes it difficult for a company to book gains on its crypto assets, while leaving open plenty of earnings downside.
In February, this concern was raised right after Tesla disclosed a $1.5 billion Bitcoin investment. It’s an important point. Depending on when exactly Tesla accrued its crypto pile, the EV maker might have to report an impairment for the June quarter. What blue-chip company wants to have that kind of headache on its balance sheet?
In contrast, stocks — classified as financial instruments — can easily be written up and down, thanks to what, in accountant-speak, is called “fair value, mark-to-market” bookkeeping. For instance, in the March quarter, venture capital giant SoftBank reported net income of 1.93 trillion yen ($17.5 billion), the most ever for a Japanese company, with essentially all of that due to unrealized gains from the newly public Coupang Inc. SoftBank owns over one-third of the South Korean e-commerce.
It feels unfair. Often cash-burning, newly-listed unicorns — such as the now-infamous Didi Global Inc. — can be as risky as 12-year-old Bitcoin. Had these unicorns been classified as intangible assets, SoftBank and other VCs would not have been able to claim profits until they sold their holdings.
Nonetheless, the accountants hold sway. Companies with extra cash and are willing to take on risk will find it hard to go into crypto. Granted, many CFOs may stay away from crypto assets anyway because of volatile trading. But the less risk-averse would be deterred by a huge institutional roadblock: their accounting firms.
Mercado Libre’s Bet On Bitcoin
Beyond the formal announcement, the relationship of the popular eCommerce portal with Bitcoin is not new. As previously reported by Cointelegraph en Español, at the end of April it enabled the use of Bitcoin for their real estate verticals in the Argentine market.
In addition, Marcos Galperín, founder and former CEO of Mercado Libre, has already announced publicly on several occasions that he has owned Bitcoin in his personal portfolio since 2013, and has also expressed a variety of bullish opinions regarding the cryptocurrency ecosystem in Latin America, even stating that he saw Bitcoin as a better store of value than gold.
CEO Michael Saylor disclosed the $15 million BTC purchase on Thursday.
MicroStrategy, the Virginia-based business intelligence firm, has added another 271 Bitcoin (BTC) to its strategic reserves, underscoring CEO Michael Saylor’s growing conviction in the digital asset.
The purchases were made through May 13 for an average price of $55,387, Saylor disclosed on Thursday. MicroStrategy now has 91,850 BTC on its books for an average purchase price of $24,403.
MicroStrategy has purchased an additional 271 bitcoins for $15.0 million in cash at an average price of ~$55,387 per #bitcoin. As of 5/13/2021, we #hodl ~91,850 bitcoins acquired for ~$2.241 billion at an average price of ~24,403 per bitcoin. $MSTRhttps://t.co/EwZnRkAt6k
MicroStrategy also disclosed the purchase to the United States Securities and Exchange Commission, or SEC, through a Form 8-K filing that was submitted on Thursday.
Although MicroStrategy’s purchase appears to have coincided with the latest correction in Bitcoin’s price, spurred on by Elon Musk’s sudden decision to stop accepting BTC payments on Tesla vehicles, the business intelligence firm isn’t timing the market.
Saylor indicated in February that he doesn’t intend to slow the rate of his company’s BTC purchase as he snatched up another $1 billion worth of the digital asset.
MicroStrategy sits atop of the Bitcoin corporate treasuries list, accounting for 0.437% of the asset’s circulating supply.
MicroStrategy is acquiring Bitcoin on the premise that the digital asset is a dependable store of value in the face of systemic dollar debasement. It has gone as far as issuing debt to expand its Bitcoin portfolio.
The United States’ M2 money supply has exploded since the 2008 financial crisis and, more recently, since the onset of the Covid-19 pandemic. Since February 2020, the money supply has expanded nearly 30% to $19.896 trillion, according to the St. Louis Federal Reserve Bank. To put that in perspective, the year-over-year increase in the M2 money supply had never exceeded 15% until 2020.
Crypto Exposure May Impact Financial Firms’ Risk Profiles: Allianz
Allianz’s report looked at the proliferation of new technologies and the impact they may have on any company’s risk profile.
Exposure to cryptocurrency could have a “profound” impact on the risk profiles of financial institutions, according to a new report by insurance giant Allianz.
Firms that offer crypto services in the form of trading or custody “will face the prospect of potential third-party liabilities,” said Ed Williams, global head of financial lines at Allianz Global Corporate and Speciality (AGCS).
With the merging of digital currencies and traditional finance, institutions will be exposed to the uncertainties of the crypto sphere, “with questions around potential asset bubbles and regulation” and “concerns for potential money laundering and the risks of theft or loss of access,” according to Williams.
This forms part of the report’s wider conversation around the proliferation of new technologies and the impact they have on any company’s risk profile.
Allianz draws comparisons with artificial intelligence (AI), robotics and biometrics threatening risk to financial firms that harness them for the purpose of credit scoring, for example.
MicroStrategy: Another Dip, Another $10M Bitcoin Purchase
The listed firm now holds 92,079 BTC bought for a total of $2.251 billion.
Publicly traded business intelligence firm MicroStrategy (NASDAQ: MSTR) is making the most of the downturn in bitcoin prices as it bought another 229 BTC for $10 million in cash.
* The purchase, which was disclosed by CEO Michael Saylor on Twitter and in an filing with the U.S. Securities and Exchange Commission Tuesday, was for an average price of $43,663 per bitcoin.
* MicroStrategy now holds 92,079 BTC bought for a total of $2.251 billion at an average price of about $24,450 per bitcoin.
* That means the firm has almost doubled its money since it started investing in the cryptocurrency, with the total holdings now worth $4.15 billion, according to CoinDesk’s price calculator.
* Only five days ago, Saylor announced the purchase of 271 BTC for $15 million.
* The company has a policy of regularly buying bitcoin for its treasury reserves as a hedge against U.S. dollar inflation.
* At press time, a bitcoin is worth $45,141, roughly flat over 24 hours.
Globant Says It Bought Bitcoin In Q1
With the purchase, the Luxembourg-based company becomes the latest company to hold cryptocurrency on its balance sheet.
Information technology and software development firm Globant bought bitcoin (BTC, +6.36%) in the quarter ended March 31, according to a company filing made this week with the U.S. Securities and Exchange Commission
* With the purchase, the Luxembourg-based firm becomes the latest company to hold cryptocurrency on its balance sheet, following in the footsteps of firms like MicroStrategy and Tesla.
* At March 31, when the price of a single bitcoin was roughly around $58,000, Globant’s holdings of the leading cryptocurrency was worth $500,000. Bitcoin is currently trading at about $34,000.
* The company didn’t disclose what it paid for each coin.
MicroStrategy And MIT Have Partnered Up To Improve The Bitcoin Network
Microstrategy has been described as one of the blockchain industry pioneers, with the MIT Digital Currency Initiative (DCI) recently raising nearly $4 million. Coinshares is another organization with which they have done business. In a press release, they confirmed that this is in order to improve the Bitcoin Network.
Corroboration From MIT, Microstrategy, And Others…
Since Satoshi Nakamoto developed Bitcoin, it has been in use for over 12 years. The Bitcoin Network has never been down since then, except for two occasions. The network was immediately restored on both occasions by their development team. This gives the Bitcoin Network justification to brag about its power. However, DCI, a division of MIT, has determined that it is in the best interests of the network to improve its security.
The DCI is partnering with a number of leading blockchain firms, including Microstrategy and Coinshares, on a new Bitcoin tech and protection project. According to the press release, they have raised $4 million, or half of their estimated goal, from a range of blockchain luminaries like Michael Saylor of MocroStrategy, Jack Dorsey of Twitter and Square, Gemini, Coinshares, and others.
The Project Has The Blessing Of Microstrategy’s CEO
According to Michael Taylor, Bitcoin is by far the most important innovation since the internet’s inception. He stated that they had a responsibility to ensure that the cryptocurrency and its underlying infrastructure are maintained and that the network is developed on a regular basis.
Since MIT’s DCI is a non-profit organization, their developers were an even better choice for leading the project’s execution. The developer team is working to boost the network’s protection against all forms of vulnerabilities that could be identified.
Broke MIT Students Miss 13,000% Gain On Free BTC After Selling For Food And Shoes
Many students who participated in the 2014 MIT Bitcoin Project lament quickly selling their free BTC for textbooks, sushi and beer.
In October 2014, the Massachusetts Institute of Technology launched the MIT Bitcoin Project, an initiative that sought to give away $500,000 worth of Bitcoin (BTC) to its undergraduate students.
Students were able to claim $100 worth of BTC in exchange for filling out a survey, equating to roughly 0.3 BTC at the time. The project was spearheaded by students Jeremy Rubin and Dan Elitzer, who raised $500,000 from university alumni and representatives of the Bitcoin community.
The project was intended to encourage exploration into digital assets and foster the campus as a global hub for crypto research.
With 3,100 students capitalizing on the offer and close to $200,000 worth of Bitcoin going unclaimed at the time, the university distributed roughly $33.8 million worth of BTC at current prices.
While many of the students presumably spent their freely obtained Bitcoin stash, with the MIT coop bookstore launching support for BTC as payment for textbooks, school supplies and other MIT merchandise from September 2014, Bloomberg spoke to one student who still holds the Bitcoin MIT gave her seven years ago.
Despite the value of 0.3 Bitcoin falling from $19,500 in mid-April to nearly $11,000 today, MIT alumni Mary Spanjers described her experience with cryptocurrency as “truly remarkable,” adding:
“Most of us thought it was a bit of a joke.”
Bloomberg also caught up with other MIT alumni who had quickly spent their Bitcoin, with several participants lamenting they had spent it on groceries or restaurants, including a nearby sushi joint that accepted Bitcoin as payment. Online forums suggest other students spent their crypto on beer, shoes and other trivial expenditures.
Christian Catalini, an MIT associate professor who oversaw the Bitcoin Project, estimates that 10% of participating students had cashed out their BTC within two weeks, while 25% had exited as of the project’s completion in mid-2017.
MicroStrategy Stock Slides After Announcing New $400M Debt Raise To Buy Bitcoin
The company’s stock has dropped by more than 60% after topping out at $1,135 in early February.
A lackluster balance sheet, excessive debt load and over-leveraged exposure to Bitcoin have crashed MicroStrategy stock by more than 63% since February already. Nevertheless, the business intelligence company has ignored the risks of its frothy valuations, and it now wants to raise more debt and buy Bitcoin with proceeds (BTC).
MicroStrategy announced on June 7 that it “intends to raise $400 million aggregate principal amount of senior secured notes in private offering […] to acquire additional Bitcoins.” The company already holds more than 92,000 BTC, worth about $3.31 billion at current exchange rates — almost 1.5x its principal investment.
MSTR plunged 2.17% to $469.29 per share after the New York Stock Exchange’s opening bell on June 7. At its year-to-date high, it was changing hands for $1,135.
Not Making Money
In previous statements, MicroStrategy clarified that it is building up a Bitcoin portfolio as an insurance policy against the continuing devaluation of the world’s major currencies. But with its back-to-back Bitcoin purchases, the company has effectively protected itself from more than just the U.S. dollar decline. Here’s a hint: unprofitable business lines.
A look into MicroStrategy’s alternative asset holdings also shows that the company is overly skewed toward Bitcoin, with real estate accounting for less than 0.2% of the total investments.
Its latest quarterly report also shows a weaker balance sheet as of March 31, with a debt-to-equity ratio of 4.55 — a significant debt load of $1.66 billion against an equity valuation of $0.37 billion.
That is particularly risky when Bitcoin’s price volatility is taken into account. MicroStrategy does not generate sufficient income to service its debt load and hugely relies on Bitcoin profits to do so. Atop that, it now wants to raise another $300 million, although its convertible notes are not due to mature until 2028.
Juan De La Hoz, a closed-end fund/exchange-traded fund strategist, fears that MicroStrategy risks becoming insolvent should Bitcoin fall by more than 50% in the future, noting the flagship cryptocurrency’s massive declines in the years 2014 and 2018. The analyst added that MicroStrategy would most likely liquidate its Bitcoin holdings to avoid insolvency.
Hoz added that he would neither invest in cryptocurrencies through leverage nor invest in a company that did so, hinting at his extremely bearish outlook for MicroStrategy and Bitcoin.
“It is simply too risky, you could lose it all, and I’d rather not take that chance.”
Bitcoin prices sleepwalked through MicroStrategy’s announcement early in the U.S. morning before trading began on the NYSE. The BTC/USD exchange rate continued trading sideways while maintaining support above $36,000.
MicroStrategy To Sell New Bitcoin Bond
Software provider doubles down on bet that digital assets will outperform cash.
MicroStrategy Inc. is borrowing $400 million in junk bonds to buy more bitcoins, adding to the company’s bet that digital assets will outperform cash.
This is the Tysons Corner, Va., company’s third bond sale to purchase bitcoins in less than a year. The new notes due in 2028 will be backed by claims on the business and “any bitcoins or other digital assets” acquired after the deal closes, excluding any claim on the company’s existing digital-asset portfolio.
In a filing Monday, MicroStrategy said it expects to post a $284.5 million loss, “based on fluctuations in market price of bitcoin,” during its next earnings report. The company held more than 92,000 bitcoins as of mid-May, according to company filings.
Prices on the company’s existing debt have fallen in recent months. The company’s $550 million convertible note due 2025 recently traded at 135.073 cents on the dollar, according to MarketAxess. That is down from around 200 cents at the start of April. Investors can exchange convertible debt for stock if shares hit a predetermined price.
MicroStrategy’s $1 billion convertible note due 2027 is trading at 67.307 cents on the dollar, implying a 7.089% yield. That is down from around 101 cents in February. The company’s share price fell 3.1% Monday to $469.81.
MicroStrategy, which sells data analytics software and services to businesses, caught investors’ attention over the past year by betting big on bitcoin.
Last year, the company sold over $1.6 billion of convertible bonds to purchase the cryptocurrency.
Shares of MicroStrategy are up more than 364% from August 2020, the same month that the company announced its first bitcoin investment, beating the S&P 500’s nearly 28% gain over that period.
The price of bitcoin has declined significantly since MicroStrategy’s stock peaked, trading around $36,000 on Monday from highs in April over $62,000. MicroStrategy shares are down more than 60% from a record of around $1,272 in February.
MicroStrategy has paid an average of $24,450 per bitcoin as of May 18, according to company filings.
MicroStrategy’s revenue has barely grown in a decade, rising to more than $480 million last year from $455 million in 2010.
But the bitcoin purchases have attracted attention and new business, some analysts say. New accounts on the MicroStrategy website grew 281% in the first quarter, according to data compiled by analysts at Canaccord Genuity.
Michael Saylor, the company’s chief executive, has said buying bitcoins is intended to keep the company’s purchasing power from going down. He expects a rise in inflation to erode the value of cash over time. MicroStrategy’s existing bitcoin portfolio will be held by a newly formed subsidiary, MacroStrategy LLC, the company said Monday.
MicroStrategy didn’t respond to requests for comment on the bond sale.
Prior sales have spurred some stock downgrades. Citigroup analysts recommended that investors sell shares despite what they described as the strongest first-quarter performance in recent memory. “The issuance of new debt to fund Bitcoin purchases is aggressive and may be a deal breaker for some software investors,” they wrote in an April note.
Companies holding bitcoins in their treasuries face an accounting risk. Because bitcoin and other digital assets are considered “indefinite-lived intangible assets” rather than currencies, even a temporary drop below what the company paid for them can force a company to write down their value. MicroStrategy posted a net loss in the third quarter due in part to bitcoin price fluctuations.
“If a company substitutes cash in their treasury to buy cryptocurrency, that is speculation,” said David Kotok, chief investment officer at Cumberland Advisors. “They may win, they may lose, but that’s not what their basic business is.”
Others are more bullish on the company’s move. Analysts at Canaccord Genuity have placed a $920 price target on MicroStrategy shares, citing a combination of its bitcoin holdings and a healthy core software business.
“The halo effect from MicroStrategy’s Bitcoin strategy is resulting in incremental leads for the core business,” they wrote in a note on April 29.
For John McClain, portfolio manager at Diamond Hill Capital Management, the new MicroStrategy bonds represent a lower-risk, lower-reward opportunity for investors who might think bitcoin is currently undervalued.
Unlike the company’s existing notes, which convert into stock, investors in the new issue won’t benefit from appreciation in MicroStrategy’s digital asset portfolio. But they will have the actual business as collateral.
“If bitcoin went down 75%, lenders would still have a lot of collateral coverage,” he said.
The Fed Probably Just Got A Piece Of Those MicroStrategy Bitcoin Junk Bonds
While the Federal Reserve’s top brass has cast a skeptical eye on cryptocurrencies, the central bank may be a surprisingly early adopter of the first Bitcoin-linked junk bond.
After the pandemic froze credit markets last year, the Fed bought bond exchange-traded funds to get things moving again. That made it the fourth-biggest owner, as of late March, of the SPDR Bloomberg Barclays High Yield Bond ETF.
About 0.01% of that ETF, commonly known by its JNK ticker, is dedicated to the junk bonds MicroStrategy Inc. issued Tuesday to buy Bitcoin. So, that technically means the Fed — assuming it still holds the fund — just contributed a teeny bit to help MicroStrategy’s crypto foray.
“It’s a pretty small amount, but to be honest I’m surprised to see it in there so soon,” Athanasios Psarofagis, ETF analyst for Bloomberg Intelligence, said of MicroStrategy’s rapid inclusion in the fund. “Fixed-income portfolio managers have a bit of discretion of which bonds they can have in the portfolio, so they could be adding a small potion ahead of a possible index inclusion.”
It’s an amusing twist of fate, given the stance U.S. policy makers have taken on cryptocurrencies. Fed Chair Jerome Powell said in April that they are simply vehicles for speculation, a sentiment echoed by European Central Bank and Bank of Japan officials as well.
Meanwhile, Fed Governor Lael Brainard said last month that regulation needs to “evolve” and widen with regard to crypto.
It’s not just JNK. Another Fed holding, the iShares Broad USD High Yield Corporate Bond ETF (ticker USHY), also owns a small sliver of the MicroStrategy debt, according to Bloomberg data.
MicroStrategy Gets $1.6 Billion In Orders In Junk Bond Offering
The firm initially sought a $400-million bond offering.
Software firm MicroStrategy saw $1.6 billion worth of orders in a recent junk bond offering — four times the initially sought amount.
Earlier this week, the company announced it would issue $400 million worth of junk bonds in a private offering, with a view to using the proceeds to purchase Bitcoin (BTC).
Junk bonds are debt offerings by companies without investment-grade credit ratings and typically offer investors higher returns while carrying higher risk. Returns between 6.125% and 6.25% have been floated for the bonds, eclipsing the returns offered by treasury bonds.
“The notes will be fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by MicroStrategy Services Corporation, a wholly owned subsidiary of MicroStrategy, and certain subsidiaries of MicroStrategy that may be formed or acquired after the closing of the offering,” stated MicroStrategy’s announcement.
One day later, the firm announced it would increase its bond offering to $500 million, after which it was inundated with $1.6 billion worth of orders.
MicroStrategy currently holds the most Bitcoin on its balance sheet out of all publicly traded companies, amounting to a dollar valuation of around $3.2 billion — more than twice the value of Bitcoin held by Tesla ($1.4 billion).
MicroStrategy’s stock price soared throughout much of 2020 and 2021 in line with the rising price of Bitcoin. But holding Bitcoin on its balance sheet wasn’t enough to stop MicroStrategy’s stock slide, which eventually came when the cryptocurrency market dipped. Since Bitcoin peaked in early April, the MicroStrategy share price has sunk by 45%.
MicroStrategy also revealed the formation of a new subsidiary to hold its existing 92,079 Bitcoins, dubbed MacroStrategy LLC.
Reaction to the news on social media was typically varied. Bitcoin supporters celebrated the news, noting the massive excess in demand for MicroStrategy’s bonds.
MicroStrategy proposed $400 Million in bonds to buy more #bitcoin and they got $1.6 Billion of interest.
They got 4x more in demand than what they offered.
Crypto skeptic Peter Schiff questioned the wisdom of purchasing an asset that has been historically volatile. Schiff asked how a sudden drop in the price of Bitcoin would affect MicroStrategy’s business operations.
I don’t think @michael_saylor is familiar with Murphy’s Law. What if #Bitcoin crashes below $20K? Will #MicroStrategy sell stock at depressed prices to shore up its balance sheet? Will it sell Bitcoin to raise cash? If MicroStrategy goes bankrupt will creditors HODL its Bitcoin?
Coinbase Teams Up With 401(k) Provider To Offer Crypto
Workers at participating companies could invest up to 5% of their account balances in cryptocurrency.
A small group of workers will find something new in their 401(k) plan starting in July: the option to invest in cryptocurrency.
ForUsAll Inc., a 401(k) provider, announced earlier this month a deal with the institutional arm of Coinbase Global Inc., a leading cryptocurrency exchange, that will allow workers in plans it administers to invest up to 5% of their 401(k) contributions in bitcoin, ether, litecoin, and others.
Executives at ForUsAll won’t say how many of the firm’s 400 employer clients have signed up for the cryptocurrency platform so far. Founded in 2012, the company provides automated 401(k) administration, menus of low-cost mutual funds, and access to human advisers.
With just $1.7 billion in retirement-plan assets, ForUsAll represents a small piece of the $22 trillion retirement-account market. But its embrace of crypto comes at a time of heightened mainstream interest in digital currencies.
That said, crypto-investing is virtually nowhere to be found in 401(k) plans and individual retirement accounts at the moment.
“There is way too much volatility,” said Lew Minsky, president of the Defined Contribution Institutional Investment Association, a research and advocacy organization for investment managers, consultants and others in the 401(k) industry.
Bitcoin, for instance, has lost around 40% of its value in just two months after hitting a record high in April.
The 401(k) industry is having “meaningful conversations” about adding alternative investments, including private equity, to 401(k) plans, Mr. Minsky said. Currently, 1% of the assets in custom-designed target-date-funds in 401(k) plans are in private equity and 2% are in hedge funds, according to DCIIA. Mr. Minsky said he wasn’t aware of any plans by his organization’s members to make cryptocurrency available.
Firms including Fidelity Investments and Charles Schwab Corp. don’t allow customers to buy or sell cryptocurrency in taxable accounts or IRAs. But they can purchase shares in trusts that invest in cryptocurrencies from companies including Grayscale Investments LLC. Fidelity has filed with the Securities and Exchange Commission to offer a cryptocurrency exchange-traded fund.
Participants in some 401(k) plans that use Fidelity and Schwab as an administrator can invest in certain Grayscale products if their employer offers a so-called brokerage window, which allows participants to buy a range of stocks, mutual funds, ETFs and other securities.
Proponents of adding a small dose of cryptocurrency to a portfolio argue this can raise expected returns without increasing overall risk. Some believe crypto can serve as a hedge against inflation.
“This is just another asset class,” said Mike Alfred, head of strategy at NYDIG, a financial services and technology company that provides bitcoin investments to institutions.
Previously the co-founder of a company that publishes data on 401(k) plans, Mr. Alfred said cryptocurrencies have started to pop up in portfolios managed by institutional investors.
New Zealand’s KiwiSaver retirement savings program and some U.S. university endowments have reportedly invested in cryptocurrencies or funds that buy them, or have taken stakes in companies in the fast-growing industry.
Paul Selker, president of Spark Street Digital, which live-streams events that have included the launch of Pete Buttigieg’s presidential campaign, said he was attracted to the cryptocurrency option ForUsAll will offer because he believes his 14 employees—many in their 20s and 30s—will “be more engaged” with the 401(k) plan. He hopes they will boost their savings from their current average rate of 8.5% of pay.
Mr. Selker said he believes the “guardrails” ForUsAll has built into the service will help his employees invest prudently. “They’re not going to let my people YOLO Dogecoin to the moon,” he said of ForUsAll, which Spark Street Digital hired in 2015, when it started a 401(k) plan.
David Ramirez, chief investment officer at ForUsAll, said workers of companies that sign up for the new offering can elect to transfer up to 5% of their account balances into a self-directed cryptocurrency window that uses Coinbase’s institutional trading platform, where they will have access to about 50 cryptocurrencies. Employees can also invest up to 5% of each payroll contribution in cryptocurrency.
Mr. Ramirez said participants who invest in cryptocurrency must acknowledge having read disclosures explaining it is a volatile asset. “Our guidance is not to be day trading anything, whether a stock or crypto,” he added.
The company plans to send alerts to participants when the value of their crypto investments exceeds 5% of the balance, urging them to sell some crypto and transfer the profits into stocks and bonds.
When the balance in crypto holdings exceeds 5% of a portfolio’s value, an employee wouldn’t be allowed to transfer any more of their current balance into it, although the ongoing contributions can continue.
ForUsAll said it plans to eventually add small allocations to other alternative investments, including private equity, venture capital, and real estate.
Following Massive BTC Purchase Announcement, MicroStrategy Says It May Sell Up To $1B In Stock
The firm said it intended to use the proceeds from the offering “for general corporate purposes, including the acquisition of Bitcoin.”
The same day business intelligence firm MicroStrategy announced it would use $488 million from the proceeds of a private offering sale to buy Bitcoin, the company said it may also sell up to $1 billion of its stock for the same reason.
In a Monday S-3 filing for the U.S. Securities and Exchange Commission, MicroStrategy said it would be launching an “at the market” securities offering which would allow it to sell up to $1 billion of its Class A Common stock over time. The firm said it intended to use the proceeds from the offering “for general corporate purposes, including the acquisition of Bitcoin.”
“Bitcoin does not pay interest or other returns and so ability to generate a return on investment from the net proceeds from this offering will depend on whether there is appreciation in the value of Bitcoin following our purchases of Bitcoin with the net proceeds from this offering,” said the filing.
“Future fluctuations in Bitcoin trading prices may result in our converting Bitcoin purchased with the net proceeds from this offering into cash with a value substantially below the net proceeds from this offering.”
According to the SEC filing, MicroStrategy held 92,079 Bitcoin (BTC) — roughly $3.7 billion at the time of publication — as of June 4, with the company saying today it intended to purchase an additional $488 million in the cryptocurrency.
The filing shows MicroStrategy purchased its existing holdings at an average BTC price of $24,450, meaning that the company has seen the value of its crypto increase by almost $1.5 billion.
Should the firm use the entirety of the $1 billion proceeds to invest in Bitcoin again, it would add roughly 25,000 coins to its coffers at the current value of $40,150. The price of the crypto asset has risen by more than 8.8% in the last 24 hours.
MicroStrategy Could Hold More Than $4B In Bitcoin After Latest Private Offering And Crypto Purchase
With the price of Bitcoin moving above $40,000 for the first time in weeks, the company could soon hold more than 100,000 BTC.
Business intelligence company MicroStrategy has completed its $500 million offering of secured notes, and said it plans to use the proceeds to purchase Bitcoin.
In a Monday announcement, MicroStrategy said it had sold $500 million worth of senior secured notes in a private offering to buyers within and outside the United States. After deducting expenses, initial purchaser discounts, and commissions, the firm said the net proceeds were roughly $488 million, funds which it intends to use to buy Bitcoin (BTC).
Since announcing its first $250 million BTC purchase in August 2020, MicroStrategy has made several major Bitcoin buys. At the time of publication, the firm’s subsidiary, MacroStrategy, currently holds 92,079 BTC — roughly $3.8 billion.
Should the price of the crypto asset stay near its current price of $40,936, the company may be able to purchase roughly 11,913 BTC. This would mean its total Bitcoin holdings would be worth more than $4.2 billion.
MicroStrategy announced the private offering on June 7, initially saying it intended “to raise $400 million aggregate principal amount of senior secured notes in private offering,” later saying it would increase the offering to $500 million. The company reportedly saw more than $1.6 billion worth of orders for the offering — four times the initial amount.
MicroStrategy Partners With MIT To Strengthen Bitcoin Network
Microstrategy has been found to be one of the blockchain industry leaders that the Digital Currency initiative (DCI) of MIT has raised close to $4 million off recently. Another company they have done business with is Coinshares. They stated in their press release that this is in a bid for them to strengthen the Bitcoin Network.
MIT’s Corroboration With Microstrategy, Others
Bitcoin has been in circulation for over 12 years now after Satoshi Nakamoto created it. After that, the Bitcoin Network has never been down save twice. On both occasions, the network was swiftly restored by their development team. This gives the Bitcoin Network cause to boast of a strong network. However, DCI, an arm of the MIT, has decided it best to further strengthen the security of the network.
The DCI are working with various top blockchain companies like Microstrategy and Coinshares with plans to create a new Bitcoin Software and security project. The press release stated that they have raised $4 million dollars, which is half of the projected target from various blockchain top-shots such as Michael Saylor of Microstrategy, Jack Dorsey of Twitter and Square, Gemini, Coinshares and many others.
Microstrategy’s CEO Strongly Behind The Project
Michael Saylor was quoted saying that Bitcoin is by far the most significant creation since the Internet was born. He claimed that they had a duty towards making sure that the cryptocurrency as well as its underlying infrastructure are maintained and that there is an improvement on the network from time to time.
MIT’s DCI, being a non-profit institution, made their developers an even better choice of being at the forefront of the project’s execution. The team of developers is looking to strengthen the network’s defenses against all kinds of bugs that could be found in the network.
Bullish All The Way? MicroStrategy Doubles Down On Its Bitcoin Bet
MicroStrategy’s latest bond offering seeks to deliver a yield of 6.25%–6.5% — significantly higher than an average junk bond yield of 4.01%.
There’s never a dull day when it comes to crypto as was exemplified recently when the digital asset market dipped by around 50%, eventually taking the total capitalization from its all-time high of $2.5 trillion to around $1.7 trillion.
As was expected, in the wake of all this turbulence, Michael Saylor-led business intelligence firm MicroStrategy announced that it was all set to “buy the dip” — successfully concluding its $500-million offering of secured notes.
To further elaborate on the matter, per a statement released by the company, it was revealed that MicroStrategy had been able to facilitate a sale of $500 million worth of “senior secured notes” via a private offering to a set number of buyers based out of the United States.
Of the above-stated total, after expense deductions, initial purchaser discounts and commissions are taken into consideration, the net total will work out to $488 million, the entirety of which will be used for additional Bitcoin (BTC) acquisition by the firm.
To quickly recap MicroStrategy’s recent crypto purchasing efforts, it should be highlighted that since August of last year — a time when the firm bought $250 million worth of BTC — the company has been on a Bitcoin-buying frenzy, as is highlighted by the fact that the firm holds a total of 92,079 BTC, which works out to nearly $3.8 billion.
Lastly, it bears mentioning that if BTC’s value continues to hover around the $40,000 zone, MicroStrategy will most likely be able to add around 11,900 Bitcoin to its balance sheets, bringing the company’s total crypto haul to over $4.2 billion.
MicroStrategy’s Move Smart Or Not?
On June 7, MicroStrategy announced the launch of the aforementioned private offering, initially stating that it was looking to raise around “$400 million aggregate principal amount”; however, as highlighted previously, this number now stands close to $500 million.
What’s more, following the announcement, Michael Saylor claimed that his company had already received $1.6 billion worth of orders for their latest offering — i.e., four times the initial amount.
Kadan Stadelmann, chief technology officer of Komodo — a blockchain solutions provider — told Cointelegraph that MicroStrategy’s move isn’t that surprising, especially when considering that its newly formed subsidiary, MacroStrategy LLC., already owns a lot of BTC, adding:
“Michael Saylor is clearly focused on a long-term investment strategy rather than short-term gains or losses. Putting company debt on the line is risky, but it could obviously lead to a massive return as well.”
In this regard, it bears mentioning that the development has clearly had a positive impact on the Bitcoin market.
In confluence with other positive news, the price of BTC has jumped from just over $35,000 to over $40,000 since the announcement. “The market does appear bearish overall despite this news, but one or two more stories of major institutional adoption of Bitcoin or other cryptos could very well bring the bull market back,” Stadelmann concluded.
Similarly, Konstantin Anissimov, executive director for cryptocurrency exchange CEX.IO, told Cointelegraph that the consistency with which MicroStrategy has continued to amass Bitcoin has been contagious, to say the least. In his view, the $500-million bond strategy is a means of emphasizing the company’s highly futuristic outlook:
“MicroStrategy appears to be seeing a very promising future for Bitcoin that no one else is seeing. While these moves may not in themselves move the price of Bitcoin, MicroStrategy will be one of the biggest beneficiaries when prices get to trade above previous all-time highs.”
Is Bitcoin Severely Undervalued?
MicroStrategy’s continued crypto accrual raises a pertinent question: Is Bitcoin undervalued right now? Daniel Peled, co-founder of Ethereum-based interoperable blockchain platform Orbs, told Cointelegraph that he is mightily impressed with Saylor’s conviction regarding Bitcoin as well as his general treasury management decisions, especially during these times of unprecedented quantitative easing, adding:
“The market currently undervalues BTC, based, among other things, on the high deflection from the stock-to-flow model, the NVT signals, and the fact that Elon Musk confirmed that Tesla has not sold any of its remaining BTC and may accept BTC as payment if enough miners will transition to clean energy.”
Peled further opined that MicroStrategy has added to this excellent timing by setting up its bond offering, ensuring that only the BTC purchased with the proceeds from the offering are senior secured and that the annual interest rate is significantly below the company’s annual profit levels, giving it the ability to cover its payments at least for the foreseeable future.
The above-highlighted structure effectively limits the ability of the company’s core business and assets to be negatively affected, particularly if its bet on buying additional BTC doesn’t pay off. “It sets up MicroStrategy to enjoy the benefits when the BTC market corrects to reflect the fundamentals,” Peled believes.
The Road Ahead For MicroStrategy And Bitcoin
When MicroStrategy kicked off its plan to start buying crypto via its first corporate bond issuance scheme, Bitcoin’s value was hovering at around the $17,000 threshold only to explode by nearly four times over the course of the next few months.
Thus, it stands to reason that the firm probably sees big things for BTC in the near to mid-term, especially after this period of ongoing turbulence subsides.
Also, as pointed out earlier, owing to the fact that MicroStrategy’s latest offering was reportedly oversubscribed upon its launch, there still seems to be a large appetite for Bitcoin across the global investor landscape. Not only that, even the United States Security and Exchange Commission’s decision regarding VanEck’s Bitcoin ETF application is currently pending, which, if approved, may serve as another catalyst for continued BTC adoption.
Steven Gregory, CEO of cryptocurrency exchange Currency.com’s U.S. subsidiary, told Cointelegraph, “The one almost ironic event to come out of this bond issuance is the Fed unknowingly having exposure to this round through their junk-buying program.”
Jack Tao, CEO of cryptocurrency exchange Phemex, believes that this move is consistent with the overall trend of institutional money flowing into crypto.
However, what’s striking to him is the fact that all of these developments are taking place despite the persisting bearish conditions, as he told Cointelegraph: “Many in the world of traditional finance are starting to realize crypto’s potential to ignite an unprecedented paradigm shift. They’re beginning to invest into the technology rather than just chasing speculative profits.”
A Risky Bet?
MicroStrategy’s decision to borrow from the corporate junk bond market to finance its BTC acquisition seems to clearly reflect heavily on the U.S. Federal Reserve’s current inflationary “quantitative easing” policy that was designed to help soften the blow inflicted by the COVID-19 pandemic on the American economy.
In fact, the numbers say it all, as is best highlighted by the fact that corporate borrowing has never been easier. For example, MicroStrategy’s latest offering promises a 6.25%–6.5% yield compared to the average junk bond yield of 4.01%.
Therefore, it will be interesting to see whether others follow in Saylor’s footsteps and continue to accumulate Bitcoin, especially after it was recently announced that El Salvador was going to start accepting the flagship crypto as legal tender.
Listed Companies, Trusts And ETPs Now Control Almost 7% Of The Bitcoin Supply
More publicly traded firms added Bitcoin to their treasuries during the first four months of 2021 than during the entirety of last year. But will it continue?
More than $6.5 billion worth of BTC — or close to 1% of the crypto asset’s entire capitalization — is held by 19 publicly-listed companies. A further 5.75% of Bitcoin’s market cap is held by exchange-traded products and closed-ended trusts.
The figures are contained in a new study by Nickel Digital Asset Management. The 19 firms cited are worth a combined market cap of more than $1 trillion, with 13 based in North America, three domiciled in Europe, and the remainder in Turkey, Hong Kong, and Australia. Seventeen other listed companies have purchased BTC, however details regarding their allocations are not available.
The study shows that institutional adoption of crypto is on the rise, with eight listed companies purchasing Bitcoin during the first four months of 2021 compared to seven during all of 2020.
Beyond the treasuries of listed firms, the study identified that $43.2 billion worth of BTC — equivalent to nearly 6% of Bitcoin’s market cap — is held by ETPs and trusts.
In Hedgeweek, Nickel’s CEO and co-founder, Anatoly Crachilov argued that a combination of the COVID-19 crisis and expansionary monetary policies from central banks has heightened the risk of currency debasement, adding:
“This, coupled with the increasingly inflationary guidance by Fed and an ever-expanding pile of US $18 trillion of negatively yielding global bonds, has encouraged many corporations to contemplate an allocation to alternative assets.”
Research from Nickel carried out earlier in the year, prior to the recent downturn, suggests institutional crypto allocations will continue to grow, with 81% of European wealth managers and institutional investors indicating they expect to see an increase in Bitcoin held among corporate reserves.
Crachilov asserted the growing trend of institutions allocating Bitcoin to their treasuries will tame crypto’s price volatility over time. “Increasing allocations by large-scale institutional and corporate players is expected to lead to a reduction of this volatility over time, thanks to a longer-term, stickier type of capital brought by those investors, as well as a much larger liquidity pool of crypto ecosystem,” he said.
However, not everyone agrees that institutions are champing at the bit to gain exposure to crypto, with JPMorgan analyst, Nikolaos Panigirtzoglou asserting the recent premium observed in the spot markets over futures prices indicates institutional demand is waning.
According to BitcoinTreasuries, a further $13.5 billion worth of BTC (1.8% of Bitcoin’s supply) is held in the treasuries of four private companies — Block.One, The Tezos Foundation, Mt Gox, and Stone Ridge Holdings Group.
The website also estimates the government of Bulgaria is sitting on roughly $8.5 billion worth of Bitcoin, while Ukraine’s government hotels $1.8 billion in BTC.
BlackRock ‘Dabbles Into’ Bitcoin As MicroStrategy Plans To Buy Another $900M
The world’s largest investment firm with $7.4 trillion in assets under management (AUM), BlackRock, is now among the Bitcoin hodlers, as Chief Investment Officer (CIO) Rick Rieder hinted in an interview for CNBC’s Squawk Box. Although he did not disclose any numbers, Rieder said that they have begun to “dabble” into Bitcoin.
Blackrock is reporting that they have “dabbled” in Bitcoin.
Rieder talked about the rise in U.S. 10-year bonds, which have climbed to a new high in one year. As recently as March 2020, this investment instrument had a significant decline, when there was the massive market crash due to the COVID-19 pandemic.
BlackRock’s CIO attributes the current bond rally to “an increase in demand” for high-yielding assets. Rieder believes that over the next few years, the global economy will see “significant growth” and added:
(…) the demand for safe assets is something that explains why people are going to certain parts of the market (…) The liquidity in the system is so immense and the need for yield is (…) demographically driven. There are not enough assets being created versus the financial crisis, there are not enough income-producing assets (…).
Bitcoin fills that “gap” that, as Rieder put it, many people are looking for. Investors looking for assets that will rise in price will put money into Bitcoin as a hedge against a possible uptick in inflation, as Rieder stated:
We’ve started to dabble in it (Bitcoin) I wouldn’t put a number on the percentage allocation someone should make, it depends on your portfolio (…) The technology has evolved and the regulations have evolved to the point where a lot of people think it should be part of a portfolio. That’s what’s pushing the price.
Presume you all saw this? Not a big suprise but it is the worlds largest asset manager and they have already bought some BTC. #Bitcoinhttps://t.co/dqzvipBrQa
Amusingly enough, the Fed may be helping to bankroll MicroStrategy’s latest Bitcoin spree.
About 0.01% of State Street’s SPDR Bloomberg Barclays High Yield Bond exchange-traded fund (ticker JNK) is allocated to MicroStrategy’s 2028 debt. BlackRock’s iShares Broad USD High Yield Corporate Bond ETF (USHY) owns a small sliver as well.
The Fed holds both of those funds—at least, it did on Monday. They were among the $8.6 billion worth of fixed-income ETFs that the Fed purchased as the pandemic descended last year, effectively freezing credit markets. The central bank began offloading its ETFs on Monday, but assuming it didn’t dump its holdings in one fell swoop, that means that the world’s most important central bank is among the earliest adopters of the first Bitcoin-linked junk bond.
That’s entertaining for several reasons, chief among them being that policy makers have taken a pretty dim view of crypto. Fed Chair Jerome Powell said in April that they are simply vehicles for speculation, while Fed Governor Lael Brainard said last month that regulation needs to “evolve” and widen with regard to crypto. And here we are!
While we’re on the topic, it’s worth pointing out how remarkably unfazed the fixed-income ETF landscape was by the Fed’s unwind. That’s because the fact that the central bank bought ETFs in the first place is a gift that keeps on giving.
In effect, the central bank gave its seal of approval to a structure that’s long been the subject of skepticism and hyberbole. The bogeyman haunting bond ETFs is that because they trade much more frequently than the debt they hold, a mass exodus from ETFs could exacerbate selling pressure in the underyling cash bonds in a downturn — the ol’ illiquidity doom loop argument.
The Fed’s foray quieted some of those critics, which matters more than the dollar amount of the purchases.
“It was very important that they stepped in and showed they had faith in the structure and the system, and it worked,” Dave Nadig, the chief investment officer at data provider ETF Trends, told me earlier this week. “The $8 billion in bond ETFs held by the Fed are really pretty irrelevant to the market as a whole.”
Tesla And Microstrategy’s Bitcoin Bet Brings Accounting Headache
Tesla, Microstrategy, and other companies investing in Bitcoin should expect to record any reduction in the recoverable value of their assets, known as an impairment charge, when the value of their holdings falls.
According to some analysts, this accounting charge means that firms holding Bitcoin could be facing a substantial loss at the end of this coming quarter.
Software giant Microstrategy holds 92,079 BTC ($3.7 billion), accounting for most of its treasury. It sold $500 million in corporate debt last week, so it could add to that total and is thought to be gearing up to buy an additional $1 billion more.
Microstrategy has already posted quarterly losses due to impairment charges in last year’s third quarter and this year’s first. Last week, the company said it expects to take a charge of at least $285 million on its Bitcoin investment in the current period, which will push it to another quarterly loss.
Impairment charges arise because cryptocurrencies are classified differently from other currencies by the U.S. Financial Accounting Standards Board (FASB) as an “indefinite-lived intangible asset.”
It means that companies must record the value of bitcoin at the time of purchase. If the value rises, they can’t log those gains until the bitcoin is sold. But if the value drops, the company must write down the value of their holdings as an impairment charge.
Tesla and other corporate Bitcoin investors all face this minor tax rule.
Initially, Tesla’s $1.5 billion Bitcoin gambit looked like a big winner, especially after the electric car maker sold 10% of its coins for a huge profit in April. The purpose, it said, was to confirm that the cryptocurrency “could be liquidated easily without moving [the] market.”
But an impairment charge, or write-down, to pre-tax earnings, was still needed, and that reduced Tesla’s net gain for the first quarter from $128 million to $101 million.
According to analysts, even if Bitcoin bounces back up above the purchase price, Tesla and Microstrategy don’t get to mark the coins back up and eliminate the write-down. Instead, profits can only be realized when the crypto asset is sold. And as this coming quarter’s charges are likely to be much more punishing than the last, investors may be forced to do just that.
Impairments And ultra-volatility
Bitcoin is notoriously volatile. The cryptocurrency has lurched from over an all-time high of $64,863 to $30,682 since mid-April (Musk ironically played a major role in its price drop when he announced that Tesla would no longer accept Bitcoin), and it’s veered by 10% during a week in mid-to-late May.
But the fact that cryptocurrencies are classified differently from other currencies is less well-known and makes for an accounting headache.
“The name Bitcoin suggests it should be treated as currency, which would require market-to-market accounting,” Ed Ketz, an accounting professor at Penn State University, told Decrypt. However, he also added that if Bitcoin were treated as a currency, this would mean even greater volatility in its quarterly earnings.
Impairment charges mean that, in a worst-case scenario, if Bitcoin falls well below the price at which it was purchased, a company could be forced to sell some of the BTC it bought to cover the loss, even if its overall investment is still above water.
If the company is as high-profile as Tesla, that has major implications for the overall price of the asset.
Fortune analysts estimate that if Tesla bought Bitcoin in January and February at an average cost of $31,600, the impairment charges for the second quarter would come to $65 million.
And, despite Elon Musk’s assurances that Tesla will not be selling any more of its Bitcoin, Ketz believes that this would, in fact, be the best strategy to offset impairment loss and may be the real reason behind its previous Bitcoin sale in April.
“Tesla would rather not have impairment losses on Bitcoin, so what it did was sell its holdings with lower valuations to recognize a gain that more than offset the impairment loss,” said Ketz. “I suspect it will try to sell some Bitcoin, again—those at the lowest valuations—to generate gains that will soften the blow or even show a net gain in future quarters.”
Accounting For Impairments
Valuing each coin separately—rather than valuing them as a group or portfolio—was key to Tesla’s approach, said Katz. “It is a good tactic for softening the accounting heartaches, but one wonders how long it will be able to play this game. And even if it can continue, it will eventually deplete the stock of Bitcoin.”
And these accounting gymnastics could also make Bitcoin less viable as a reserve asset, to investors.“The accounting is a little bit incongruous with the underlying purpose,” Jennifer Stevens, an accounting professor at Ohio University, told the Wall Street Journal.
The rules could also be preventing other firms from investing in cryptocurrencies. According to a February poll by Gartner, only 5% of chief financial officers surveyed said they planned to hold Bitcoin this year.
“Companies will have a hard look at these experiences of Tesla before investing in Bitcoin,” said Ketz. “It looks like a good investment when prices are going up, but it has a dark side when prices come down.”
Microstrategy has publicly recognized the risk involved too: ”The concentration of our Bitcoin holdings enhances the risks inherent in our Bitcoin acquisition strategy,” it wrote, adding: “Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.”
Such a mercurial asset class may suit a particular class of investor, a maverick like Musk, but doubling down on risk may not be a catchy strategy for most.
MicroStrategy’s Bitcoin Binge May Trigger $77 Million Writedown
MicroStrategy Inc.’s most recent crypto spending spree should deliver another hit to the company’s bottom line.
The Tysons Corner, Virginia-based enterprise software company said Monday that it purchased an additional 13,005 Bitcoins for about $489 million in cash at an average price of about $37,617 per Bitcoin. The news did little to slow a dramatic slide in the world’s largest cryptocurrency, with prices slumping nearly 10% to roughly $32,300.
As a result of the freefall, MicroStrategy may have to mark down the value of the Bitcoins it just purchased.
Accounting rules dictate that the firm will have to write down its holdings once the market value dips below the price at which it acquired the coin. Bitcoin touched an intraday low of $31,735 on Monday, meaning that MicroStrategy may incur a nearly $77 million charge, according to data compiled by Bloomberg.
While $77 million may seem like a trivial amount for a $5.7 billion company, MicroStrategy’s net income from 2018 to 2020 was just $67.6 million. That’s in addition to the roughly $284.5 million charge it will take in its next earnings report, according to a filing earlier this month. That will bring the company’s total Bitcoin-related impairments to more than $500 million, according to its filings and data compiled by Bloomberg.
It’s a painful twist of fate for MicroStrategy, which has emerged as the cryptocurrency industry’s biggest corporate advocate with Michael Saylor at the helm. The company owns over 105,000 Bitcoins after making its initial purchases last summer, and has issued over $1.5 billion in convertible notes and junk bonds to fund that buying.
MicroStrategy shares are still nearly 400% higher over the past year, thanks largely to Bitcoin’s rally. However, the stock has dropped 54% since February’s peak, and fell another 9.8% on Monday to mirror Bitcoin’s plunge.
MicroStrategy Stock Tanks With Bitcoin As S&P 500, Nasdaq Rally
MSTR shares declined by as much as 12% on Tuesday as the broader U.S. stock market showed signs of strength.
Shares of MicroStrategy (MSTR) plunged anew on Tuesday, extending an early week slump on the back of a highly volatile cryptocurrency market that saw Bitcoin (BTC) briefly pierce below $30,000.
MSTR touched an intraday low of $513.02 through the early morning session, capping off a 12% decline. Shares of the business intelligence firm collapsed 16.7% on Monday, erasing much of last week’s rally.
By comparison, the broad S&P 500 Index of large-cap stocks rose 1.4% on Monday and the technology-heavy Nasdaq Composite Index climbed 0.8%. Both indices were on track to close higher on Tuesday.
MSTR has played out like a crypto proxy stock ever since CEO Michael Saylor first announced his company’s exposure to Bitcoin. Saylor’s Bitcoin gambit shined a positive spotlight on the crypto industry and contributed to the market’s eye-watering rally between October 2020 and May 2021. As a result, MicroStrategy’s share price peaked at $1,315.00 in February before correcting sharply lower over the next three months.
Saylor and entities under his direct control now manage roughly 111,000 BTC. Saylor’s new Bitcoin holding company, MacroStrategy LLC, holds 105,084 BTC for a total value of roughly $3.4 billion.
The cryptocurrency market was nursing heavy losses on Tuesday. With a total market capitalization of $1.3 trillion, cryptos are down more than half from their peak last month.
MicroStrategy’s Most Recent Bond Drops Below Par As Bitcoin Sells Off
The price on the $500 million bond has fallen by almost three points.
MicroStrategy’s latest bond to finance the company’s additional purchase of bitcoin is now trading below its face value as the price of the cryptocurrency continues to decline.
* Prices on the $500 million bond, which closed on June 15, dropped almost three points after the company said on Monday that it completed its purchase of 13,005 bitcoin at an average price of $37,617. Bitcoin was trading at around $32,780 as of press time.
* On Tuesday, the price on the bond was trading at 97.75 cents on the dollar, down from 100.62 on Friday, according to Trace, a bond pricing service.
* Yields were at 6.53% on Tuesday, 40.5 basis points higher than its coupon rate of 6.125%. Bond prices and yields move in opposite directions.
* The bond, which is due 2028, is guaranteed by the new bitcoin MicroStrategy bought and any other digital assets the company acquires in the future.
* Meanwhile, another of the Virginia-based software company’s debt instruments, a $1.05 billion convertible bond, was trading at at 68.76, down from 74.23 on Friday.
* If bitcoin’s price remains at its current level of $32,668, the company will need to write down roughly $64 million for its recent bitcoin purchase.
* At last count, MicroStrategy held 105,085 bitcoin. The company has so far issued more than $1.5 billion in convertible notes and junk bonds to fund purchases of the cryptocurrency.
* MicroStrategy’s stock also took a hit Tuesday, with shares trading down 4% as of press time.
MicroStrategy’s Saylor Says China Bitcoin Exit Offers A Windfall
China’s crackdown on cryptocurrencies could become a “trillion-dollar” mistake, and has already brought a windfall to Bitcoin miners in North America, MicroStrategy Inc. Chief Executive Officer Michael Saylor said.
MicroStrategy might have paid double or triple for recent Bitcoin acquisitions if not for the China exit, Saylor said Friday on Bloomberg Television.
New regulators under U.S. President Joe Biden are more progressive and enlightened on Bitcoin, he said.
Capital International Purchased $600M In MicroStrategy Stock
MicroStrategy’s stock price rose by more than 1.5% to reach $628.44 at the time of publication, making Capital International’s shares worth roughly $600 million.
Financial services company Capital International invested more than half a billion dollars into business intelligence firm MicroStrategy stock.
In MicroStrategy’s filings to the U.S. Securities and Exchange Commission, or SEC, for the second quarter of 2021, the firm disclosed Capital International Investors has purchased 953,242 shares of its stock. Following the release of the SEC filing, MicroStrategy’s stock price rose by more than 1.5% to reach $628.44 at the time of publication, making Capital International’s shares worth roughly $600 million.
Capital International’s Q1 2021 filing with the SEC reportedly showed the firm did not own any shares of MicroStrategy as of March 31.
MicroStrategy, the company which first announced last year it would be purchasing more than $250 million in Bitcoin (BTC), has gone on to acquire 105,085 BTC, more than $3.5 billion at the time of publication. Despite the news of a major investment into a company with massive crypto holdings, the price of BTC was seemingly unaffected. Bitcoin has risen 2% in the last 24 hours to reach $33,438.
Last month, the firm announced it intended to “raise $400 million aggregate principal amount of senior secured notes in private offering” to purchase more Bitcoin. Though MicroStrategy later increased the debt offering to $500 million and bought roughly $489 million in the crypto asset, its stock price briefly fell by more than 2%.
Capital International Group Purchases 12.2% Stake In MicroStrategy
MicroStrategy is by far the largest corporate Bitcoin holder on the planet with 105,084 BTC on its books. Entities under Michael Saylor’s control hold more than 111,000 BTC.
Capital International Group, a $2.3 trillion asset manager headquartered in Los Angeles, has acquired a 12.2% stake in MicroStrategy — making it one of the largest indirect investors in Bitcoin (BTC) on the planet.
According to a filing with the United States Securities and Exchange Commission, or SEC, Capital International Group now holds 953,242 MSTR stock worth roughly $560 million at current prices. Only BlackRock has bigger exposure to the business intelligence firm.
The Filing, Which Referred To Capital International Group As CII, Read:
CII is deemed to be the beneficial owner of 953,242 shares or 12.2% of the 7,782,568 shares believed to be outstanding.
Capital International Group serves clients across the financial industry, with dedicated services for family offices, wealth managers, pension trustees and others. Although the asset manager has yet to comment publicly on Bitcoin or cryptocurrencies, its investment stake in MicroStrategy suggests it may be exploring digital-asset exposure more broadly.
MicroStrategy has been loading its strategic reserves with Bitcoin for almost one year after CEO Michael Saylor became convinced that the digital asset represented a new monetary standard. As Cointelegraph reported, the company’s recent Bitcoin gambit was worth $489 million. Earlier in June, MicroStrategy successfully raised $400 million in debt to purchase additional BTC.
MicroStrategy has become a sort of Bitcoin proxy stock due to its oversized exposure to the digital asset. The company’s Bitcoin holdings are now held in a newly formed subsidiary called MacroStrategy LLC.
Although MicroStrategy maintains a viable business model in enterprise data analytics, investors increasingly view the company as a viable alternative to investing directly in Bitcoin. Institutional appetite appears to be growing, as evidenced by the rapid uptake of Canada’s Purpose Bitcoin ETF and the ongoing success of Grayscale’s GBTC fund.
Michael Saylor Doesn’t Think Bitcoin Is ‘Going To Be Currency In The US Ever’
The MicroStrategy boss thinks Bitcoin is a form of property and points out that the U.S. government is not threatened by other forms of property.
MicroStrategy CEO Michael Saylor thinks that Bitcoin (BTC) is more like digital property than digital currency.
He was speaking on the July 15 edition of the Coin Stories podcast with host Natalie Brunell. Asked if he thought that Bitcoin was a threat to the United States dollar, Saylor replied:
“I would call it a digital property; it’s a threat to property; it’s particularly a threat to other forms of property. Gold is property; real estate is property. I don’t think the United States government is threatened by real estate or buildings or companies or gold.”
The comments follow on from Saylor’s assertions earlier this week on Scott Melker’s Wolf Of All Streets podcast, in which he stated that “I don’t really think that Bitcoin’s going to be a currency in the U.S. ever. Nor do I think it should be.”
“And what it’s doing is it’s demonetizing other forms of property,” he added as he outlined that people are now weighing up whether to purchase Bitcoin instead of opting for traditional investments, such as real estate, stocks, starting a business or buying gold.
MicroStrategy has been gradually accumulating Bitcoin since August 2020, and the firm now holds 105,085 BTC worth around $3.3 billion at today’s prices.
Saylor told Brunell that even if Bitcoin crashes in the short term, MicroStrategy has no intention to sell and is prepared for the volatility that will occur in the future.
He emphasized the key is to hodl through periods of market downturn and FUD, and he pointed to giants in the tech space such as former Microsoft CEO Steve Balmer, who didn’t sell his stocks when the price crashed in the past:
“What was the brilliant thing that Steve Balmer did in order to be worth $100 billion? You know, he didn’t sell Microsoft.”
Saylor also referenced a quote from Warren Buffet that asserts that “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes,” and cited that even Amazon’s stock has recovered from 80% crashes in the past.
“One iPhone 12 in a hundred years will be worth nothing, so the product that Apple is selling isn’t gonna last 1,000 years. The product that Bitcoin is selling is 1/21 millionth of all the money in the world. That doesn’t have to change, it just kinda has to not break,” he said.
The MicroStrategy CEO did note, however, that if the price of Bitcoin is lower than what it is today four years from now, he will have to reconsider his strategy.
Accountants, Lawmakers Urge Rules On Crypto Accounting
Companies now treat bitcoin as an intangible asset, meaning they can record gains only when selling, not while holding.
Accountants and lawmakers are urging standard-setters to fill a void and write concrete rules telling companies how to account for bitcoin and other cryptocurrency assets.
The assets, for which there are no binding U.S. accounting requirements, have drawn regulators’ interest after sharp swings in recent months and investments by companies such as electric-car maker Tesla Inc. and payment provider Square Inc. Bitcoin, which rose to a record of $63,381 in April, has roughly halved in value since then, mirroring volatility in other digital currency assets.
The Securities and Exchange Commission, which oversees U.S. securities markets, is considering new regulation for the cryptocurrency market to prevent fraud. Chairman Gary Gensler, who taught courses on digital currencies at the Massachusetts Institute of Technology before he took office, has argued that investor protection rules similar to those that cover derivatives and equities should apply to crypto exchanges.
The Basel Committee for Banking Supervision, which sets global standards for banking regulation, last month suggested banks dealing in crypto assets should hold substantial buffers to cover potential losses.
On the accounting front however, there hasn’t been much progress. The Financial Accounting Standards Board, which sets accounting standards for public and private companies and nonprofits in the U.S., last year decided against adding the topic to its agenda, saying investing in cryptocurrencies isn’t widespread among companies.
Last month, the FASB launched an agenda consultation, its first in five years, seeking the public’s views on what its long-term priorities should be.
Depending on the feedback, the board could consider new accounting projects such as financial reporting on digital assets. The FASB expects to review the responses, which are due Sept. 22, by early next year, a spokeswoman said.
It is too early to tell what, if any, action the FASB would take on cryptocurrency investments, the spokeswoman said.
The issue of how companies account for crypto assets is separate from how they pay taxes on the investments.
Because there are no specific binding accounting rules yet, companies with crypto holdings classify them as indefinite-lived intangible assets—similar to trademarks and website domains—following nonbinding guidelines from the Association of International Certified Professional Accountants.
Under these guidelines, businesses have to review the value of these assets at least once a year. Companies have to write down the value if it drops below the purchase price, depending on the result of their impairment test. However, if the value goes up, companies can record a gain only when they sell the assets, not while holding the assets.
That’s creating an imperfect picture for investors seeking to understand a company’s crypto investments. “You’re getting really less than half the story,” said Aaron Jacob, head of enterprise resource planning at software provider TaxBit Inc., which helps individuals and companies figure out the taxes they owe on their cryptocurrency holdings. Mr. Jacob wrote to the FASB last month asking it to set rules for crypto assets.
A bipartisan group of seven congressmen led by Rep. Tom Emmer (R., Minn.) made a similar request to the FASB in May, pointing to the surge in value of these digital assets.
“Lack of thoughtful and carefully developed authoritative guidance from the FASB threatens the ability to create accurate and consistent financial reporting of a large and fast-growing financial asset class,” they wrote. Mr. Emmer last week introduced a bill seeking for Congress to provide a clear definition of digital assets under U.S. securities law.
Big Four accounting firm PricewaterhouseCoopers said it encourages standard-setters to look into accounting for cryptocurrencies. KPMG declined to comment, while Deloitte and Ernst & Young didn’t immediately respond to requests for comment.
So far, most chief financial officers have steered clear of crypto investments due to concerns about volatility. The absence of tailored accounting rules only exacerbates these worries, said Deniz Appelbaum, assistant professor of accounting and finance at Montclair State University. “If there was a standard set, CFOs would know how to proceed…and whether an investment in coins is appropriate for their firm,” she said.
For companies that do dabble in cryptocurrencies, shareholders want to see details such as the underlying purpose of crypto investments, the purchase price and the quantity, said Ben Wechter, a research analyst at Zion Research Group, which provides investors with information about accounting and tax issues.
One prominent corporate investor in cryptocurrencies is Tesla, which disclosed in its annual report in February that it bought $1.5 billion in bitcoin.
As of March 31, its bitcoin holdings totaled $2.48 billion, according to a quarterly filing.
Square recorded cryptocurrency holdings of $472 million as of March 31, up from $136.5 million at the end of December.
MicroStrategy Inc., a software company based in Tysons Corner, Va., said it had $1.94 billion in bitcoin as of March 31, up from $1.05 billion at the end of December, in part due to additional bitcoin purchases during the first quarter. Chief Executive Michael Saylor recently said the company is making do with the current accounting method for now.
One alternative to treating crypto holdings as intangible assets could be to allow companies to apply fair-value accounting rules for certain digital assets if the fair value can be determined readily, the FASB said. Bitcoin would meet the criteria, according to Zion Research’s Mr. Wechter.
Stakeholders are encouraged to submit comments on any aspect of the ITC by September 22, 2021, using one of the following methods:
Sending a letter to “Technical Director, File Reference No. 2021-004, FASB, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.”
Feel free to use my template:
“Lack of thoughtful and carefully developed authoritative guidance threatens the ability to create accurate and consistent financial reporting of this large and fast-growing financial asset class.
A bipartisan group of seven congressmen led by Rep. Tom Emmer (R., Minn.) made a similar request to the FASB in May, pointing to the surge in value of these digital assets. Mr. Emmer last week introduced a bill seeking for Congress to provide a clear definition of digital assets under U.S. securities law.
Also, big Four accounting firm PricewaterhouseCoopers and others encourage standard-setters to look into accounting for cryptocurrencies.
So far, most chief financial officers have steered clear of crypto investments due to concerns about this lack of guidance. The absence of tailored accounting rules only exacerbates these worries. If there was a standard set, CFOs would know how to proceed…and whether an investment in coins is appropriate for their firms.
I hope this e-mail finds you well. I received the below e-mail from Ryan Carter about your question to submit a comment letter on cryptocurrencies. We received your comment letter today. I wanted to check if you are all set or if you had any further questions. Thanks for your comments.
MicroStrategy Pledges To Buy More BTC Despite Paper Loss On Its Holdings Of $424.8M In Q2
As of June 30, 2021, MicoStrategy held an approximated 105,085 BTC with a carrying value of $2.051 billion, at a total impairment loss of $689.6 million since acquisition of the digital asset.
Business intelligence and mobile software firm MicroStrategy has pledged to buy more Bitcoin despite reporting impairment losses of $424.8 million in Q2.
This is only a paper loss, however, based on the price of Bitcoin at the end of the quarter and does not reflect a realized loss. Depending on how you add the figures up, MicroStrategy appears to have made nearly one billion dollars more from Bitcoin than it spent.
Along with CEO Michael Saylor’s fervent belief in Bitcoin, that may be why it’s resolved to add more Bitcoin to its reserves going forward. The report stated:
“We continue to be pleased by the results of the implementation of our digital asset strategy. Our latest capital raise allowed us to expand our digital holdings, which now exceed 105,000 bitcoins. Going forward, we intend to continue to deploy additional capital into our digital asset strategy.”
The Q2 report was announced earlier today. As of June 30, 2021, MicroStrategy held an approximate 105,085 BTC with a carrying value of $2.051 billion, at an impairment loss of $689.6 million since the acquisition. The average carrying amount per Bitcoin was an estimated $19,518.
Earlier this week, Elon Musk’s Tesla also published a Q2 report which showed a $23 million impairment loss on its Bitcoin holdings.
As both firms categorize Bitcoin as an “intangible asset,” accounting rules mandate that they must report an impairment loss when the asset’s price drops below its cost basis. However, they are not required to report price appreciation in the specified asset until the position is realized through a sale.
The digital asset figures were calculated using Generally Accepted Accounting Principles (GAAP) — a collection of commonly accepted accounting rules used for financial reporting. The firm also provided non-GAAP calculations, which in this report exclude the “impact of share-based compensation expense and impairment losses and gains on sale from intangible assets.”
The non-GAAP figures paint a different picture for MicroStrategy’s digital asset holdings, with the BTC cost basis at $2.741 billion but its market value is $3.653 billion, which reflects an average cost per BTC at $26,080 and a market price of $34,763, as of June 30.
Total revenues for the second quarter totaled $125.4 million, which was a 13.4% increase compared to Q2 of 2020. Microstrategy’s Gross profit equated to $102.3 million and represented a gross margin of 81.6%, which was a minor increase of 4.2% compared to the year prior. Overall, MicroStrategy reported a second-quarter loss of $299.3 million, compared to a $3 million profit in the same quarter last year.
Saylor and MicroStrategy appear to be all-in on Bitcoin at this stage, and both have continued to accumulate the asset despite the crypto downturn that began in May, as the strategy is to hold the asset long term. The CEO did recently note, however, that if the price of Bitcoin is lower than what it is today four years from now, he will reconsider his strategy.
MicroStrategy Announces Second Quarter 2021 Financial Results.
Under fair-value accounting, companies recognize losses and gains in value immediately and treat the digital assets as financial assets, not as intangibles.
This approach captures the value of digital assets more accurately, said Dan Amiram, a vice dean and accounting professor at Tel Aviv University. But, because it incorporates both gains and losses, fair-value accounting can create even more volatility on companies’ income statements, he said.
Practitioners expect that accounting for digital assets will remain a headache for executives because of the volatility in trading, which is something that investors and analysts want to see reflected in financial statements.
“If there is a market value to it, you want that on the balance sheets of companies,” said Shripad Joshi, a senior director at ratings firm S&P Global Ratings.
MicroStrategy Bitcoin Bet Is A Win And A Loss At The Same Time
MicroStrategy Inc.’s big, and growing, bet on Bitcoin has the company sitting on massive paper gains despite having to write off millions in accounting charges related to the token.
The tech company’s 105,085 Bitcoin would produce a paper gain of about $1.4 billion if sold at Friday’s prices — that’s more than double what MicroStrategy has posted in cumulative earnings in the last 25 years, data compiled by Bloomberg show.
That nominal gain is also more than three-times the revenue generated by the company since it adopted Bitcoin as its primary treasury asset last August.
Perhaps not surprisingly, Chief Executive Officer Michael Saylor said in the quarterly statement on Thursday the company plans to use additional capital to help fund its ongoing digital asset strategy — which means more crypto. MicroStrategy had roughly 105,085 Bitcoins as of June 30, at an average cost of $26,080 compared to Friday’s level of $39,050, the report showed.
Bitcoin holdings come at a cost though. The company disclosed in its quarterly statement cumulative impairment losses of $689.6 million related to the digital asset.
Do shareholders, many of whom use the stock as a vehicle to invest in Bitcoin, care? While MicroStrategy shares are up 60% this year they have shed half their value from a February record amid Bitcoin volatility. They traded 2% lower on Friday at $612.27.
MicroStrategy didn’t immediately respond to a Bloomberg News email requesting a comment.
GoldenTree Asset Management Is Reportedly Investing In Bitcoin
At least three executives at the $45 billion firm have participated in a funding round for the blockchain-focused VC group Borderless Capital.
New York-based asset management firm GoldenTree has reportedly added Bitcoin to its balance sheet, though the amount of this supposed investment remains unknown.
According to a Friday report from financial news outlet The Street, the firm with roughly $45 billion in assets under management has purchased some Bitcoin (BTC) but has seemingly shied away from other cryptocurrency investments. Citing two sources with knowledge of the matter, the publication reported the BTC purchase followed discussions between executives regarding hiring staffers familiar with crypto investments.
Executives at the firm, including founder Steven Tananbaum and partners Deeb Salem and Joseph Naggar invested in a funding round this month for Borderless Capital, which previously helped launch an accelerator program from Algorand. Borderless also participated in a funding round for the Coinbase-backed digital asset securities firm Securitize.
Other asset management firms have begun to delve into the crypto space as well, either through direct investments or by offering investment vehicles for Bitcoin and other tokens.
Last week, Stone Ridge Asset Management filed a prospectus with the U.S. Securities and Exchange Commission to add BTC to its open-end mutual fund. On Wednesday, Contrarian investment firm Horizon Kinetics advised investors to seek exposure to crypto assets to protect themselves against currency debasement.
MicroStrategy CEO Likens Borrowing To Buy Bitcoin To Investing Early in Facebook
Michael Saylor defended his company’s debt-fueled, bitcoin buying spree over the last year by saying it continued to be a great investment.
The CEO of business software company MicroStrategy, which holds more than 105,000 bitcoins in its reserves, told CNBC Friday that borrowing money now to buy more bitcoin was like investing in one of today’s dominant tech companies in the early days.
“If you borrow billions of dollars at 1% interest and invest it in the next Big Tech digital network that you thought was going to be the dominant Amazon or Google or Facebook of money, why wouldn’t you?” MicroStrategy’s Michael Saylor said, according to CNBC. “I mean, if I could borrow $1 billion and buy Facebook a decade ago for 1% interest, I think I would’ve done quite well.”
Saylor noted that his company has $2.2 billion of debt and pays about 1.5% interest on that debt. Since last August, his company has financed its purchases of massive amounts of bitcoin using company cash flows, equity issuance, convertible debt, senior secured debt and a $1 billion shelf registration.
“Our point of view is being a leveraged, bitcoin-long company is a good thing for our shareholders,” he said.
Saylor also said that the notoriety that its bitcoin purchases have given the company has elevated its brand by a factor of 100.
MicroStrategy issued its second-quarter earnings report on Thursday, in which it said it planned to continue amassing bitcoin on its balance sheet.
For the quarter, the company recorded an impairment of $424.8 million on its bitcoin holdings, since accounting rules force it to do so when an asset’s price drops below its cost basis. But appreciation in an asset is only required to be reported once a gain is realized through a sale.
At the end of June, MicroStrategy’s bitcoin holdings were worth $3.65 billion, reflecting bitcoin’s market price of $34,763 at the time. The non-GAAP (generally accepted accounting principles) digital asset cost basis of those holdings was $2.74 billion, or $26,080 per bitcoin.
There’s No Reason Not To Hold Bitcoin For 100 Years, Michael Saylor Says
Nobody is in a hurry with Bitcoin, according to MicroStrategy CEO Michael Saylor: “We’re thinking that it’s the future of the property.”
Michael Saylor, CEO of business intelligence firm MicroStrategy, has staunchly defended the company’s bullish, long-term Bitcoin (BTC) position based on its unique potential to evolve into “the future of the property.”
In an interview with Bloomberg TV, Saylor argued that MicroStrategy’s big bet on Bitcoin, which it has turned to the debt markets to sustain, is the “highest upside, lowest risk strategy” the company can pursue.
“Some people think diversification means buying other types of cryptocurrencies or other kinds of equities,” he said. “We think that by holding Bitcoin, we’re diversified. Because we can see Bitcoin on the balance sheets of cities, states, governments, companies, small [and] big investors. Ultimately, Bitcoin is going to be the core to tech innovation at Apple, Amazon and Facebook, so we want to be holding the Bitcoin.”
In response to his interviewer’s probing as to how the interests of large, centralized behemoths such as Twitter and Facebook can be reconciled with a decentralized network, Saylor made the case that Bitcoin holds the key to solving their endemic issues with cybersecurity and spam.
Integration with Bitcoin — and, specifically, the micropayment-supporting Lightning Network — could tackle these by incorporating an ecosystem that can vouch for creditworthiness and trust:
“If you want to improve the user experience [on these tech platforms], then you need to have skin on the game. And Bitcoin provides skin in the name for all of the interactors in the cyber environment. Dorsey understands this. The killer app is cybersecurity integrated into an international trust network.”
Saylor’s projection for Bitcoin’s long-term potential appears to be balanced between this capacity to support new functionalities on the web and to evolve into the future of the property.
The reason MicroStrategy has leveraged long on Bitcoin — for which it has controversially borrowed $2.2 billion at a blended interest rate of about 1.5% — is that the firm anticipates that Bitcoin, as an open property network, will be used by “billions of users.” While the firm currently takes a 10-year view, Saylor’s comments suggested his perspective is long in a truly maximalist sense:
“People joke that Bitcoin isn’t really a trading strategy, it’s an exit strategy. What we want to hold is a form of non-sovereign store of value forever […] I took a survey: the average Twitter user thinks it’s going to last 3500 years. Nobody’s in a hurry with Bitcoin. We’re thinking that it’s the future of property.”
In the interim, the coin is nonetheless also meeting the needs of retail traders, Saylor observed, noting that cryptocurrencies in general offer users of apps like Robinhood the unique possibility of trading 24/7, 365 days a year.
In his view, it “makes total sense” for Robinhood to drive hard and up its support for the new asset class. Yet among digital assets, Bitcoin, as the “risk-off king of all the cryptos,” is, for Saylor, still “where all the traffic and excitement is.”
According to the results of a recent study from Crypto.com, the number of crypto users worldwide more than doubled from 100 million this January to 221 million in June. While Bitcoin retains the lion’s share of users, smaller altcoins have slowly eaten into both the veteran coin market share and the market’s second-most popular crypto, Ether (ETH).
The price of MARA, RIOT, MSTR and other publicly listed companies with exposure to Bitcoin has nearly tripled in the last three months.
The price of Bitcoin (BTC) soared to a three-month high at $46,293 after bulls confirmed that they intended to take full control of the market. While crypto traders may have returned to the green and pro traders are looking to add larger leveraged positions, not every class of investors has obtained direct exposure to Bitcoin.
For institutional investors, a fund administrator sets the rules for what percentage of a portfolio is invested in various asset classes, and different companies have varying appetites for risk. The reasons that investors may be piling into these assets versus simply holding BTC include the aforementioned restrictions and the regulatory uncertainty surrounding the direct purchase of Bitcoin.
Because of this, several entities are restricted from investing directly in Bitcoin and other cryptocurrencies, but there are other ways to obtain exposure to the crypto sector.
Companies that specialize in Bitcoin mining have also generated immense profits, and a handful are listed and can be an offset play for investors looking to gain some exposure to BTC in their stock portfolios.
The recent miner crackdown in China has led to a more distributed mining network and prompted several rounds of fundraising and expansion for publicly listed Bitcoin mining companies that could benefit from a reshaping of Bitcoin’s global mining network that is likely to continue for years to come. Here are a few publicly listed companies that offer investors exposure to Bitcoin.
MicroStrategy’s Bet On Bitcoin Provides A Boost
The software company MicroStrategy and its CEO, Michael Saylor, have become well known across the cryptocurrency sector for Saylor’s wild support for Bitcoin as a store of value and the massive amount of BTC the company has purchased in the last year.
Along with helping to educate the world about the promise of Bitcoin and blockchain technology, MicroStrategy has amassed a Bitcoin portfolio in excess of 105,000 BTC in its treasury as a way to hedge against inflation.
As a result, MicroStrategy’s stock price has become somewhat correlated with the price performance of BTC, and it has been observed moving in tandem with the top cryptocurrency.
As seen in the chart above, the price of MSTR reached a low of $474 on July 20, the same day as the low in Bitcoin, and has since increased 65% to trade at $781.
Bitcoin Mining Stocks Soar
Listed companies that specialize in Bitcoin and cryptocurrency mining have also benefited from the price growth in BTC.
Perhaps the most well-known Bitcoin mining firm is Riot Blockchain, a company that operates warehouses full of ASIC miners that help to process transactions on the network in return for BTC rewards.
Since hitting a low at $23.86 on July 20, the price of RIOT has increased by 66% and reached an intraday high at $39.94 on Aug. 9.
Another company that focuses on Bitcoin mining as well as purchasing BTC with its treasury holdings is Marathon Digital Holdings.
Data from TradingView shows that after reaching a low of $20.52 on July 20, the price of MARA has rallied 83% to an intraday high of $37.77 on Aug. 6, making MARA the top-performing Bitcoin mining stock over the past two weeks.
Neuberger Berman’s $164M Commodities Fund Can Invest 5% In Bitcoin
The investments manager increased a crypto bet it began chasing just last week.
Neuberger Berman’s $164 million commodities fund can invest up to 5% of its assets in bitcoin futures and funds, the asset manager said Friday, following up the crypto play that it began last week.
* “Effective immediately,” Neuberger Berman Commodity Strategy Fund may invest in bitcoin futures and Canada’s bitcoin exchange traded funds (ETF), the regulatory filing said.
* The fund got an initial go-ahead to chase bitcoin and ether exposure through derivative products on August 11. Ether now appears to be off the table; Friday’s bitcoin-only filing said it “replaces” the original.
* While certain ETFs are now on the fund’s whitelist, it still cannot invest directly in digital assets – likely due to regulatory concerns.
* The new filing indicates that Neuberger Berman – a $400 billion asset manager – is seriously eyeing crypto investments if not already participating in its greenlit products.
MicroStrategy Splashes $177M On Bitcoin, Now Holds Almost 109,000 BTC
MicroStrategy’s Bitcoin holdings are now worth more than $5.3 billion at the current BTC price.
MicroStrategy has once again purchased more Bitcoin (BTC), with the company adding 3,907 BTC to its holdings.
According to a Form 8-K filing with the United States Securities and Exchange Commission published on Tuesday, the business intelligence upped its Bitcoin holdings by 3,907 BTC between July 1 and Monday, Aug. 23.
The SEC filing also revealed that MicroStrategy spent an average of $45,294 to acquire the additional Bitcoin.
With its latest purchase, Michael Saylor’s firm now holds 108,992 BTC, which cost the company about $2.918 billion to acquire at an average price of approximately $26,769 per “coin.”
With Bitcoin trading above $49,000, the company’s Bitcoin holdings are worth over $5.3 billion.
Wednesday’s purchase announcement also serves as a fulfillment of earlier promises to continue adding to its Bitcoin position. As previously reported by Cointelegraph, the firm stated back in June that the paper losses suffered on its holdings during the crypto market decline in Q2 had done little to dampen BTC appetite.
Indeed, the over 50% crypto market decline did cause some impairment losses for U.S. firms with Bitcoin holdings. Tesla also reported a $23 million impairment loss on its Bitcoin holdings as part of its Q2 financials.
MicroStrategy announced its first Bitcoin purchase back in August 2020 and has consistently added to its BTC position. The firm’s CEO, Michael Saylor, has also become a BTC proponent even encouraging other companies to consider adding Bitcoin to their balance sheets.
MicroStrategy’s latest Bitcoin balance sheet expansion comes on the heels of the BTC price action moving above the $50,000 mark for the first time since May. The move marked an 87% upward swing for the largest crypto by market capitalization since falling to the $27,000 bottom back in mid-May.
Bitcoin is yet to hold the $50,000 as the upward rally stalled at $50,500 with BTC losing $2,000 in the last 24-hour trading period.
MicroStrategy Stock Flips Bullish With MSTR A Bitcoin ‘Proxy’ For Institutional Investors
The bullish setup has appeared after MSTR’s increasingly positive correlation with Bitcoin, the flagship cryptocurrency that has surged 339% year-on-year and is now struggling to close above $50,000.
MicroStrategy’s stock, MSTR, is preparing to undergo a massive bull run in the sessions ahead.
So shows a technical setup, dubbed inverse head and shoulder, that has a history of predicting upside moves with an accuracy of 83.44%, as per Samurai Trading Academy’s research. MSTR appears to have formed a similar bullish structure, as shared by independent market analyst Bob Loukas.
In detail, an inverse head and shoulder (IH&S) is when the price forms three troughs in a row, with the middle one (head) deeper than the other two (shoulders). Meanwhile, all the troughs hang by a price ceiling (neckline).
Traditional chartists consider IH&S as bullish if the price breaks above the neckline with higher volumes. In doing so, the price expects to rise by as much as the distance between the middle trough’s bottom and neckline.
Applying the classic definition to the MSTR chart, the next profit target for the stock appears near $1,478, almost twice the current bid range.
Is MSTR A Shortcut To Gain Bitcoin Exposure?
The upside outlook for MSTR appears as it continues to stay positively correlated to Bitcoin (BTC), a highly volatile cryptocurrency propagated as “digital gold” by its hardcore enthusiasts.
MicroStrategy owns 105,085 BTC worth around $5.23 billion as Bitcoin’s price returns to $50,000. In fact, the Nasdaq-listed company’s exposure to Bitcoin has made MSTR a quasi-proxy for the flagship cryptocurrency.
MSTR has gained momentum, especially amid aggressive traders — those with a higher appetite for risks — with its year-to-date returns now at 65.21%.
At the same time, Bitcoin prices have climbed 68.22%, with many analysts now anticipating the BTC/USD rates to have doubled by the end of 2021 and hit $100,000.
But MSTR and BTC/USD showed signs of decoupling after June. In the period, the MicroStrategy stock limited its downside moves against a comparatively aggressive bearish trend in the Bitcoin market.
Financial analyst Alexander J Poulos spotted the deviation, noting that it could have been due to Capital Group’s investment in MicroStrategy.
In June, the United States-based financial services company, which runs the American Funds family of mutual funds, bought a 12.2% stake in MicroStrategy. Poulos stressed that Capital Group’s $600-million investment was an indirect way for it to gain exposure to Bitcoin.
“With the SEC not approving a pure-play BTC ETF [exchange-traded fund], MSTR will continue to serve as a proxy for fund families,” he said, adding:
“The move by the Capital Group is not an outlier. I expect others to initiate or add to their existing positions.”
A High-Risk Play
MicroStrategy has amassed heavy debts to purchase Bitcoin. Therefore, considering it could sell its crypto holdings to respect its financial commitment to bond investors could be a potentially negative event for MSTR.
In his SeekingAlpha op-ed, Joshua Sorto, the staff accountant at MNCPA, wrote that MicroStrategy could easily pay back the debt on its first $650-million convertible note — MSTR is already trading above $517 to convert notes into shares that do not require MicroStrategy to sell the Bitcoin inventory.
But the second convertible note has a conversion rate benchmark set at $1,432.46. That said, MicroStrategy would need to have tripled its market valuation by 2027, which means MSTR would need to rise over 100% before the bond’s maturity.
“In order for MSTR to do that, the analytics business will have to produce cash flows of $125 million per quarter; at the moment, it’s running at less than half that level,” Sorto said while referring to MicroStrategy’s second-quarter earnings.
The third note is not convertible. MicroStrategy has bought 13,005 BTC with nearly half a billion dollars worth of proceeds. So, whether or not the firm will pay off its debt depends majorly on Bitcoin’s performance until 2026.
In its filings with the U.S. Security and Exchange Commission, MicroStrategy revealed a total of 49 risks, 47% of which concerns finance and corporates. Also, the risk tally comes to be higher than the S&P Average of 31.
Insiders Sold MicroStrategy Stock After Bitcoin’s Bull Run
Notorious Bitcoin bull and MicroStrategy CEO Michael Saylor himself hasn’t dumped any company stock since 2012.
Virginia-based enterprise software company MicroStrategy has captured the attention of crypto and financial news outlets alike with its CEO’s atypical strategy of going all-in on Bitcoin, beginning in 2020, with some reporters quipping that the company has since morphed into something closer to a Bitcoin (BTC) investment vehicle than a software firm.
Recent filings with the United States Securities and Exchange Commission suggest some of the company’s top-level executives are ambivalent about pursuing this strategy long-term.
The filings reveal that MicroStrategy chief financial officer Phong Le and chief technology officer Timothy Lang both unloaded stock in August of this year by exercising roughly 30% of the options they received as compensation.
As Bloomberg reports, Lang exercised 10,000 of his awarded options on Aug. 26 and later sold all the converted shares, pocketing roughly $7.1 million. Phong, for his part, exercised 20,000 options between Aug. 2 and 6 then sold the shares in return for a little over $7.3 million. Each has held on to roughly 20,000 options.
CEO Michael Saylor himself has not sold any shares since 2012, although he did reallocate 50,000 shares of Class A company stock to another of his firms, Alcantara LLC, this January.
The report notes that, while exercising options is commonplace for executives, Phong and Lang’s moves were made without a pre-arranged trading plan.
Matt Maley, chief market strategist of Miller Tabak + Co., has claimed that the decision may be indicative of their concerns about the long-term viability of Saylor’s corporate strategy and his commitment to tying the company’s fate so closely to that of Bitcoin. “Senior executives do not sell stock if they think it’s going higher. It’s just a bad sign no matter how you slice it,” Maley reportedly said.
As of June 30, 2021, MicroStrategy held an approximate 105,085 BTC, with Saylor doubling down on his crypto strategy in late July by pledging to continue to amass more BTC.
Earlier in June, the firm had announced a $400-million debt raise to expand its Bitcoin treasury holdings, and in August, MicroStrategy added a further 3,907 BTC to its holdings, bringing its total to 108,992 BTC, at a cost of $2.918 billion to the company.
As of the time of writing, MicroStrategy stock is down close to 9.4% on the day and just over 77% over the past six months.
However, Ed Moya, a senior market analyst at Oanda, has argued that Phong and Lang’s sell-offs are unlikely to discourage MicroStrategy investors who share Saylor’s commitment to Bitcoin, given that the CEO’s “relentless support for Bitcoin has made the company a cryptocurrency trade and not necessarily a bet on the company’s software solutions and services.” He added, “The share price will likely continue to go the direction of Saylor and his bet on Bitcoin.”
MicroStrategy Doles Out $240M On Additional Bitcoin Purchase
The company’s Q3 Bitcoin spend now stands at almost $420 million following this latest BTC acquisition.
Business intelligence outfit and corporate Bitcoin (BTC) whale MicroStrategy has increased its BTC ownership with the additional purchase announced on Monday.
MicroStrategy CEO Michael Saylor announced the purchase of 5,050 BTC for about $242.9 million at an average of $48,099 per coin.
In a Form 8-K filing with the United States Securities and Exchange Commission published on Monday, MicroStrategy stated that it had added 8,957 BTC to its corporate Bitcoin treasury in Q3 2021.
As previously reported by Cointelegraph, MicroStrategy recently bought 3,907 BTC at the cost of about $177 million between July 1 and Aug. 23.
Following the latest Bitcoin acquisition, the company now holds about 114,042 BTC acquired at an aggregate purchase cost of $3.16 billion. Given the current BTC spot price, the company’s Bitcoin holdings are valued at over $5 billion.
According to the Form 8-K document, MicroStrategy’s Bitcoin cost comes down to about $27,713 per BTC, including fees and sundry expenses.
The additional 5,050 BTC purchase is yet another indication of its intention to expand its Bitcoin position. Despite paper losses on its Bitcoin investment in Q2, MicroStrategy has stated its Bitcoin appetite remains unaffected.
Since announcing its maiden BTC purchase back in August 2020, the business intelligence company has bought more Bitcoin, becoming the largest corporate holder of the largest crypto by market capitalization among publicly traded firms in the United States.
Saylor has also become a prominent Bitcoin proponent, regularly encouraging other U.S. firms to add BTC to their balance sheets.
Monday’s purchase announcement comes amid a price decline for Bitcoin, with BTC down almost 3% in the last 24-hour trading period.
The total cryptocurrency market capitalization is down more than 4% as token prices slipped on Monday.
MicroStrategy’s Bitcoin Treasury Exceeds Cash Held By 80% of S&P 500 Non-Financial Companies
The Nasdaq-listed company recently announced it added another 5,050 Bitcoin to its coffers for about $242.9 million.
The value of MicroStrategy’s massive Bitcoin (BTC) holdings has surpassed what most S&P 500 companies hold in their cash treasuries.
The Nasdaq-listed enterprise software firm purchased an additional 5,050 Bitcoin for about $242.9 million, raising the value of its 114,042 BTC holdings to nearly $5.3 billion. That comes out to be higher than what 80% of non-financial S&P 500 companies hold in their cash coffers, as per data compiled by Bloomberg.
Cash Spending Up Among Corporations
MicroStrategy made buying Bitcoin its official corporate strategy in 2020, with its celebrated CEO, Michael Saylor, calling the move a defense against the U.S. dollar’s potential devaluation.
Companies like Tesla and Square later copied the strategy to replace a portion of cash reserves with Bitcoin.
On the other hand, firms with lower risk appetites continued to increase their cash holdings. For instance, in the second quarter, non-financial companies on the S&P 500 boosted their treasuries by 12% from a year ago due to escalating uncertainty caused by the COVID-19 pandemic.
Some of those firms — including General Electric, Ford and Boeing — started spending the cash during the ongoing third quarter. For instance, in July, non-financial S&P 500 companies slashed their dollar reserves by $30 billion, or 2%, from a year ago.
At the same time, companies like Amazon and Alphabet (Google’s parent company) were still amassing cash but did little to change overall dollar spending. The total cash stockpiles held by United States corporations fell to $1.52 trillion from $1.55 trillion as they acquired new businesses, bought back shares and increased dividends, Bloomberg data reveals.
Overall, the declining cash holding trend shows that publicly traded companies have become more comfortable with spending their money, led by expectations that the COVID-19 pandemic is almost over.
MSTR Gives De Facto Bitcoin Exposure
Shares of MicroStrategy have surged by almost 359% in the past 12 months, in lockstep with Bitcoin, whose value has surged by 314% in the same period.
Since MSTR appreciation has outpaced Bitcoin’s price growth, some analysts believe that owning shares gives investors easier exposure to the benchmark cryptocurrency market through traditional infrastructure.
“It’s no secret that MSTR is being valued above the NAV [net asset value] of coins currently owned, and I don’t think investors are buying it for the legacy business upside,” said analyst Kingdom Capital.
“The [clearest] reason I can see is it is one of the few companies with a large market capitalization in the BTC space.”
For instance, the Amplify Transformational Data Sharing ETF, which manages $1.2 billion worth of investments, has gained 6.5% exposure in MSTR after snubbing Grayscale Bitcoin Trust, the leading Bitcoin investment vehicle in the U.S. that trades over-the-counter, which restricts it from receiving capital from certain funds and exchange-traded funds.
Similarly, the Siren Nasdaq NexGen Economy ETF has exposure to MSTR but holds no GBTC.
As a result, MicroStrategy stock and Bitcoin prices are expected to trend in sync, unless more crypto stocks become available. Kingdom Capital weighed in:
“There appear to be better vehicles available to investors for BTC equities, and as they become more widely accessible I expect some ETFs will reduce their MSTR exposure.”
Bitcoin Accounting Zaps Millions From MicroStrategy’s Income
MicroStrategy Inc.’s massive bet on Bitcoin is seriously enriching the company as the cryptocurrency surges. It’s also battering the firm’s income statement.
Its Bitcoin hoard increased in value by more than $1.3 billion during the third quarter. But accounting rules require MicroStrategy to take a writedown if the tokens it buys fall — even only temporarily — below the price it paid for them.
So, for the third quarter, MicroStrategy booked a $65 million writedown, leading to an unprofitable quarter.
That accounting hit brings the total writedowns tied to its digital-asset strategy to $684 million for the first nine months of the year, nearly double the revenue generated by MicroStrategy’s software business.
MicroStrategy’s stock has surged 24% this month, zooming higher with Bitcoin and validating the company’s decision to broaden its remit from just software to include investing in the hot digital asset.
Its Bitcoin collection is now worth almost $7 billion at Friday’s prices, up from $3.7 billion at the beginning of the third quarter.
MicroStrategy Added 9K BTC Last Quarter, Its Stash Is Now Worth $7 Billion
As of Sept. 30, MicroStrategy held 114,042 BTC at an average purchasing price of $27,713.
MicroStrategy added almost 9,000 Bitcoin (BTC) to its holdings in Q3, bringing its total BTC stash to a valuation of around $7 billion.
The company highlighted the purchase of 8,957 BTC in its Q3 report on Wednesday, with the firm’s perma-bull CEO, Michael Saylor, stating that there is more BTC accumulation to come:
“Today, MicroStrategy is the world’s largest publicly traded corporate owner of Bitcoin with over 114,000 Bitcoins. We will continue to evaluate opportunities to raise additional capital to execute on our Bitcoin strategy.”
The software firm has increased its Bitcoin holdings by 198% since the same period last year, and as of Sept. 30, the total stood at 114,042 BTC with an estimated average purchasing price of $27,713 per coin, or a total spend of $3.16 billion.
On paper, MicroStrategy posted a carrying value of $2.406 billion for its BTC holdings at an impairment loss of $754.7 million since the acquisition; however, this is a paper loss.
As the firm categorizes Bitcoin as an “intangible asset,” accounting rules mandate that it must report an impairment loss when the carrying value dips below its cost basis. However, the firm is not required to report any paper gains on the asset until a profit is realized through a sale.
As BTC is priced at roughly $60,600 at the time of writing, the value of MicroStrategy’s holdings equates to around $6.9 billion, suggesting that the firm would make nearly $3.75 billion in profit if it sold today.
MicroStrategy provides business intelligence software, mobile app software and cloud-based solutions, and the firm pulls in revenue via streams such as product licensing and subscription services.
The firm reported $128 million worth of total revenue for the quarter, beating the Zacks Consensus Estimate by 0.39% and marking a 0.5% increase compared to MicroStrategy’s Q3 results from 2020.
While MicroStrategy’s revenue squeaked past estimates, the firm posted earnings of $1.86 per share compared to the forecast of $1.12 per share. The investment research firm highlighted on Thursday that MicroStrategy has surpassed consensus estimates three times “over the last four quarters.”
“This quarterly report represents an earnings surprise of 66.07%. A quarter ago, it was expected that this business software company would post earnings of $0.73 per share when it actually produced earnings of $1.72, delivering a surprise of 135.62%,” said Zacks Investment Research.
Saylor highlighted in the report that “overall demand” for the MicroStrategy platform and growing adoption of the firm’s cloud-based solutions contributed to the firm’s strong performance in Q3.
The firm posted a gross profit of $105.7 million for the quarter, with the figure tallying in the same as the year before. Net loss for the quarter was $36.1 million, or $3.61 per share, compared to the loss of $14.2 million, or $1.48 per share, in Q3 2020.
Earlier today, Saylor reiterated his bullishness for digital gold by stating, “You do not sell your Bitcoin” as he retweeted his own post from October 2020 revealing personal holdings of 17,732 BTC.
MicroStrategy’s Bitcoin Stake Has Doubled In Value To $7 Billion
MicroStrategy Inc. founder and Chief Executive Officer Michael Saylor has cemented the enterprise-software company’s position as the largest corporate owner of Bitcoin, saying it purchased $414 million more of the largest cryptocurrency during its recent swoon.
The Tysons Corner, Virginia-based company, which has been buying Bitcoin since August 2020, now holds 121,044 tokens valued at about $7 billion, after accounting for its October and November purchases.
And if the price of Bitcoin continues to recover losses posted over the Thanksgiving holiday, MicroStrategy will have doubled its money gains based on the average purchase price paid since the initial acquisition.
Shares of MicroStrategy jumped as much as 4.5% to $693 following a tweet Monday from Saylor announcing the purchase, and amid a continuing rebound in the price of Bitcoin. MicroStrategy has surged about 450% since July 2020, while Bitcoin has increased roughly fivefold.
MicroStrategy has purchased an additional 7,002 bitcoins for ~$414.4 million in cash at an average price of ~$59,187 per #bitcoin. As of 11/29/21 we #hodl ~121,044 bitcoins acquired for ~$3.57 billion at an average price of ~$29,534 per bitcoin. $MSTRhttps://t.co/OA8VWG1bZX
“It’s very clear by looking at MicroStrategy’s valuation now versus when it initiated its Bitcoin acquisition strategy that the plan has worked,” said Mark Palmer, a digital assets and fintech analyst at BTIG who has a buy rating on the company’s shares.
Saylor has become the most prominent pro-crypto CEO by opening the backdoor to crypto investing, effectively creating a proxy out of MicroStrategy’s shares after tapping both equity and debt markets to raise cash to buy more coins. The company has a market value of about $7 billion.
Bitcoin gained about 4% to $58,647 in New York trading. It had climbed as high as almost $69,000 on Nov. 10.
MicroStrategy Bought 7K Bitcoins In Fiscal Fourth Quarter For $414M
The business-intelligence software company said it owned 121,044 bitcoins as of Nov. 29, worth about $3.6 billion.
MicroStrategy said it bought 7,002 bitcoins for about $414 million in cash during its fiscal fourth quarter.
* The company bought bitcoins during the quarter for an average price of about $59,000, it said in a statement.
* The largest crypto currency by market capitalization was trading around $57,326 on Monday.
* MicroStrategy now holds 121,044 bitcoins worth about $3.6 billion with an average purchase price of about $29,534 each.
* CEO Michael Saylor has made bitcoin acquisition a second mandate for his 32-year-old company. Its other business is developing business-intelligence software.
Michael Saylor Calls Bitcoin the World’s Reserve Asset but Not So Good For Buying A Cup Of Coffee
The billionaire founder of the business software company MicroStrategy said in a CoinDesk TV interview that bitcoin is the best inflation hedge.
Michael Saylor, the billionaire founder of business intelligence company turned bitcoin hot stock MicroStrategy, thinks BTC is the best asset, better than the U.S. dollar. But he doesn’t think it works to buy coffee.
“You don’t want to pay for your coffee with your bitcoin, you want to pay for your coffee with a currency,” Saylor said in an interview with CoinDesk TV on Tuesday.
Saylor believes that bitcoin is the world reserve asset whereas the dollar is the world currency. That’s the main distinction between the two.
Saylor’s MicroStrategy has doubled its bitcoin holdings in the fiscal fourth quarter this year and now owns 121,044 bitcoins worth about $3.6 billion, which he says that he will likely “hold forever.”
Viewing bitcoin as an asset rather than as a currency also makes life easier from a regulatory perspective.
“All of these regulations … they’re really regulations restraining your use of a digital asset as a currency rather than as a property,” Saylor said, adding that if you acknowledge that, it’s easy to see that the future of the industry is “quite bright.”
Saylor also addressed the issue of inflation, saying that bitcoin would provide the best hedge against inflation.
“There’s going to be volatility, but it seems to me that now we have universal acknowledgment that the world needs an inflation hedge,” he said. “So if you have bitcoin, don’t sell it.”
MicroStrategy Purchases $82M In Bitcoin, Now Holds 122,478 Coins
MicroStrategy’s holdings are valued at more than $5.9 billion, representing more than $2.2 billion in gains since its initial purchase in August 2020.
Business intelligence firm MicroStrategy has added 1,434 Bitcoin to its coffers after purchasing the crypto asset at an average price of $57,477.
According to a Thursday filing with the Securities and Exchange Commission, MicroStrategy purchased 1,434 Bitcoin (BTC) between Nov. 29 and Dec. 8 for roughly $82.4 million, making its total holdings 122,478 BTC.
With the recent buy, MicroStrategy’s holdings are valued at more than $5.9 billion, representing more than $2.2 billion in gains.
MicroStrategy has purchased an additional 1,434 bitcoins for ~$82.4 million in cash at an average price of ~$57,477 per #bitcoin. As of 12/9/21 we #hodl ~122,478 bitcoins acquired for ~$3.66 billion at an average price of ~$29,861 per bitcoin. $MSTRhttps://t.co/Xke8QhoYpy
Since making its initial $250-million Bitcoin investment in August 2020, MicroStrategy has gone on to purchase billions of dollars in Bitcoin in separate buys using the company’s cash on hand in addition to sales of convertible senior notes in private offerings to institutional buyers.
Though there are cases in which the business intelligence firm bought the dip, some buys followed the price surges in early 2021 when the BTC price was more than $50,000.
According to data from Cointelegraph Markets Pro, the price of Bitcoin is $48,684 at the time of publication, having fallen more than 25% in the last 30 days. The crypto asset has been hovering near $50,000 since dipping to the $42,000s on Friday.
MicroStrategy’s Saylor Lays Out Ways Firm Could Generate Yield From Its Massive Bitcoin Holdings
The CEO discussed several ways the software company could produce income from the 122,478 bitcoin on its balance sheet.
MicroStrategy (MSTR) officials outlined some potential ways the company could generate yield from its enormous holdings of bitcoin during a virtual investor day Thursday.
* MicroStrategy, which makes business analytics software but whose market cap largely reflects its bitcoin holdings, owned 122,478 bitcoin as of Dec. 10, according to the company’s presentation. Those bitcoin were purchased since the third quarter of last year for roughly $3.7 billion in total, and are now worth roughly $5.8 billion.
* To generate income from its bitcoin, MicroStrategy could lend some portion of it to a “trustworthy counterparty,” CEO Michael Saylor said.
* The company could also put its bitcoin into some form of partnership with a big tech company or bank. “You could think of that as putting a lien on it,” Saylor explained.
* MicroStrategy might also look to put a mortgage against its bitcoin, generating long-term debt under “favorable circumstances.”
* Finally, MicroStrategy could develop “some kind of interesting application” for its bitcoin, said the CEO.
* Saylor noted in his presentation that no formal steps had been taken on any of these potential initiatives.
MicroStrategy Purchases 1,914 Bitcoin, Now Holds Almost $6B In Crypto
The company’s holdings are valued at roughly $5.9 billion, representing more than $2.1 billion in gains since its initial purchase in August 2020.
Business intelligence firm MicroStrategy has added $94 million worth of Bitcoin (BTC) to its holdings after purchasing the crypto asset at an average price of $49,229.
According to a Thursday filing with the U.S. Securities and Exchange Commission, MicroStrategy purchased 1,914 BTC between Dec. 9 and Dec. 29 for $94.2 million, making its total holdings 124,391 BTC.
With the recent buy, the company’s holdings are valued at roughly $5.9 billion, representing more than $2.1 billion in gains.
MicroStrategy has purchased an additional 1,914 bitcoins for ~$94.2 million in cash at an average price of ~$49,229 per #bitcoin. As of 12/29/21 we #hodl ~124,391 bitcoins acquired for ~$3.75 billion at an average price of ~$30,159 per bitcoin. $MSTRhttps://t.co/tNxDwaT8VD
Since making its initial $250-million Bitcoin investment in August 2020, MicroStrategy has gone on to purchase more than $3.7 billion in BTC in separate buys using the company’s cash on hand in addition to sales of convertible senior notes in private offerings to institutional buyers.
Though there are cases in which the business intelligence firm bought the dip, some buys followed the price surges in early 2021 when the BTC price was more than $50,000.
The firm’s most recent BTC purchase follows the price of the crypto asset dipping under $46,000 on Thursday as it continues to show volatility prior to the new year.
According to data from Cointelegraph Markets Pro, the price of Bitcoin is $47,226 at the time of publication, having fallen more than 7% in the last seven days.
FASB Targets New Long-Term Agenda, Rules On Expense Disclosure In 2022
The U.S. accounting rule maker could issue a standard that would require companies to share more information about significant costs, chair says.
The Financial Accounting Standards Board plans to propose new rules on how companies disclose expenses and make key changes to its long-term agenda this year, including exploring potential standards on cryptocurrencies and transactions linked to sustainability issues.
2022 marks a pivotal year in which the U.S. accounting standard setter could overhaul its priorities as part of a so-called “agenda consultation.” The consultation, which began last year, was the first in five years.
The FASB in recent months received more than 500 letters in which companies, investors, academics and other stakeholders shared their opinions on what it should focus on.
Many finance executives want the FASB to write rules on how to account for cryptocurrency assets—a sentiment echoed by investors—and on financial instruments tied to environmental, social and governance issues. In both cases, there are currently no specific rules that companies can follow.
“We sometimes accelerate projects, particularly when there’s significant investor interest in an emerging issue,” FASB Chair Richard Jones said.
Mr. Jones last month said the FASB would conduct research on how to account for and disclose cryptocurrencies and ESG-related financial contracts. It will then decide whether to add these projects to a technical agenda it uses to determine its standard-setting priorities.
“There’s a fair degree of need for accounting guidance around both issues,” said Robert Herz, a former FASB chair. “My hope would be that they could move them expeditiously from the research agenda to actual standard setting.”
The FASB also continues to advance its existing projects on accounting for goodwill and disclosure of expenses. Both could have a major impact on companies’ financial reporting.
The standard setter in the first half of this year plans to issue a proposal that would force companies to break out big-ticket expenses incurred by different business divisions, followed by a final rule, potentially before year-end, Mr. Jones said.
Such expenses are usually part of what companies report as segment profits or losses. Senior executives already get to see this information, but don’t need to share it with investors.
If completed, the project could mark a win for investors. Many of them for years have pushed for a greater breakdown of companies’ expenses and other financial information, which can help shareholders forecast revenue and margins when valuing a business.
Companies often resist disclosing detailed information on the performance of their business segments for fear of revealing too much to competitors.
The project has a better shot at producing a new rule in 2022 than some of the FASB’s other signature projects, including one on how companies account for goodwill, a contentious issue it added to its agenda in 2018, Mr. Jones said.
Under current rules, an acquiring business must measure the fair value of its reporting units annually and, if that figure is less than the amount recorded on the books, reduce the value of the goodwill. Many businesses consider the current model costly and subjective.
The FASB is leaning toward adding amortization, a method it eliminated in 2001, to the existing goodwill model. Companies would have to write down a set portion of goodwill annually over a set period.
The International Accounting Standards Board, which sets standards for many jurisdictions outside the U.S., is considering sticking to the existing impairment model, though with potential modifications.
It is unclear whether changes to goodwill accounting make it to the proposal stage this year, as the FASB plans to align with the IASB on timing. The boards are sharing information on the progress of their goodwill projects, Mr. Jones said.
Eighty-nine percent of 700 global investors and analysts, or 623, in a recent survey said the FASB and IASB should follow the same approach in accounting for goodwill, according to the CFA Institute, which represents investment professionals. Mr. Jones said the FASB will factor these views into its cost-benefit analysis.
Investors continue to push the FASB to better incorporate their views into the standard-setting process. The CFA Institute is urging the organization to work on providing greater disclosure for investors in areas such as intangible assets and segment reporting and not focus resources on providing guidance that could eliminate that information.
For example, the amortization of goodwill, which the FASB is considering reviving, isn’t useful for conducting investment analysis, said Sandy Peters, senior head of financial reporting advocacy at the CFA Institute.
Mr. Jones said he would continue to evaluate the effectiveness of recently-implemented rules, including on leases, revenue recognition and credit losses.
The procedure, which is a standard one for the FASB, is expected to include reviewing how private companies cope with new leasing rules that public companies adopted in 2019 as well as finishing a proposed rule that would force businesses to give more information about certain debt restructurings.
Companies can also expect a new rule requiring them to provide the key terms and the size of their supply-chain financing arrangements, a move to give investors more clarity on firms’ use of the short-term borrowing tool. Mr. Jones said he expects the board to approve the rule in the first half of the year.
The FASB enters the new year on more stable footing than other standard-setters such as the Public Company Accounting Oversight Board, the IASB and the newly-formed International Sustainability Standards Board, which are undergoing major leadership transitions.
Andreas Barckow is about six months into running the IASB, while Emmanuel Faber on Jan. 1 started as head of the ISSB. Erica Y. Williams, the recently appointed chair of the PCAOB, hasn’t been sworn in yet.
“Our strategy with bitcoin has been to buy and hold, so to the extent we have excess cash flows or we find other ways to raise money, we continue to put it into bitcoin,” Chief Financial Officer Phong Le said.
The company held $2.41 billion of the cryptocurrency as of Sept. 30, up from $1.05 billion at the end of 2020. MicroStrategy also said it purchased bitcoins for $2.04 billion in cash for the first nine months of 2021, up from $425 million in the prior-year period.
MicroStrategy will continue buying bitcoin this year, Mr. Le said, though it is unclear if it would buy more than it did last year; the company has no plans to sell the asset.
MicroStrategy is also considering buying bitcoin-backed bonds if the market becomes more liquid, possibly in the next year or two, he said. “We’re constantly looking at other ways to be additive to our shareholders as it relates to bitcoin,” he said.
The SEC recently told the software company to revise its disclosure on the crypto asset.
MicroStrategy Inc. plans to continue investing in bitcoin despite recent declines in the value of the cryptocurrency asset and a call by U.S. securities regulators to revise its disclosure in future filings.
The Tysons Corner, Va.-based software company is one of a handful of companies with bitcoin holdings, alongside auto maker Tesla Inc. and payment company Square, which recently renamed itself Block Inc.
The company is scheduled to release its fourth quarter earnings on Feb. 1.
Bitcoin fell to $36,800 late Monday—down nearly half from its record high of $68,990.90 in November—after hitting a seven-month low in the morning. Market volatility is among the top reasons many CFOs are avoiding putting corporate cash into crypto assets. The lack of defined accounting standards has also spooked them.
MicroStrategy’s own stock has declined 19% since Thursday, closing at $370.45 on Monday. Mr. Le attributed the drop largely to the broader selloff of technology and bitcoin-related stocks.
In letters made public last week, the Securities and Exchange Commission told MicroStrategy to revise the way it discloses its bitcoin holdings in future filings. The SEC’s corporate-finance division often sends comment letters to public companies to inquire on their disclosures or accounting practices.
MicroStrategy has been stripping out bitcoin volatility when using measures not defined under U.S. generally accepted accounting principles, or GAAP.
“We object to your adjustment for bitcoin impairment charges in your non-GAAP measures,” the regulator wrote in a Dec. 3 letter.
In an October letter to the SEC, Mr. Le had said the inclusion of such impairment losses, as later sought by the SEC, could distract from investors’ analysis of the company’s operating results. On Dec. 16, however, MicroStrategy told the SEC it would revise its disclosures accordingly.
“Accounting is black and white, but disclosures tend to be gray,” Mr. Le said on Monday, adding that the SEC’s comments made sense.
The SEC, meanwhile, is working to clarify the rules for the approximately $2 trillion cryptocurrency market.
Companies with crypto holdings account for them as indefinite-lived intangible assets—similar to trademarks and website domains—based on nonbinding guidelines from the Association of International Certified Professional Accountants.
Under those guidelines, businesses have to review the value of these assets at least once a year. Companies have to write down the value if it drops below the purchase price, depending on the result of their impairment test. But if the value rises, companies need only record a gain when they sell the assets, not while holding them.
In a September letter to the Financial Accounting Standards Board, MicroStrategy said this approach doesn’t accurately reflect its financial condition and results of operations.
Instead, MicroStrategy and others have pushed to apply fair-value accounting rules to digital assets. Under fair-value accounting, companies recognize losses and gains in value immediately and treat the digital assets as financial assets, not as intangibles.
MicroStrategy has made more than $750 million on its bitcoin investment at the current price, said Brent Thill, a senior analyst at Jefferies Group LLC, a financial-services firm. But some investors are concerned the company isn’t focusing enough on its core business, he said.
MicroStrategy reported a net loss of $36.1 million for the quarter ended Sept. 30, widening from a loss of $14.2 million in the prior-year period. Revenue, meanwhile, grew 0.5% to $128 million for the quarter from a year earlier.
Accounting Standards Are Key To Getting Digital Assets On Corporate Balance Sheets
The Financial Accounting Standards Board says crypto accounting standards are the top priority among its stakeholders. The lack of guidance is harming adoption. But the FASB looks likely to act soon, says the head of the Digital Chamber of Commerce.
The Financial Accounting Standards Board (FASB), which sets accounting standards for private and public U.S. companies, has not developed any accounting standards for digital assets. This has proved to be one of the biggest barriers to the adoption of digital assets.
FASB solicited an “agenda request” in September inviting comments from the public on identifying “pervasive needs” to improve generally accepted accounting principles (GAAP), and inquiring about potential areas for future accounting standards setting.
Perianne Boring is Founder and CEO of the Chamber of Digital Commerce.
The Chamber of Digital Commerce has been advocating the FASB since 2015 on the need for accounting standards for digital assets. Previously, the FASB has pushed back due to perceived lack of “pervasiveness” of digital assets, and therefore did not allocate the resources necessary to develop authoritative guidance on accounting for crypto.
The Chamber of Digital Commerce led a significant response to the FASB’s most recent agenda, providing input from the Chamber’s more than 200 members, as well as insights from congressional leadership and other industry stakeholders.
Our intention was to both educate the FASB and its advisory staff on the pervasive impacts of digital assets, as well as to make a strong case for FASB to now undertake standards setting for digital assets.
We are seeing more and more investors look to digital assets as a hedge against inflation. A survey from Fidelity Digital Assets found that seven in 10 institutional investors from around the world, including advisers, family offices, pensions, hedge funds and endowments, plan to buy or invest in digital assets within the next five years.
Deloitte’s 2021 Global Blockchain Survey found 76% of respondents believe digital assets will either serve as a strong alternative to fiat currencies or outright replace fiat within the next five to 10 years.
Through the comment process, FASB received a significant response of 522 comment letters. Of these 522 responses, 445 (85% of the respondents) commented solely and exclusively on accounting standards for digital assets, providing feedback on the pervasive impact of digital assets and the need to prioritize standards setting.
More than 50% of the respondents indicated that standard setting for digital assets should be considered as the highest priority for FASB.
The Board will consider the impact of this feedback in upcoming meetings in setting scope and priorities in standard setting.
“We sometimes accelerate projects, particularly when there’s significant investor interest in an emerging issue,” FASB Chair Richard Jones told the Wall Street Journal.
Accordingly, the Chamber of Digital Commerce will continue to work with FASB to assure this crucial standard setting is on the agenda and prioritized accordingly because 2022 is going to be a pivotal year. It is clear from the FASB survey that there is demand to address accounting standards for digital assets.
At the same time, the U.S. and other countries seem poised to develop clear policy frameworks for crypto. It is important that all invested in the growth of the digital asset ecosystem continue to work to increase this momentum to bring certainty to the marketplace for innovators and investors alike.
FASB To Consider Setting Rules On Companies’ Crypto Accounting, Disclosure
The decision represents a turnaround at the U.S. standard-setter, which for years declined to take up the issue of crypto accounting.
The Financial Accounting Standards Board voted to consider setting clear rules on the accounting and disclosure of certain digital assets such as Bitcoin and Ethereum, a move that could fill a gap for companies that hold these assets and provide more information to investors.
The U.S. accounting standard-setter said on Wednesday it would add the new project to the technical agenda that determines its rule-making priorities, paving the way for a potential new rule.
In December, the FASB began conducting research on whether to establish accounting and disclosure rules for cryptocurrencies and exchange-traded commodities.
On Wednesday, the board said the new crypto effort wouldn’t include commodities such as natural gas or gold, though Chairman Richard Jones added that the board would continue to research commodities once its work on digital assets is complete.
Wednesday’s decision comes after years of foot-dragging on the crypto issue, with the FASB declining to take it up. Most recently, in October 2020, the standard-setter demurred again, saying investment in cryptocurrencies wasn’t widespread among companies.
At present, there are no specific accounting or disclosure rules on companies’ crypto holdings. In recent months, companies and investors have urged the FASB to provide such rules.
Several board members Wednesday said the matter had acquired more urgency as the market capitalization of Bitcoin and other crypto assets had shot up over time and more and more firms are investing in Bitcoin and Ethereum. Auto maker Tesla Inc., payment firm Block Inc. and software provider MicroStrategy Inc. are among those holding big crypto assets on their balance sheets.
The FASB’s project should focus on digital assets that don’t carry ownership rights, such as “plain vanilla cryptocurrency,” Mr. Jones said, as opposed to those with copyrights, like nonfungible tokens.
The board is re-examining its priority projects after an “agenda consultation,” which netted more than 500 letters from companies, investors, academics and other stakeholders offering opinions on matters from accounting rules on crypto to rules on climate-related transactions.
Companies with crypto holdings currently account for them as indefinite-lived intangible assets, comparable to trademarks and website domains, based on nonbinding guidelines from the Association of International Certified Professional Accountants.
Under those guidelines, businesses have to review the value of these assets at least once a year. Companies have to write down the value if it drops below the purchase price, depending on the result of their impairment test. If the value rises, companies only can record a gain when they sell the assets, not while holding them.
Due to the volatility of crypto assets, companies have said this approach doesn’t reflect their financial condition or their operating results, and have pushed to apply fair-value accounting rules instead. Under fair-value accounting, companies recognize losses and gains in value immediately and treat digital assets as financial assets, not as intangibles.
The FASB said on Wednesday it would consider fair-value accounting, among other options.
“I can understand that the accounting under the intangible model doesn’t yield necessarily meaningful results,” Board Member Marsha Hunt said at the meeting. “The ability to measure an economic expectation is not served by the accounting that’s being followed today and I can agree that there’s opportunity for improvement.”
New York Digital Media Company The Latest To Add Bitcoin To Balance Sheet
While the purchase won’t cast a shadow on the billions worth of Bitcoin owned by other firms, the company said it could have made $1.2 million if it sold its holdings at the end of the first quarter.
Townsquare Media, a New York-based digital marketing and radio station company, is the latest business to back the original cryptocurrency with its addition of $5 million worth of Bitcoin (BTC) to its balance sheet.
A filing with the United States Securities and Exchange Commission (SEC) disclosing Townsquare’s purchase of Bitcoin was first picked up by Macroscope, a Twitter account that focuses on institutional trading, posted the find on Monday.
In an SEC filing today, Townsquare Media (NYSE: TSQ), based in New York, stated:
“During the first quarter of 2022, the Company invested an aggregate of $5.0 million in Bitcoin. The Company believes in the long-term potential of digital assets as an investment.”
According to the filing, the company “invested an aggregate of $5 million into Bitcoin” during the first quarter of 2021 and provided an explanation for why it chose a crypto investment, stating:
“The Company believes in the long-term potential of digital assets as an investment. The Company may increase or decrease its holdings of digital assets at any time based on our view of market conditions.”
While the price of Bitcoin at the time of purchase wasn’t disclosed, Townsquare said it recorded an impairment loss of $400,000, resulting from “changes to the fair value” of its digital asset holdings over the quarter.
The so-called loss appears to be due to the unusual way companies need to report on crypto holdings. Townsquare also stated it could have sold its Bitcoin for $6.2 million total on March 31, as the price of Bitcoin that day closed at a price of around $45,500.
The company stated it views its Bitcoin investment as liquid due to the ease of converting it to cash using a crypto exchange.
While the purchase is small in comparison to MicroStrategy’s nearly $3 billion stash worth of Bitcoin, Townsquare Media is around the middle of the list in terms of the amount of the crypto held by publicly traded companies.
According to Bitcoin Treasures, a site that measures Bitcoin held by companies, Townsquare would sit somewhere around the Bitcoin mining companies Cleanspark Inc which holds around $4.3 million and Cathedra Bitcoin Inc., which holds just over $5 million worth of Bitcoin.
With the price of Bitcoin sliding this year and recently hitting 10-month lows, other companies with big positions in the world’s first cryptocurrency have reported losses due to having the asset on their balance sheet.
Earlier in May, crypto investment manager Galaxy Digital Holdings reported a $111.7 million loss in the first quarter of 2022 due to unrealized losses on its cryptocurrency portfolio. MicroStrategy CEO and Bitcoin advocate Michael Saylor also had to assure investors that the company could cover its debts if asked due to a Bitcoin-backed $205 million loan it took out in March.
FASB To Review Accounting Rules For Digital Assets Held On Balance Sheets
A clearer framework for how companies might account for crypto could pave the way greater institutional adoption.
The Financial Accounting Standards Board (FASB) on Wednesday reportedly unanimously voted to begin a project to review the accounting for exchange-traded digital assets and commodities.
The news was tweeted out by MicroStrategy (MSTR) CEO Michael Saylor, whose company holds more than 129,000 bitcoin (BTC) on its balance sheet. The FASB site shows “Accounting for Exchange-Traded Digital Assets and Commodities” on the board meeting agenda for today, but has not yet been updated with the results of any vote.
As Saylor has previously noted, current rules may discourage companies from holding bitcoin on their balance sheets as the accounting forces charges when prices head lower, but does not allow for anything to be recouped when prices rise.
Bitcoin bulls believe a clearer and more evenhanded approach would make it far easier for companies and other institutions to hold the crypto in their treasuries.
Michael Saylor Welcomes FASB Vote To Review Crypto Accounting Standards
The FASB is set to review its accounting rules for digital assets, which could see firms no longer be required to report crypto such as BTC as “intangible assets” on their balance sheets.
Bitcoin (BTC) proponent and MicroStrategy CEO Michael Saylor has welcomed the United States Financial Accounting Standards Board (FASB) vote to review accounting rules for digital assets and commodities.
As it stands under current FASB guidelines — which is the source of authoritative Generally Accepted Accounting Principles (GAAP) — companies must report digital assets such as BTC as “intangible assets” on their balance sheets.
This is due to crypto not meeting the agreed definition of “cash and cash equivalents, financial instruments, financial assets, and inventory” among the agency.
Since crypto is deemed as an intangible asset, companies are required to measure the assets at their lowest price during a given reporting period, which often results in “impairment losses” on balance sheets even if the firm hasn’t closed its position.
The FASB held a meeting to vote on the crypto accounting review earlier on Thursday. While it has yet to publish the results via its website, it appears that Saylor was watching the livestream, as he reported that the vote went through 7-0 and stated “congratulations to the Bitcoin community.”
“This is amazing. One step closer to making it easier for corporates to own Bitcoin on their balance sheet and account for it in a cogent manner,” responded Kraken’s director of growth marketing Dan Held.
While it is unclear when the review will take place or what the outcome could be, a shift to a definition resembling anything in the ballpark of “traditional financial assets” would make it a lot easier for firms to accurately report their holdings instead of reporting them at their lowest prices under intangible assets.
For example, both Tesla and MicroStrategy have reported impairment losses on their BTC stashes at various quarterly reports over the past 12 months.
This is despite not realizing a loss through a sale, and the price of BTC often indicates that their positions are in the green.
Cointelegraph also reported on Wednesday that New York-based digital marketing and radio station company Townsquare Media posted a Q1 impairment loss of $400,000 on its BTC holdings. This is despite being able to sell its position for a $1.2 million profit on the last day of Q1 on March 31.
BTC And MSTR Tanking
If MicroStrategy were reporting on Thursday, however, the impairment loss would be actual. MicroStrategy reported the average purchase price of its mammoth 129,218 BTC holdings at $30,700 in its Q1 report released last week, suggesting the firm would post a loss if it were to sell on Thursday.
According to Forbes estimates, Saylor’s net worth — which is largely comprised of BTC and MicroStrategy stock – has dropped from $1.6 billion in March to just shy of $1 billion this week.
Data from CoinGecko shows that BTC has dropped 27.9% since March 1, to sit at $29,741 at the time of writing, while MicroStrategy stock has dropped 63.7% to $168.20 within that same time frame, according to TradingView.
Although Saylor has outlined on numerous occasions irrespective of price, the company will continue to buy and hodl.
MicroStrategy Scoops Up 480 Bitcoin Amid Market Slump
The business intelligence firm has now amassed 129,699 BTC at an average price of $30,644, according to CEO Michael Saylor.
Business intelligence firm MicroStrategy has added to its Bitcoin holdings, reaffirming CEO Michael Saylor’s bullish outlook on the digital asset despite its recent struggles.
In a Form 8-K filing with the United States Securities and Exchange Commission (SEC), Microstrategy disclosed that it had acquired an additional 480 BTC at an average price of roughly $20,817. The total purchase amount was $10 million in cash.
With the purchase, MicroStrategy now holds 129,699 BTC, making it the largest corporate holder of Bitcoin. The total value of its holdings is roughly $3.98 billion.
MicroStrategy has purchased an additional 480 bitcoins for ~$10.0 million at an average price of ~$20,817 per #bitcoin. As of 6/28/22 @MicroStrategy holds ~129,699 bitcoins acquired for ~$3.98 billion at an average price of ~$30,664 per bitcoin. $MSTRhttps://t.co/leQYTXn817
The business intelligence firm is scooping up Bitcoin during a period of extreme market volatility. On Wednesday, Bitcoin’s price briefly dipped below $20,000, which is more than $10,000 lower than the company’s average acquisition price.
The company’s BTC stash is currently sitting at a net unrealized loss of nearly $1.4 billion, according to data provided by Bitcoin Treasuries.
Michael Saylor, the firm’s CEO, remains bullish on Bitcoin’s long-term prospects.
Earlier this month, he told his 2.5 million Twitter followers that the firm plans to “HODL through adversity” and has no plans to offload its holdings.
The bullish reaffirmation came amid rumors that the company risked a margin call if Bitcoin’s price fell below $21,000. According to Saylor, the margin call rumor is a “nothing issue.”
MicroStrategy reported first-quarter revenues of $119.3 million. Gross profit for the quarter was $93.6 million.
Michael Saylor Will Step Down As MicroStrategy CEO But Remain As Executive Chair
The soon-to-be former CEO said splitting the roles of MicroStrategy’s chief executive officer and chair would help the firm pursue its strategy of “acquiring and holding Bitcoin.”
Bitcoin (BTC) maximalist Michael Saylor has announced that he will step down as the chief executive officer of MicroStrategy, the business intelligence firm he helped co-found in 1989.
In a Tuesday notice on its second quarter earnings for 2022, MicroStrategy said Saylor would be assuming the new role of executive chair at the company, while president Phong Le will become CEO. The changes are expected to take effect on Aug. 8.
“I believe that splitting the roles of Chairman and CEO will enable us to better pursue our two corporate strategies of acquiring and holding Bitcoin and growing our enterprise analytics software business,” Saylor said.
Le was MicroStrategy’s chief financial officer from August 2015 to July 2019 before combining his responsibilities with those of president of the company until May 2022, when he took on the latter role full time.
According to MicroStrategy, Le will continue his duties as both president and CEO in “handling day-to-day execution of the company’s corporate strategies” while Saylor will focus on “Bitcoin acquisition strategy and related Bitcoin advocacy initiatives” in his role as executive chair.
MicroStrategy reported that it held more than 129,699 Bitcoin — worth roughly $2 billion after considering the company’s cumulative impairment losses — as of June 30, with total revenues for the second quarter of 2022 coming in at $122.1 million, compared with $119.3 million in the first quarter.
The business intelligence firm disclosed to the U.S. Securities and Exchange Commission that it had acquired 480 BTC for $10 million in June.
Amid the market downturn in June — in which the price of Bitcoin fell under $18,000 — Saylor said MicroStrategy would “continue to HODL through adversity,” adding that the firm had prepared for volatility and structured its balance sheet accordingly.
According to the soon-to-be former CEO, this strategy will allow MicroStrategy to post collateral even “if the price of BTC falls below $3,562” — an event that happened briefly during the market crash in March 2020.
Investment banking firm Jefferies reported on July 26 that it had downgraded MicroStrategy’s stock to underperform from hold, with a price target of $180. At the time of publication, MSTR shares traded at $278.26, having risen by more than 48% in the last 30 days.
MicroStrategy’s Bitcoin Maximalist CEO Saylor Hands Job To Deputy, Takes Executive Chairman Role
Saylor says he plans to focus on buying bitcoin, leaving MicroStrategy’s software business in the hands of the new CEO.
Michael Saylor, one of the most prominent bitcoin backers in corporate America, handed the chief executive officer role at MicroStrategy (MSTR) to a deputy and became executive chairman, putting his focus exclusively on hoarding cryptocurrencies.
He founded the company in 1989 as a software developer, but in recent years began buying billions of dollars of bitcoin with MicroStrategy’s money — much of it borrowed through debt sales. Phong Le, who had been the company’s president, is the new CEO, according to a statement Tuesday.
“I believe that splitting the roles of Chairman and CEO will enable us to better pursue our two corporate strategies of acquiring and holding bitcoin and growing our enterprise analytics software business,” Saylor said in the statement. “
As Executive Chairman I will be able to focus more on our bitcoin acquisition strategy and related bitcoin advocacy initiatives, while Phong will be empowered as CEO to manage overall corporate operations.”
Meanwhile, during the earnings conference call, Le said he doesn’t expect any imminent strategy changes for the company and he’s been aligned with Saylor on the enterprise and bitcoin strategy throughout their time together.
He also applauded CFO Andrew Kang’s handling of MicroStrategy’s financial division, and said the overall changes will free up time for Le to run the company while Saylor focuses on corporate strategy, innovation and the bitcoin strategy.
“I would sort of see this as a business as usual transition,” Le told analysts and investors during the conference call.
Saylor is handing off the CEO job at a time when his bitcoin bets have led to major losses at the company. In its second-quarter results also released Tuesday, MicroStrategy posted an impairment charge of $917.8 million on its bitcoin holdings, reflecting the sharp decline in bitcoin’s price in the quarter.
The company now owns approximately 130,000 bitcoin worth roughly $3 billion; they were acquired for a total of about $4 billion.
Le has served as MicroStrategy’s president since July 2020 and has also served in various other senior executive positions since joining the company in 2015, including chief financial officer and chief operating officer.
MicroStrategy shares fell 1.2% in after-hours trading Tuesday. The stock has lost about half its value this year, roughly mimicking bitcoin’s plunge.
MicroStrategy is planning to hold a call with analysts to discuss its second-quarter results at 5 p.m. ET.
MicroStrategy Stock MSTR Hits 3-Month High After CEO’s Exit
Poor earnings coupled with overvalued fundamental metrics pose long-term bearish risks for MSTR.
MicroStrategy (MSTR) stock opened higher on Aug. 3 as investors digested the news of its CEO Michael Saylor’s exit after a depressive quarterly earnings report.
Microstrategy Stock Up 142% Since May Lows
On the daily chart, MSTR’s price surged by nearly 14.5% to $324.55 per share, the highest level since May 6.
The stock’s intraday gains came as a part of a broader recovery that started on May 12 at $134. Since then, MSTR has grown by 142% versus Nasdaq’s 26.81% gains in the same period.
Bad Q2, Saylor’s Resignation As CEO
The Aug. 3 MSTR rally came a day after MicroStrategy reported a billion dollar loss in its second quarter (Q2) earnings call. Interestingly, the company’s major Bitcoin exposure was a large reason for its poor quarterly performance.
To recap: MicroStrategy is an information technology firm that provides business intelligence, mobile software and cloud-based services. But one of its primary corporate strategies is to invest in Bitcoin to hold it long-term.
Unfortunately, holding Bitcoin has cost MicroStrategy an impairment loss of $917.84 million from its 129,698 BTC holdings in Q2, primarily due to the crypto’s 50% year-to-date (YTD) price drop. In comparison, MSTR plunged 42% in the same period.
Furthermore, MicroStrategy’s revenue fell 2.6% year-over-year to $122.07 million. The net quarterly losses prompted Saylor—who has strongly backed the Bitcoin investment strategy since August 2020—to quit as the firm’s CEO and become an executive chairman.
MSTR responded positively to Saylor’s resignation and the appointment of Phong Le, president of MicroStrategy, as his replacement, suggesting that investors are comfortable with the change in leadership.
What’s Next For MSTR?
MSTR’s course for the remainder of 2022 depends largely on Bitcoin’s performance, given their consistently positive correlation in recent years. But several metrics are hinting at a correction ahead.
For instance, MicroStrategy’s enterprise value-to-revenue (EV/R) ratio was at 10.76 on Aug. 3, or in “overvalued” territory.
Similarly, MSTR’s forward price-to-earnings (P/E) ratio has reached 54.95, more than double the market average of 20–25. In other words, the market expects MicroStrategy to show enormous future earnings growth despite its underperformance in recent quarters.
MicroStrategy also has amassed $2.4 billion in long-term debts with $46.6 million in interest expenses. Therefore, the company could find it unable to meet its debt obligations if it continues to suffer losses at the current pace.
In other words, MicroStrategy could pledge its nearly $2 billion worth of Bitcoin holdings as collateral or sell them to raise capital.
“Nonetheless, crypto and MSTR bulls may remain invested,” noted Juxtaposed Ideas, a Seeking Alpha contributor, in its latest analysis, saying that most are willing to “gamble on Bitcoin’s eventual recovery to $40,000” or beyond by 2023 or 2024.
“That would be a positive catalyst for its future stock recovery, returning some much-needed capital to the highly volatile investment.”
Bitcoin’s Laser-Eyed King Is Blind To $1 Billion Loss
MicroStrategy is delaying the inevitable on its cryptocurrency bet, with some hair-raising justifications.
MicroStrategy Inc. is two things: a publicly listed enterprise-software company whose annual revenue has barely budged in five years, and a publicly listed Bitcoin trading vehicle that has borrowed money to buy volatile cryptocurrency and lost a cumulative $2 billion in the process.
The results of this dodgy experiment have been scary — all the more so because of leader Michael Saylor’s willful blindness to the consequences.
The company’s latest $1 billion quarterly loss, equivalent to about two years of revenue, was almost entirely due to a slump in the value of its Bitcoin stash.
Given rising interest rates have proven crypto is anything but a hedge, one might have expected MicroStrategy to cut its losses and stick to software. After all, even Tesla Inc. has dumped the bulk of its Bitcoin pile, prioritizing cash in an environment of war and pricier goods.
O, ye of little faith. MicroStrategy’s response to all these pressures, including a surge in short-seller interest, has been to stick to its Bitcoin-buying bet and create two leadership roles.
Saylor, the zealous supporter of crypto’s digital-gold ideology, was named executive chairman, while Phong Le was appointed chief executive officer to focus on the day-to-day operations in the more prosaic world of cloud computing.
Ideally, separate roles at the top should allow for more checks and balances. But Saylor remains an executive and the principal overseer of the firm’s “Bitcoin acquisition strategy.” Le also paid lip service to the company’s faith in the “long-term store of value” of crypto. The firm insisted that selling wasn’t an option, preferring to pledge more of its stash as collateral to satisfy lenders.
The strategy, therefore, remains the same. Even scarier were the justifications as to why.
After initially portraying Bitcoin purchases as defensive, Saylor claimed they had become a source of shareholder value and a new strategic direction.
Choosing a start date of August 2020, when MicroStrategy spent $250 million on 21,454 of the tokens, Saylor said the firm’s stock price had outperformed Amazon.com Inc., Google parent Alphabet Inc., Facebook parent Meta Platforms Inc., Apple Inc. and Bitcoin itself.
That conveniently ignores other, less flattering data. The increased volatility of MicroStrategy’s stock price since diving into Bitcoin means it has also badly underperformed all of the above, and more, over the past year.
Its negative total return of 55.5% over one year is worse than all but one of 10 similar-sized peers in a Bloomberg software industry basket. Its implied cost of borrowing has also risen since taking on more crypto risk, making it pricier to refinance or issue fresh debt.
To defend this as good for the firm’s balance sheet or its shareholders is truly Panglossian. Its cumulative writedowns of $1.989 billion now exceed the $1.988 billion carrying value of its 129,699 remaining Bitcoin.
Yet it’s Saylor’s follow-up that should really ring alarm bells. Acknowledging the stomach-churning swings in his company’s stock, he adopted an attitude similar to Oscar Wilde: Better to be talked about as a reckless debt-fueled bet on digital currencies than not be talked about at all.
Saylor said buying Bitcoin had made MicroStrategy a more “interesting” company, one that “attracts attention and attracts capital.” The more the C-suite, analysts, journalists and investors argued over his strategy, the less he needed to publicize it.
“The thing you don’t want is to be irrelevant to the world, when nobody knows you and nobody cares whether you succeed or don’t and no one knows what you do,” said Saylor, who was already known as a symbol of hubris during the dotcom boom.
This is certainly a new twist on fiduciary duty. It suggests that it will take more profit pain and market pressure for MicroStrategy to start managing its Bitcoin stash sensibly, rather than according to Saylor’s devotion to what he calls “a swarm of cyber hornets serving the goddess of wisdom.”
It also raises serious questions over how the stock market became home to the kind of business that even the hedge fund world might balk at.
Saylor’s hope is that in the kingdom of the Bitcoin-blind, the laser-eyed man is king. But right now, it’s MicroStrategy that doesn’t seem to see things clearly.
Michael Saylor Bet Billions On Bitcoin And Lost Or Maybe Not?
The longtime MicroStrategy CEO, and perhaps the biggest bitcoin bull, steps down.
If you ask Michael Saylor why he bet the future of his company on bitcoin, he’ll tell you he didn’t have a choice.
In 2020, MicroStrategy Inc.’s stock was stagnant, and the tech company struggled to compete with software giants. “We were either going to die a fast death, or a slow death, or embark on a risky strategy,” he said.
He opted to buy bitcoin—lots of it. That decision backfired, badly. On Tuesday, MicroStrategy announced Mr. Saylor would step down as CEO, a position he has held since 1989, amid mounting losses tied to bitcoin.
His dalliance with bitcoin began on Aug. 11, 2020 when the company announced a plan to take $250 million—half of its corporate reserve—and convert it into bitcoin. It has since doubled down, and doubled down again.
In total, MicroStrategy raised $2.4 billion in debt and loans. It issued $1 billion in equity. The company used it all to buy bitcoin.
For a time, the decision appeared to be working. The price of bitcoin rose from about $11,900 in August 2020 to nearly $69,000 by November 2021. MicroStrategy’s stock rose from $124 the day before its announcement to a record of $1,273 on Feb. 9, 2021.
But on Tuesday, MicroStrategy announced its seventh quarterly loss in the eight quarters since it started buying bitcoin. This time the loss was big: $1 billion, much of that from bitcoin.
The same day, the company announced Phong Le, the company’s president, will take on the additional role of CEO. Mr. Saylor took on the role of executive chairman.
MicroStrategy shares were down 49% year-to-date through Tuesday, and 78% from its record.
The company is sitting on nearly 130,000 bitcoins valued at roughly $3 billion at current market prices. Its market capitalization is about $3.1 billion. Essentially, MicroStrategy has become a bitcoin-holding vehicle with a cash-generating software business attached to it.
MicroStrategy’s losses reflect the volatility of bitcoin. Under accounting rules, the company must assess the value of its bitcoin holdings each quarter and take an impairment charge if the price has declined. MicroStrategy has taken a string of such charges totaling about $2 billion.
The bitcoin strategy turned Mr. Saylor into one of bitcoin’s most visible proponents. His Twitter feed, followed by 2.6 million, is a constant stream of pro-bitcoin quips.
He is uniformly bullish in interviews. In one, he advised people to “take all your money and buy bitcoin. Then take all your time, figure out how to borrow more money to buy more bitcoin. Then take all your time to figure out what you can sell to buy bitcoin.”
He similarly advised a conference room full of crypto enthusiasts in Miami to never sell their bitcoin.
It is this very philosophy that has worried some market observers.
“MicroStrategy is not an ideal investment for most traders,” said Oanda analyst Edward Moya.
For one thing, Mr. Moya said, MicroStrategy’s strategy was only to buy and hold bitcoin. There was no profit-taking. There also was no hedging against the inevitable volatility and tumbles. When the selloffs came, MicroStrategy was exposed to the full breadth of them.
Another problem is that the company doesn’t have many more ways to get more money to buy more bitcoin, said BTIG analyst Mark Palmer. “A lot of the levers MicroStrategy could have pulled to create more capacity have been pulled,” he said. “Now it’s just using the cash flow from the software business.”
Still, Mr. Palmer said, the ultimate judgment on MicroStrategy’s bitcoin bet won’t come until some of that debt it borrowed to buy bitcoin starts to mature. If the price of bitcoin languishes, the company is going to have problems paying back its creditors, he said.
“The ticking clock is the maturity of the MicroStrategy debt,” he said.
Despite the risks and the criticisms, Mr. Saylor still believes in his strategy, and bitcoin. In an interview last week, he noted that the stock is still well above its pre-bitcoin levels, and believes the strategy has raised the company’s profile, despite the risks attached to it.
“I feel better about it today than I did on the day we started,” he said.
He says he will continue to head MicroStrategy’s bitcoin investments. He has no plans to sell any bitcoin, and still expects it to gain in value over the years. The company reiterated Tuesday it has no plans to sell any bitcoin.
Mr. Saylor said swapping the CEO roles had been a long-term plan. “The new executive structure means I can even more enthusiastically focus on communications and strategy and bitcoin advocacy and evangelism,” he said.
FASB Excludes NFTs, Some Stablecoins From Crypto Accounting Project
Popular digital currencies like Bitcoin and Ethereum would be included in the U.S. standard-setter’s effort toward clear accounting rules for digital assets. NFTs aren’t ‘pervasive or material’ yet, FASB member says.
The Financial Accounting Standards Board on Wednesday laid out its criteria for the assets it will include in its cryptocurrency project—parameters that left out nonfungible tokens and certain stablecoins.
The decision marked another step toward an eventual proposal and a final rule, which would fill a void for companies holding these assets and would provide more detail to investors.
For years, businesses and investors had asked the FASB for rules on how to account for and disclose their holdings of bitcoin and other digital assets, and for years the standard-setter had declined to do so, saying investment in crypto wasn’t widespread among companies.
In May, however, the FASB added the crypto project to the technical agenda that sets its rule-making priorities.
On Wednesday, the board outlined its criteria for the crypto assets that would be covered by a new rule. The subset of digital assets under the project would include those that are intangible, that is, non-financial assets that lack physical substance, and that don’t carry contractual rights to cash flows or ownership of goods or services. The assets also must be fungible, meaning they are interchangeable and not unique.
The FASB didn’t say which specific crypto assets it would exclude from the project’s scope. However, the criteria indicate that NFTs—digital proofs of purchase for items such as art, baseball cards or digital music that can also provide access to live streamed concerts and other services—and certain stablecoins—cryptocurrencies pegged to assets such as the U.S. dollar—won’t make the cut.
NFTs are, by their very definition, nonfungible, and may carry rights to underlying goods, services or other assets. And certain stablecoins are intangible assets.
Popular crypto coins, such as Bitcoin and Ethereum, would fall within the rule’s scope.
FASB board member Susan Cosper defended the exclusion of NFTs from the project, saying they might slow it down.
“It’s not pervasive or material at this juncture,” she said, referring to companies’ investments in NFTs. “It’s certainly something that we can focus on later if need be.”
Given their exclusion from the project, accounting for NFTs and certain stablecoins will likely remain a headache for the companies that own them.
Those that do generally account for crypto as indefinite-lived intangible assets, comparable to website domains and trademarks, based on nonbinding guidelines from the Association of International Certified Professional Accountants.
Under those guidelines, businesses must review the value of these assets at least once a year. Companies are required to write down the value if it drops below the purchase price, depending on the result of their impairment test.
If the value rises, however, companies can record a gain only when they sell the asset, not if they continue to hold it.
Companies say this approach doesn’t reflect their financial condition or operating results, given the exceptional volatility of many crypto assets, and they are instead pushing for fair-value accounting rules.
Under this type of accounting, companies recognize losses and gains in value immediately and treat digital assets as financial assets, not as intangibles.
The FASB has said it would consider fair-value accounting, among other options, as part of the current project. Its standard could apply to U.S. public and private companies, as well as to nonprofit groups.
In recent months, individual investors as well as groups of analysts, such as Alliance of Concerned Investors and the CFA Institute, have pushed for the FASB to set rules on crypto accounting and disclosure to get a clearer picture of companies’ investments.
The FASB wants to wrap up initial discussions on its crypto project by year-end, when the board would vote on whether to issue a proposal, a spokeswoman said.
Michael Saylor Can’t Stop: MicroStrategy Now Holds 130,000 Bitcoin
MicroStrategy bought an additional 301 BTC for $6 million at an average price of $19,851, the company’s executive chairman announced on Twitter.
MicroStrategy now owns 0.62% of all the Bitcoin that will ever be mined. The company’s executive chairman, Michael Saylor, announced that the company bought another 301 BTC for roughly $6 million at an average price of $19,851 per BTC.
In sum, the company is one of the planet’s largest holders of the asset, owning 130,000 BTC. Apparently, Saylor likes round numbers, buying 301 BTC to reach the 130,000 milestone.
MicroStrategy has purchased an additional 301 bitcoins for ~$6.0 million at an average price of ~$19,851 per #bitcoin. As of 9/19/22 @MicroStrategy holds ~130,000 bitcoins acquired for ~$3.98 billion at an average price of ~$30,639 per bitcoin.https://t.co/5kYW98ij4I
Due to plunging price action, the company’s investment is down substantially in U.S. dollar terms. MicroStrategy’s entry price is roughly $30,639 per BTC, and the Securities and Exchange Commission filing states that the firm has bought 130,000 BTC at an aggregate purchase price of approximately $3.98 billion.
If MicroStrategy started stacking sats (buying Bitcoin) at today’s prices, it would have spent $2.48 billion on 130,000 BTC. Saylor is currently at a paper loss of over a billion dollars.
According to the SEC filing, the company made the purchase with “excess cash.”
Saylor recently stepped down as CEO of the company to focus on buying more Bitcoin, while Washington, DC has taken aim at the billionaire in a tax evasion lawsuit.
Bitcoin enthusiasts were quick to commend Saylor’s buy. Referred to as the “Chad” or “Gigachad,” Saylor’s conviction and commitment to buying Bitcoin despite the investment being underwater has garnered both a devout following and numerous critics.
Other large wallet addresses include that of crypto exchange Bitfinex, which holds 170,000 BTC, and a Binance reserve wallet that holds 125,000 BTC. Binance is the world’s largest crypto exchange and has several wallets holding six figures of Bitcoin.
Regarding individuals, Saylor has stated that he holds Bitcoin, and FTX CEO Sam Bankman-Fried and Binance CEO Changpeng Zhao are also “hodlers” — a meme that became popular jargon for holding crypto.
FASB Mulls Fair-Value Accounting For Crypto Holdings
Fair-value accounting for crypto will encourage companies to put bitcoin on their balance sheet, according to Michael Saylor.
The Financial Accounting Standards Board (FASB) has said that firms should use fair-value accounting methods for cryptocurrencies likes bitcoin (BTC) and ether (ETH), according to a Wall Street Journal report.
Fair-value accounting of crypto would allow companies to report losses and gains immediately and treat the asset class as traditional financial assets. Currently, digital assets are considered as indefinite-lived intangible assets that only require reporting once a year.
In May, the FASB unanimously voted to review accounting rules for crypto following pressure from the likes of former MicroStrategy (MSTR) CEO Michael Saylor, who said that current rules discourage companies from holding bitcoin on their balance sheets.
Saylor tweeted his support for the new accounting system, calling it a major milestone on the road to institutional bitcoin adoption.
“The Financial Accounting Standards Board on Wednesday said companies should use fair-value accounting for measuring bitcoin and other crypto assets” – @WSJ
This is a major milestone on the road to institutional #bitcoin adoption. https://t.co/b9r8Av9uys — Michael Saylor⚡️ (@saylor) October 12, 2022
MicroStrategy currently holds 130,000 bitcoin valued at $2.47 billion, with the position at an unrealized loss of $1.51 billion.
“We expect the disconnect between the reported carrying value on our balance sheet and the fair market value of our bitcoin holdings to grow significantly over time,” MicrosStrategy CEO Phong Le said in a letter to the FASB last year, as quoted by WSJ.
The FASB will make likely make a decision before the end of the year, the report said.
Crypto Notches A Win Among Professional Accountants
The Financial Accounting Standards Board made a change in October to help public companies that hold cryptocurrencies on their balance sheets.
Institutional adoption is an exciting yet frustrating topic in crypto. The true modern-day crypto inheritors of the 90s cypherpunk legacy have a vision for crypto as human empowerment through decentralization.
That vision includes breaking down the intermediaries that charge rents and threaten human freedom and privacy. On the other hand, Crypto Twitter becomes abuzz when a large financial institution makes new moves into crypto.
Dogecoin mooned on the hopes that Elon Musk would use Twitter to help the cryptocurrency’s adoption. The cognitive dissonance extends to the institutions themselves, as banks start crypto projects without considering how a crypto payment system built on the Bitcoin Lightning Network or an Ethereum layer 2 is intended to make that very bank obsolete.
Those broader philosophical questions aside, the United States-based Financial Accounting Standards Board, or FASB, instituted a change to accounting standards in October that will help public companies hold digital assets on their balance sheet. For now, that’s good for both institutions and crypto.
The old method of accounting for crypto on company books was to account for it as software. It went on the balance sheet at its historical cost and then was written down as a value impairment on every price drop (but not written up again when prices went up).
This was a deterrent to public company holdings for anyone but the die-hard Michael Saylors of the world. It’s hard to hold an asset that might remain recorded on your books at the bottomed-out price of the last bear market.
The new rules take a more reasonable approach and implement the same fair value accounting rules that apply to company holdings of publicly traded stock. Crypto covered by the rule will simply be valued at the publicly listed price.
This shouldn’t be the end of accounting standard deliberation over crypto, however, and there are still many questions left to consider. For one, stablecoins backed by other assets are not included in the new accounting methodology.
Many public companies that are willing to accept crypto from customers do so to humor the customer and immediately convert that crypto into fiat dollars.
That may not always be the case, and if companies start using crypto as currency themselves, then inclusion in some kind of new balance sheet quasi-case or digital cash category would be appropriate.
Another thing to consider is the differences in asset-backed stablecoins. USD Coin is basically just a cash equivalent and would readily fit the standard cash equivalent category in generally accepted accounting principles, or GAAP.
Tether is a closer case and was historically backed by riskier commercial paper, though that is changing. Maker’s Dai is a very different form of stablecoin, partially backed by USDC and partially by other cryptocurrencies. Dai seems like it would need a novel quasi-cash or quasi-currency category.
And what about cryptocurrencies such as Bitcoin or Ether that a company holds for the purposes of using it to pay for things, like cash, and not for investment purposes?
Will Bitcoin used as a means of payment be accounted for in a new quasi-currency category, or will it remain in an investment category despite its partial payment use case? While it is designed for payments, it is highly volatile, unlike stablecoins.
Fair valuation methods will be relatively straightforward to apply to liquid, highly traded currencies like Bitcoin and Ether, which is most of what companies are holding. But as companies start holding and using other types of cryptocurrencies, there will be a wealth of questions to consider.
For those digital assets not in actively traded markets, it will be a challenge to apply classic financial valuation models to their valuation.
Existing financial valuation methods for assets like stock in public companies may not entirely carry over to cryptocurrencies because of the unique design of the asset class.
The FASB should be saluted for its thoughtful adaption of accounting principles to this new technology, an approach the Securities and Exchange Commission and other financial regulators might learn from.
The FASB hired crypto-native experts and adapted their rules to the reality of this new technology in a short period of time, ensuring that in the crypto revolution, GAAP is going to make it.
Many questions remain in GAAP accounting for crypto. Crypto natives will need to continue to develop their own accounting methods once we decentralize finance.
For now, it’s a helpful change to encourage institutional crypto holding.
MicroStrategy Adds To Bitcoin Stake Despite Steep Loss
The value of the firm‘s Bitcoin holdings has declined 45%, with an average purchase price of $30,397.
In a new filing with the United States Securities and Exchange Commission, software analytics firm MicroStrategy said that it acquired 2,395 Bitcoin at an average price of $17,181 for a total of $42.8 million during the period Nov. 1 and Dec. 21.
Subsequently, the company sold 704 BTC at $16,776 per coin for a total of $11.8 million on Dec. 22. On Dec. 24, MicroStrategy acquired approximately 810 BTC for $13.6 million in cash, at an average price of $16,845 per coin.
In a Bloomberg interview published earlier this year, MicroStrategy CEO and blockchain personality Michael Saylor told reporters: “We’re only acquiring and holding Bitcoin, right? That’s our strategy. We’re not sellers.”
The Dec. 28 filing represents the first publicly reported BTC sale by the firm in recent memory. In supporting the decision, MicroStrategy wrote:
“MicroStrategy plans to carry back the capital losses resulting from this transaction against previous capital gains, to the extent such carrybacks are available under the federal income tax laws currently in effect, which may generate a tax benefit.”
After the aforementioned transactions, MicroStrategy now holds 132,500 BTC, with an average purchase price of $30,397 and a total book value of $4.03 billion. However, the market value had declined to $2.2 billion at the time of publication.
MicroStrategy previously disclosed on Sept. 9 that the company may issue or sell up to $500 million worth of common stock. Between Oct. 1 and Dec. 27, the company sold 218,575 units for total net proceeds of $46.4 million.
Saylor is currently embroiled in a lawsuit brought by Washington, DC‘s attorney general on allegations of tax evasion.
Michael Saylor’s MicroStrategy Repays Silvergate Loan And Buys 6.5K BTC
MicroStrategy has increased its total Bitcoin holdings to 138,955 BTC, purchased for $4.1 billion at an average of $29,817 per coin.
MicroStrategy, a business intelligence firm and major Bitcoin investor, is acquiring more BTC amid the recent cryptocurrency market recovery.
MicroStrategy co-founder and former CEO Michael Saylor took to Twitter on March 27 to announce that the firm has repaid its $205 million loan to Silvergate.
Citing a form 8-K filing with the United States Securities and Exchange Commission, Saylor stressed that MicroStrategy repaid the Silvergate loan at a 22% discount.
The company also acquired a significant stash of Bitcoin, purchasing 6,455 BTC for $150 million, or at an average price of $23,238 per coin as of March 23, the former CEO said. According to the filing, MicroStrategy acquired its latest batch of Bitcoin between Feb. 16, 2023 and March 23, 2023.
With the purchase, MicroStrategy has increased its total Bitcoins holdings to 138,955 BTC, bought for $4.1 billion at an average of $29,817 per coin, Saylor said.
MicroStrategy repaid its $205M Silvergate loan at a 22% discount. As of 3/23/23, $MSTR acquired an additional ~6,455 bitcoins for ~$150M at an average of ~$23,238 per #bitcoin & held ~138,955 BTC acquired for ~$4.14B at an average of ~$29,817 per bitcoin. https://t.co/ALp9VLkTpt
As previously announced, MicroStrategy’s subsidiary MacroStrategy received a $205 million term loan from Silvergate Bank under its Silvergate Exchange Network Leverage program in March 2022.
The loan was collateralized by certain Bitcoin owned by MacroStrategy and had a scheduled maturity date of March 23, 2025.
Under the terms of the credit agreement, MacroStrategy was required to maintain a loan to collateral value ratio of less than 50%.
On March 24, 2023, MacroStrategy and Silvergate entered into a prepayment, waiver and payoff to credit and security agreement, with MacroStrategy voluntarily prepaying Silvergate around $161 million in full repayment.
“Upon Silvergate’s receipt of the payoff amount, the credit agreement was terminated, and Silvergate released its security interest in all of MacroStrategy’s assets collateralizing the loan, including the Bitcoin that was serving as collateral,” the filing reads.
In the filing, MicroStrategy also mentioned that the company entered into an agreement with two companies — Cowen and Company and BTIG — to sell its aggregated class A common stock worth $500,000,000.
According to the latest updates, MicroStrategy issued and sold an aggregate of 1,348,855 shares under the sales agreement for aggregate net proceeds to MicroStrategy of roughly $339 million.
The latest Bitcoin acquisition by MicroStrategy is apparently the first such transaction so far in 2023. The previous purchase took place in late December 2023, with MicroStrategy buying 2,395 BTC at an average price of $17,181 for a total of $42.8 million between Nov. 1 and Dec. 21.
MicroStrategy did not immediately respond to Cointelegraph’s request for comment. This article will be updated with new information as it becomes available.
MicroStrategy Adds Another 1,045 Bitcoin To Its Growing Crypto Treasury
MicroStrategy buys another 1,045 Bitcoin for $29.3 million, taking its total holdings to 140,000 BTC worth over $12.6 billion.
MicroStrategy, an American business intelligence firm, has just announced its latest acquisition of an additional 1,045 Bitcoin for approximately $29.3 million at an average price of $28,016 per BTC.
This news was announced in a tweet by MicroStrategy executive chairman Michael Saylor on April 5.
MicroStrategy has acquired an additional 1,045 #bitcoin for ~ $29.3M at an average price of $28,016 per bitcoin. As of 4/4/2023 @MicroStrategy holds 140,000 bitcoin acquired for ~$4.17 billion at an average price of $29,803 per bitcoin. $MSTRhttps://t.co/IBufTxalnv
As of April 5, 2023, MicroStrategy holds a total of 140,000 BTC, which was acquired for approximately $4.17 billion at an average price of $29,803 per BTC. This news comes as a significant milestone for the company as it continues to invest in Bitcoin as a reserve asset.
Number 14 on Cointelegraph’s Top 100 in crypto, Saylor has been an outspoken advocate for Bitcoin and has been leading the charge for corporations to adopt the largest cryptocurrency as a strategic asset.
Saylor has repeatedly stated that Bitcoin is the securest and most reliable store of value that exists in the market today and that it offers a unique opportunity for businesses to protect their assets from inflation.
Saylor’s MicroStrategy recently repaid its Silvergate loan and bought 6,500 BTC at the end of March. The company’s Bitcoin strategy appears to be dollar-cost averaging but with vast amounts of money.
MicroStrategy made its first Bitcoin purchase in August 2020, and since then, the company has been consistently adding to its holdings.
The latest purchase brings the total amount of Bitcoin owned by MicroStrategy to over $12.6 billion, which is a testament to the company’s confidence in the long-term potential of the cryptocurrency.
MicroStrategy Bitcoin Bet Turns Green As BTC Price Climbs To 10-Month High
Michael Saylor, the co-founder of the Fortune 500 company, had maintained throughout the bear market that they would continue to invest in Bitcoin as they are confident in its fundamentals.
Business intelligence and Fortune 500 company MicroStrategy’s Bitcoin investment has turned green again as BTC broke past the critical resistance of around $29,000 to record a new 10-month high of $30,163.
MicroStrategy started investing in Bitcoin in the second quarter of 2020 when the BTC price was trading around $10,000.
Since then, the business intelligence firm had made a series of BTC purchases over the period of two years. The firm has accumulated a total of 140,000 Bitcoin, acquired for nearly $4.17 billion at an average price of $29,803 per BTC.
MicroStrategy co-founder Michael Saylor introduced the Bitcoin strategy as a treasury hedging asset over the United States dollars.
Apart from holding BTC personally and on the company’s balance sheet, Saylor also convinced several public companies to accumulate BTC on their balance sheets, including the likes of Tesla, SpaceX and a dozen others.
The Bitcoin bet made by the Fortune 500 company looked lucrative throughout the bull market in 2021. However, a prolonged crypto winter in 2022 fueled by multiple crypto contagions brought upon by the collapse of leading crypto unicorns, crashed BTC price by over 70%.
The same Bitcoin bet that looked lucrative in 2021 attracted a lot of flak from crypto critics as MicroStrategy’s Bitcoin investment was at a 50% loss at the peak bear market in 2022.
However, Saylor always maintained that MicroStrategy had full confidence in Bitcoin’s underlying fundamentals and would continue to invest in the top cryptocurrency. In an interview with Cointelegraph, Saylor said that a Bitcoin investment should be judged from a four-year price cycle rather than based on one bear or bull market.
After a disastrous 2022, BTC price has shown strength throughout 2023, with the price seeing over a 55% increase in the first quarter of this year.
Bitcoin price has closed above the previous month’s high three months in a row, a sign considered to be a bullish market indicator and an indication of another bull run on the horizon.
Bitcoin has outperformed most traditional stocks and bonds this year and has eclipsed the losses incurred from the crypto contagions caused by FTX and Terra-Luna saga.
MicroStrategy’s Stock Price More Than Doubles In 2023 In Lockstep With Bitcoin
Bank of America and Fidelity have increased their MicroStrategy exposure in what appears to be a passive Bitcoin investment.
MicroStrategy’s bold Bitcoin investment strategy is playing out profitably so far into 2023.
Today, MicroStrategy’s stock, MSTR, is up roughly 140% year-to-date (YTD) to $350 per share, its highest level since September last year.
It mirrored Bitcoin’s 90% YTD gains, maintaining a strong positive correlation with the top cryptocurrency.
Proxy Bitcoin Investment Boom
To recap, MicroStrategy is essentially a proxy for direct BTC investment without a spot Bitcoin exchange-traded fund (ETF) in the United States.
It holds 140,000 BTC worth $4.26 billion, the most by a publicly traded company as a part of its treasury strategy.
MSTR investors typically get their buying or selling cues from the same catalysts that drive Bitcoin market trends.
As a result, the stock has mirrored the BTC price uptrend so far in 2023, led by rush-to-safety trades amid the U.S. banking crisis and anticipation that the Federal Reserve would stop hiking rates.
For instance, CNN data shows Bank of America’s entities owns 86,147 MSTR shares.
Similarly, Fidelity purchased 97,199 MSTR shares throughout 2022, suggesting growing institutional interest in proxy Bitcoin investments.
Coinbase’s COIN, another stock offering indirect crypto exposure, has doubled in value this year as well.
MicroStrategy’s Core Business Is Unhealthy
MicroStrategy is essentially an enterprise software solution company and generates its revenue from software licensing and subscription services.
The firm realized a net loss of $193.7 million during Q4 2022, up from $137.5 million a year ago, led by a Bitcoin impairment loss of $197.6 million.
Furthermore, its operating cash flow was $18.2 million compared to a positive cash flow of $3.2 million in the same quarter a year ago.
Revenue isn’t what you’re making it out to be. If a lemonade stand does $100M in revenue and spends $99,999,999 to generate that revenue, then a $1.00 profit isn’t all that amazing.
Of course, MicroStrategy could sell its Bitcoin holdings to boost its balance sheet reserves.
But the company said it would not alter its BTC buying strategy under financial stress. Instead, it employs strategies like share dilutions and debt offerings to raise capital to buy BTC.
“The risk here will come from its inability to buy Bitcoin with positive cash flows in future quarters as per its strategy,” said Pacifica Yield, a financial blogger at Seeking Alpha, adding:
“Dilution to buy assets that you lose money on if Bitcoin returns to its near-term lows would not be a shareholder-friendly strategy.”
20% Correction For MSTR Stock In Q2?
From a technical standpoint, MSTR has a high probability of a 20% price correction in Q2.
The stock’s yearly rally has landed its price near a resistance range — between $320 and $340 — notorious for capping breakout attempts.
Suppose a pullback occurs, the price could drop toward its 50-3D exponential moving average (50-3D EMA; the red wave) below $260 by June.
MicroStrategy is expected to release its Q1 earnings report by May 2.
MicroStrategy Returns To Profitability With Bitcoin Rebound
* Company Took Impairment Charge Of About $1 Billion A Year Ago
* Second-Quarter Revenue Fell 1.4% And Was Below Forecasts
MicroStrategy Inc., the enterprise-software maker that is the largest publicly-traded holder of Bitcoin, returned to profitability in the second quarter after having to take a large writedown a year earlier because of a plunge in the value of the cryptocurrency.
The Tysons Corner, Virginia-based company had net income of $22.2 million, or $1.54 a share, compared with a loss of more than $1 billion, or $94 a share, in the year-ago period.
The company, controlled by Bitcoin advocate Michael Saylor, missed Wall Street’s revenue estimates, with sales dropping 1.4% to $120.4 million.
Analysts surveyed by Bloomberg expected $123.2 million. The firm recorded digital-asset impairment losses of $24.1 million.
MicroStrategy acquired about $361.4 million in Bitcoin during the second quarter, the company’s largest purchase since prices peaked in late 2021. That brought MicroStrategy’s Bitcoin purchases to around $4.53 billion.
The company bought 467 more tokens since June 30, according to a statement Tuesday. As of July 31, the company held 152,800 Bitcoin.
In a filing Tuesday, MicroStrategy said it may raise as much as $750 million via share sales and use the proceeds for general corporate purposes — including Bitcoin purchases and working capital — as well as the repurchase of debt.
Saylor began buying Bitcoin in 2020, citing the need to reduce the company’s holdings of cash because of the perceived eroding threat of inflation. The shift came as revenue from the software business stagnated.
Saylor gave up his chief executive officer title a year ago, saying he would focus on the Bitcoin aspect of the company’s dual strategy.
MicroStrategy’s operations are still unprofitable, having booked a quarterly operating loss of $26.7 million in the quarter. The company has over $700 million in deferred tax benefits from prior writedowns of its Bitcoin holdings.
Now that Bitcoin has recovered in value, the company has removed a valuation allowance against the tax assets.
Phong Le, who took over as CEO when Saylor shifted to executive chairman, said on a conference call Tuesday that the company’s chief revenue officer resigned and he has assumed those responsibilities.
Bitcoin closed the second quarter up 7% to $30,390, building on a first-quarter surged of almost 72%. In last year’s second quarter, the largest digital currency by market value had tumbled 59% to $18,731.
Bitcoin rose as much as 2.8% on Wednesday and was trading at $29,715 as of 11:30 a.m. in Singapore.
Shares of MicroStrategy, which serve as a Bitcoin proxy for many equity investors, was little changed at around $434 after the close of regular trading. They’ve more than tripled this year, after tumbling 74% in 2022. The stock soared as high as $1,315 in February 2021.
FASB Adopts Crypto Accounting And Disclosure Rule For Companies
The Financial Accounting Standards Board voted to set a new rule on cryptocurrency accounting and disclosure, changes companies holding these assets have argued more accurately reflect their financial condition.
There are no specific accounting or disclosure rules for crypto assets in the U.S. Businesses now classify crypto assets as indefinite-lived intangible assets, similar to intellectual property such as copyrights.
Companies have to review the value of such assets at least once a year and write it down if it drops below the purchase price.
If the value were to rise, companies can record a gain only when they sell the asset, not if they continue holding it.
The FASB, which sets accounting standards for U.S. public and private companies and nonprofits, on Wednesday voted unanimously to adopt a new standard that would require businesses to use fair-value accounting for bitcoin and certain other crypto assets.
Companies and accountants have repeatedly rallied for this change, as it would allow them to recognize losses and gains immediately, and treat digital assets as they would some financial assets instead of as indefinite-lived intangible assets.
Public companies’ financial statements will have to disclose their crypto assets, separating them from intangible assets like patents and trademarks, on a quarterly and annual basis.
Private companies must do the same in whichever financial reports they compile. Businesses will have to include gains and losses on their crypto assets in their net income.
The rule is set to go into effect for 2025 annual reports for calendar-year public and private companies, which can adopt the changes early. The FASB expects to formally issue the standard by year-end, a spokeswoman said.
The rule’s benefits not only likely outweigh the compliance costs for companies, but could also spur cost savings in some cases, Vice Chair Jim Kroeker said.
The approval comes as ownership of cryptocurrencies continues to climb despite the series of hurdles the industry has recently faced. Several crypto exchanges and projects have failed and regulators are ramping up enforcement and questioning the compliance efforts of major firms in the space. Bitcoin’s price has fallen about 60% since its peak in November 2021 as of Tuesday.
Among crypto’s owners, very few new companies have jumped aboard in a material way due to the volatile nature of bitcoin and lack of clear rules, among other reasons.
Automaker Tesla, payment company Block and software provider MicroStrategy are among the handful of public companies with crypto holdings on their balance sheets.
Companies generally have backed the proposed rule and said any disclosure beyond that is unnecessary.
As part of the proposal, the FASB asked the public to weigh in on whether companies should have to provide additional information on areas such as crypto-related gains and losses, the nature and purpose of holding crypto, and information about pricing and its cryptographic private key, which they use to keep these assets safe.
The board previously declined to require these particular disclosures.
Block has security concerns with disclosing information on private keys and would prefer that such information remain confidential, Chief Accounting Officer Ajmere Dale said in an undated letter to the FASB.
“We strongly believe additional disclosure about cryptography private keys would not be useful to readers and that discussion of risk factors that are already in our financial statements are sufficient,” Dale wrote.
MicroStrategy, in a May 22 letter, said disclosing the nature and purpose of holding crypto could become less relevant in the future if the assets continue to gain wider adoption and become a more mainstream treasury reserve asset option.
The company is encouraged by the widespread support for the proposed change during the comment period, Chief Financial Officer Andrew Kang said Wednesday, declining to comment on the vote.
The FASB on Wednesday didn’t add any of these disclosures, saying they wouldn’t be necessary details for investors.
Some companies said the proposed exclusion of crypto with so-called enforceable rights was unclear. Assets that have contractual rights to cash flows or ownership of goods or services wouldn’t fall under the requirements.
For example, the FASB has said the proposed requirements wouldn’t apply to wrapped tokens, which allow crypto assets from one blockchain to be represented and used on a different blockchain. Nonfungible tokens, or NFTs, and certain stablecoins are also excluded.
BlockFi, a crypto lender that filed for chapter 11 protection after FTX’s collapse, asked the FASB to remove “enforceable rights” from the proposed rule.
Certain users could broadly interpret the term as any benefit inherent within the token’s specific protocol, such as rights to staking revenue tied to a token, Chief Accounting Officer Rob Loban wrote on June 1.
“This interpretation could eliminate a large portion of digital asset tokens from consideration and undermine the core purpose of this standard,” Loban said.
Crypto asset manager Grayscale Investments, in a June 5 letter, said this criterion could require it and other companies to conduct additional analysis and use more judgment.
Regarding the standard overall, Grayscale is supportive of all progress that provides clearer crypto accounting guidance, a spokeswoman said Wednesday.
The board opted to keep the term “enforceable rights.” Tweaking the criteria for these rights would require more research and could slow down the project, FASB Chair Rich Jones said. Block declined to comment, and BlockFi didn’t immediately respond to a request for comment Wednesday.
“I know there will be some that are disappointed that we haven’t expanded the scope to address wrapped tokens and NFTs and whatnot, but I think intentionally keeping this project narrow has really allowed us to get this into the hands of investors sooner,” board member Sue Cosper said.
Change To US Accounting Rules Will Be A Boon To Companies Holding Crypto In 2025
The Financial Accounting Standards Board has recommended recording crypto at fair market value on corporate balance sheets, removing possibly significant impairments but adding to volatility.
The United States Financial Accounting Standards Board has unanimously approved rules for accounting for the fair value of companies’ cryptocurrency holdings, according to media reports. The rules will go into effect in 2025.
The FASB is the organization that sets accounting and reporting standards for organizations that follow U.S. Generally Accepted Accounting Principles (GAAP). It issued a call for comments on proposed changes to the FASB Accounting Standards Codification in March.
The proposal was discussed and put to a vote on Sept. 6.
Fair value is the estimated price of an asset that takes into account current market value and other decisive elements. The FASB had made a “tentative” decision on fair value accounting for crypto assets in October 2022.
Christmas came early for @saylor$MSTR and other companies with Bitcoin on their balance sheets!
FASB is moving to fair value reporting for Bitcoin holdings
Should @Swan host a livestream today to explain the implications?
Previous practice required companies to keep impairment losses from crypto, caused when an asset suddenly loses value, on their balance sheets even after the digital asset regained its value.
The new accounting method will increase volatility in the earnings of companies with large crypto holdings but allow them to record financial recoveries from increasing crypto prices.
Companies can begin using fair-value accounting for their crypto immediately if they wish to. FASB member Christine Botosan said:
“It’s not very often that we can both take cost out of the system and improve the decision usefulness of information, and it makes it a really easy vote to do both of those.”
Besides crypto-native companies like Coinbase, the rule change will affect investment companies and companies like MicroStrategy and Tesla that hold large amounts of crypto. MicroStrategy chairman Michael Saylor wrote on X:
“Fair value accounting is coming to #Bitcoin. This upgrade to FASB accounting rules eliminates a major impediment to corporate adoption of $BTC as a treasury asset.”
To accommodate the changes, crypto will become a line item under “intangible assets” in financial accounts.
FASB Says Crypto Assets Should Be Marked At Current Values
The U.S. standard-setting organization for accounting has moved to insist companies use “fair-value” accounting to report their crypto holdings.
The first U.S. accounting rule specifically for cryptocurrency will say that companies must use a fair-value approach that would demand certain digital assets be measured at what they would trade for in the markets, according to the Financial Accounting Standards Board (FASB).
At a Wednesday meeting, the board evaluated comments on the change and gave staff permission to draft a final version of the new accounting standard, effective for fiscal years starting after December 15, 2024. The final language is expected to be approved in a written vote before the end of the year.
The FASB, which is a nongovernmental standard-setting board overseen by the U.S. Securities and Exchange Commission (SEC), had proposed the rule in March. The suggested changes departed from the usual practice of marking these assets for their unrealized losses – seen by the industry as a barrier to wider crypto adoption.
Specifically moving crypto into the accounting rules means companies will make gains and losses a part of their quarterly income reports.
“I think we heard overwhelmingly from investors that allocate capital based on the use of financial statements that this will provide them better information to make their decisions, and so I’m fully supportive of it,” said Richard Jones, the board’s chairman.
The board is encouraging companies to seek early adoption of the new standard.
Michael Saylor, the founder and former CEO of MicroStrategy (MSTR), tweeted that this development “eliminates a major impediment to corporate adoption of $BTC as a treasury asset.”
MicroStrategy Bought 5,445 Bitcoin For $150M Since August
The software ompany now holds nearly $4.68 billion worth of the largest cryptocurrency by market capitalization.
Software developer MicroStrategy (MSTR) purchased nearly $150 million worth of bitcoin (BTC) between Aug.1 and Sept.24, it said in a Monday regulatory filing.
“MicroStrategy, together with its subsidiaries, acquired approximately 5,445 bitcoins for approximately $147.3 million in cash, at an average price of approximately $27,053 per bitcoin, inclusive of fees and expenses,” the company said in the filing.
MicroStrategy now holds approximately 158,245 BTC, which were acquired at an aggregate purchase price of approximately $4.68 billion at an average purchase price of roughly $29,582 per bitcoin.
The company said it had issued and sold a total of 403,362 MSTR shares to fund the purchase.
In August, MicroStrategy said it may raise up to $750 million by selling more stock, and plans to use some of the proceeds to buy more bitcoin.
MicroStrategy Buys $147M Worth Of Bitcoin, Now Holds 158K BTC
MicroStrategy bought the latest Bitcoin stash at an average price of $27,053 per coin, or 9% lower than the average purchase price of its entire BTC purchase.
MicroStrategy, a business intelligence firm and major Bitcoin investor, is sending a bullish signal to the market by announcing the acquisition of another big stash of cryptocurrency.
Michael Saylor, co-founder and executive chairman of MicroStrategy, took to X (formerly Twitter) on Sept. 25 to announce a 5,445 BTC purchase by the firm. The coins were bought for $147.3 million in cash at an average price of $27,053 per BTC.
According to a Form 8-K filing with the United States Securities and Exchange Commission, MicroStrategy and its subsidiaries acquired the amount between Aug. 1 and Sept. 24.
As of Sept. 24, MicroStrategy and its subsidiaries held an aggregate of approximately 158,245 BTC, which was acquired at an average purchase price of roughly $29,582 per coin, inclusive of fees and expenses, the filing notes.
The aggregate purchase price for MicroStrategy’s total Bitcoin holdings amounts to $4.68 billion.
The new purchase comes as Bitcoin has traded sideways at around $26,000 over the past few weeks. After briefly touching $28,000 on Aug. 29, Bitcoin slipped to as low as $25,000 on Sept. 11.
At the time of writing, Bitcoin is trading at $26,081, down 1.9% over the past 24 hours, according to data from CoinGecko. The cryptocurrency is also down around 4% over the past seven days.
MicroStrategy’s latest purchase further reaffirms the company’s bullish stance on Bitcoin. The firm previously bought 12,333 BTC for $347 million in June 2023 at an average purchase price of $29,668 per coin.
In Q1 2023, MicroStrategy reported its first profitable quarter since 2020 due to a one-time income tax benefit. The company managed to retain profitability in the next quarter, reporting $22.2 million in net income in early August.
MicroStrategy’s Bitcoin Stash Back In Profit With BTC Price Above $30K
The Michael Saylor-led software firm has made $132 million in unrealized profits from its Bitcoin bet.
MicroStrategy’s Bitcoin holdings have turned profitable for the first time since July, now that BTC has broken through $30,000. MicroStrategy up $132 million in paper profits
As of Oct. 23, MicroStrategy held 158,245 BTC, worth $4.847 billion, up about $132 million from the original amount invested — with the Bitcoin purchased at an average cost of $29,870 per coin. In other words, the firm is now up at least $130 per coin.
MicroStrategy started buying Bitcoin in 2020 and ramped up purchases in 2023 as its price recovered from extreme losses resulting from the United States Federal Reserve’s policy around interest rate hikes as well as high-profile crypto bankruptcies and implosions.
In September 2023, MicroStrategy acquired 5,444 BTC by raising an equivalent amount of capital, mirroring the approach that saw the firm buy approximately 12,333 BTC by raising funds earlier this year.
Michael Saylor, the co-founder and chairman of MicroStrategy, shared data showing Bitcoin’s outperformance versus traditional assets since the company adopted its cryptocurrency-buying strategy in August 2020.
Will Bitcoin Price Rise Further Into 2024?
Since May 2022, Bitcoin has failed to establish a clear bullish momentum after crossing $30,000. This scenario may repeat in the coming weeks. This, in turn, risks pushing MicroStrategy’s BTC investment below its average buying price once again.
More downside cues come from Bitcoin’s daily relative strength index (RSI), now at its most overbought levels since January 2023. As a rule of technical analysis, an overbought RSI (above 70) could prompt BTC’s price to drop or consolidate sideways.
A correction scenario will see Bitcoin’s price head toward its 50-day exponential moving average (50-day EMA; the red wave) near $27,720 in November, down about 10% from current levels.
Conversely, maintaining and confirming $30,000 as the new support level will open the door toward the next big resistance area at $32,000 — a level not seen since May 2022.
From a fundamental perspective, the potential approval of Bitcoin exchange-traded fund (ETF) in the U.S. serves as a strong bullish backdrop, according to CryptoQuant. It notes that the approval of a Bitcoin ETF could boost the Bitcoin market’s net capitalization by $155 billion.
CryptoQuant argues that if this happens, the price of Bitcoin could hit $50,000 to $73,000 in 2024, which would certainly become a boon for MicroStrategy.
However, the firm says it will stay on its BTC course even if a Bitcoin ETF gets the green light.
MicroStrategy’s Bitcoin Bag Is Up $900M Amid BTC Price Surge
Michael Saylor’s MicroStrategy has bought 6,067 BTC since the start of the third quarter.
Business intelligence firm MicroStrategy has notched a paper gain of $900 million on its stack of 158,400 Bitcoin, spurred by optimism over the potential approval of spot Bitcoin exchange-traded funds (ETFs).
The Michael Saylor-founded firm has added 6,067 BTC since the third quarter, including another 155 in October, according to MicroStrategy’s Nov. 1 results filing.
MicroStrategy CEO Phong Le said the firm isn’t shying away from its Bitcoin strategy any time soon.
“Our commitment to acquire and hold bitcoin remains strong, especially with the promising backdrop of potential increased institutional adoption.”
The firm’s revenue increased 3% year-on-year to $129.5 million over the quarter; however, it wasn’t enough to keep the firm out of the red, recording a net loss of $143.4 million.
While Bitcoin’s price has surged again of late, BTC fell 11.5% from $30,480 to $26,970 during the third quarter (July 1 to Sept. 30).
MicroStrategy capitalized on this downward period, buying the 6,067 BTC for an average price of $27,590.
The firm is also confident in where its artificial intelligence-integrated business analytics products are situated, with its software licenses and subscription services increasing 16% and 28% year-over-year.
“We believe MicroStrategy is well situated to capitalize on both the tailwinds in bitcoin and growth in our BI business,” Le said.
Microstrategy just reported their Q3 earnings
– They hold 158,400 BTC at a cost basis of $29,586 – They are at 900MM profit on their BTC buys – Their annual revenue is 129.5MM (up 3% y/y)
By buying + hodling BTC, they’ve made 7 years of their annual revenue
MicroStrategy’s stock price (MSTR) has increased 2.7% in after-hours trading to $438, according to Google Finance.
MicroStrategy’s Saylor Makes Biggest Bitcoin Purchase In More Than 2 Years
* The Purchase Is MicroStrategy’s Biggest Since February 2021
* The Firm’s Bitcoin Holdings Are Now Worth Roughly $6.5 Billion
MicroStrategy Inc. chairman and co-founder Michael Saylor placed one of his biggest bets yet, with the enterprise-software maker turned Bitcoin investment-fund proxy purchasing $593.3 million more of the largest cryptocurrency.
The Tysons Corner, Virginia-based firm said in a filing Thursday that it bought 16,130 Bitcoin in November, raising its holdings to roughly $6.5 billion.
It was the company’s biggest purchase since it bought 19,452 Bitcoin for just over $1 billion in February 2021.
Saylor started buying Bitcoin in 2020, and has ramped up purchases this year as the cryptocurrency recovered from a year of losses caused by rising rates and some high-profile crypto implosions and bankruptcies.
Saylor stepped down from the chief executive role a year ago, saying he would focus on the Bitcoin aspect of the company’s now dual strategy.
MicroStrategy’s shares have surged 250% this year, outperforming Bitcoin as it rallied more than 125% amid optimism the US may soon approve an exchange-traded fund that invests directly in the cryptocurrency.
That has helped to allay concern that an ETF will diminish demand for the stock.
“If/when we get a Bitcoin ETF, it will raise the interest in the asset class,” said Matthew J. Maley, chief market strategist at Miller Tabak + Co. “There shouldn’t be a lot of cannibalization.”
MicroStrategy also entered into an agreement with Cowen and Company, Canaccord Genuity and BTIG to offer up to $750 million of common stock.
The company initially announced plans to raise the amount through share sales in August, saying proceeds would be used for purposes such as Bitcoin purchases, working capital and the repurchase of debt.