MicroStrategy's stock price is up 1,000% since its first Bitcoin purchase, and Warren Buffett missed the boat.
On August 10, 2020, MicroStrategy purchased its first Bitcoin reserve, becoming the first public company to use cryptocurrency as its primary financial reserve asset. Four years later, this bold move has evolved into a decisive key strategy for the company, with a return rate that even exceeds that of Berkshire Hathaway, operated by Buffett.
As of August 10, 2024, exactly four years later, MicroStrategy holds about 226,500 bitcoins, worth about $13.771 billion, with an average purchase cost of about $37,000 each. With the current bitcoin trading price at about $60,500, MicroStrategy probably has about $5.39 billion in unrealized profits.
However, despite the huge gains, the company still holds on to Bitcoin and has not sold any of its accumulated assets. MicroStrategy has also expressed its intention to continue to increase its holdings of Bitcoin, and its most recent purchase of Bitcoin on August 1 further proves this.
MicroStrategy's stock (MSTR) has responded positively to its Bitcoin purchases, with the stock price rising by about 1,000% since August 2020. In comparison, this increase is 1.5 times the return of Bitcoin and 16.25 times the return of the S&P 500 (SPX) over the same period.
It is worth noting that since MicroStrategy first bought Bitcoin, Warren Buffett's Berkshire Hathaway Class A shares (BRK.A) have significantly underperformed MSTR. During this period, BRK.A has only increased by 104.75%. Buffett has always held a negative attitude towards Bitcoin, which has prevented Berkshire Hathaway from investing in cryptocurrencies.
Back in 2018, Buffett called Bitcoin "rat poison." And his close partner, the late Charlie Munger, publicly predicted in 2021 that the price of Bitcoin would collapse to zero, calling it a "disgusting product." However, seemingly slapping his face, in recent years, Bitcoin and MSTR stock have still outperformed Buffett's major holdings, including Apple, American Express, and Bank of America.
However, this year, many institutions and investors have said they intend to short MSTR stock because they believe that the value of MicroStrategy's software business may be between $1 billion and $1.5 billion, which is not worth a lot of money. The price of Bitcoin must rise for the company's value to increase. If the price falls, the company's value will also fall.
In this regard, investment company Kerrisdale Capital clearly pointed out that MSTR's stock price has an unreasonable premium compared to Bitcoin, that is, "the premium is too high." They will trade according to the value of Bitcoin and intend to "short MicroStrategy and go long Bitcoin." This view reflects the different expectations of the market for the future development of MicroStrategy, especially in the context of the current increased volatility in the cryptocurrency market.
Despite market uncertainty and external doubts, MicroStrategy remains firmly optimistic about the future of Bitcoin. The company has said that as an emerging asset class, cryptocurrency has huge growth potential. The encryption strategy is not only for the pursuit of short-term gains, but also focuses on the long-term impact that Bitcoin may have on the global financial system.
The success of micro-strategies in Bitcoin investment has challenged traditional investment concepts and brought new perspectives to the entire investment community. The micro-strategy proves the rationality and necessity of its investment to the market with actual returns, verifying that Bitcoin as an asset can achieve significant returns under certain circumstances. As Bitcoin is gradually recognized as an important investment asset, its future development deserves our continued attention.
At the same time, Buffett's long-term strategy may not be completely outdated. His adherence to conservative investing still has great appeal in some situations. In a rapidly changing market environment, Buffett's value investment philosophy still has its reason for existence, although it is very different from the investment approach of emerging assets such as Bitcoin.
In general, MicroStrategy's success has not only affected its own performance, but also had a profound impact on the entire market. As the first public company to include Bitcoin in its balance sheet, MicroStrategy has set an important benchmark, prompting other institutional investors to pay attention to Bitcoin. Over time, more and more companies have begun to recognize the value of Bitcoin as a digital asset and have joined the ranks of Bitcoin investment.
