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In 2023, MicroStrategy, steered by its bitcoin-supporting founder and executive chairman Michael Saylor, has seen its stock skyrocket by an impressive 246%. The firm’s shares experienced a notable increase on Thursday, surging 6% to approximately $492 per share. This surge can be attributed to MicroStrategy’s strategic investment in bitcoin, the world’s foremost cryptocurrency, which also reached a new annual high on Friday, surpassing $37,900. The company’s substantial bitcoin holdings, amounting to billions of dollars, have contributed significantly to this year-to-date increase of 122% in the cryptocurrency’s value.

Michael Saylor has expressed his belief that the unique economic environment, marked by government-induced inflation and technology-driven deflation, makes it challenging for companies outside the elite group of the ‘Magnificent Seven’ to achieve significant, sustained growth. He discussed in a Fox Business interview how mainstream companies are metaphorically battling with one hand tied behind their backs, emphasizing the need for such companies to expand their revenues and cash flows at a minimum of 20% annually to keep pace with dominant firms like Apple, Microsoft, and others in the ‘Magnificent Seven.’

There’s seven companies that generate all the shareholder returns. There’s 7,000 companies that can’t keep up. What we did in August of 2020 was recognize that there’s no way we’re going to outgrow Google and Microsoft and Apple Computer as a mid-sized software company.

Saylor’s strategy for MicroStrategy involved seeking a “high-growth digital monopoly” for investment, leading to the selection of bitcoin as the most promising asset. He highlighted bitcoin’s rapid growth rate of 40-50% per year, explaining how investing in it has enabled MicroStrategy to use its balance sheet for corporate expansion. Saylor’s vision extends beyond the current year, as he anticipates further growth for bitcoin, especially with the potential approval of bitcoin spot ETF products by regulatory bodies. Bloomberg Intelligence strategists predict a high likelihood of this approval by January 2024.

 

Saylor has a positive outlook on bitcoin’s future, especially considering the upcoming halving in April, which will reduce its supply by half, and the anticipated launch of spot ETFs, which he believes will double the demand. This dynamic, he suggests, will lead to a price adjustment necessary to balance the market.

MicroStrategy’s Bitcoin Accumulation: A Strategic Asset Buildup

Over the past three years, MicroStrategy has strategically accumulated over 158,000 bitcoins. This significant investment was made possible through the allocation of company funds and the proceeds from bond sales. Impressively, the current value of these Bitcoin holdings constitutes more than 80% of MicroStrategy’s stock market capitalization, which stands at $7.1 billion.

The investment in these Bitcoin assets has been substantial, totaling a cumulative $4.6 billion, according to Bitcoin Treasuries. This amount dwarfs the investment of the next largest institutional holder, the bitcoin miner Marathon Digital. Marathon Digital’s holdings are comparatively modest, with 13,000 bitcoins valued at around $500 million at the current market price, which is more than tenfold smaller than MicroStrategy’s investment.

In terms of recent acquisition activity, MicroStrategy has continued to expand its Bitcoin portfolio. Prior to Sept. 24, the company made additional purchases of 5,445 bitcoins, spending just under $150 million. This equates to an average acquisition cost of approximately $27,053 per Bitcoin, indicating the company’s ongoing commitment to expanding its Bitcoin assets amidst varying market conditions.

To the Moon?

Saylor’s bullish views are echoed by other experts in the digital asset sector, who foresee bitcoin potentially soaring beyond $100,000 following the halving. Historically, each of bitcoin’s previous three halving events has been followed by record highs in the following 12 months. Saylor remains optimistic about the future of this asset class, particularly in the coming year.

However, a word of caution is in order. Because of this recent surge in crypto, the market sentiment right now has become very bullish to the point of “greed”. It is times like this when significant drops can occur, and recently there was a “flash crash” in Bitcoin, that was quickly bought up. A more serious correction is perhaps around the corner, so investors are advised to take that into account. Youtuber Jason Pizzino explains some of that in one of his recent videos on the matter.

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