Despite a significant retracement in cryptocurrency over the past week, the 'Bitcoin whale' MicroStrategy continues to 'buy, buy, buy';
The company announced on Monday that it has purchased another 5,262 Bitcoins, marking its seventh consecutive week of accumulation;
MicroStrategy currently holds a total of 444,262 Bitcoins, with an average purchase price of $62,257.
On December 24, despite the significant retracement in cryptocurrency over the past week, the 'Bitcoin whale' MicroStrategy continues to 'buy, buy, buy'. The company announced on Monday that it has purchased another 5,262 Bitcoins, marking its seventh consecutive week of accumulation.
According to a filing with the U.S. Securities and Exchange Commission (SEC), the company sold about $561 million worth of stock through ATM (at-the-market issuance), and then used the proceeds to increase its Bitcoin reserves.
The average purchase price last week was about $106,613, slightly below Bitcoin's historical peak of around $108,500.
MicroStrategy announced in October this year that it plans to issue about $42 billion in stocks and bonds over the next few years to purchase Bitcoin. Since then, the company has increased its holdings by nearly 200,000 Bitcoins, raising the average holding cost from $39,266 in October to around $62,257 now.
MicroStrategy currently holds a total of 444,262 Bitcoins, with an average purchase price of $62,257, making the company the largest corporate holder of Bitcoin in the world.
Risky move
Even though MicroStrategy has a massive reserve of Bitcoins, the company is still buying more through leverage. This approach may be risky.
Although MicroStrategy has realized approximately $41 billion in unrealized gains from its Bitcoin bet, the cryptocurrency's significant decline could pose risks to the company, especially considering that its main software business is not consistently profitable, and the company has raised over $7 billion through convertible bonds.
Their strategy is to issue convertible bonds and use the proceeds to buy Bitcoin. This is essentially leveraged trading—borrowing money to purchase financial assets, said Steve Sosnick, chief strategist at Interactive Brokers.
He also pointed out that when asset prices move in a favorable direction, MicroStrategy's approach will be very effective, but if they move in an unfavorable direction, it will collapse in a very unpleasant way.
Sosnick emphasized that MicroStrategy benefits from a 'self-fulfilling feedback loop'. The company buys Bitcoin, which helps to drive up the price, then sells more debt and equity to buy more Bitcoin, further pushing up the Bitcoin price.
This kind of thing will never last forever and often ends badly—the question is 'when?' The short-term answer seems to be 'not yet', said Sosnick.
Since Trump's election, Bitcoin's price has surged nearly 40%, breaking through $108,000 earlier last week, setting a new all-time high. However, due to the Fed's hawkish policy outlook, Bitcoin recently recorded its first weekly decline since Trump's victory, currently hovering around $94,500.
Even a slight adjustment in Bitcoin can have a significant impact on MicroStrategy's stock price. As Bitcoin has retraced in recent days, MicroStrategy's stock price has also plummeted by nearly 20% over the past week.
However, MicroStrategy's founder Saylor continues to advocate for Bitcoin. He stated last week that buying Bitcoin is like purchasing land in Manhattan hundreds of years ago, and he said, 'I will keep buying Bitcoin. Every day is a good day to buy Bitcoin.'