MicroStrategy Buys $250M in Bitcoin, Calling the Crypto ‘Superior to Cash’

[fillippone]

Well, apparently, more to come:


MicroStrategy Tells SEC It ‘May Increase’ $250M Bitcoin Reserves

Basically they informed the SEC they might further increase their BTC allocation.
From the SEC filing (bols is mine):

On September 11, 2020, the Board of Directors (the “Board”) of MicroStrategy Incorporated (the “Company”) adopted a new Treasury Reserve Policy (the “Policy”) that updated the Company’s treasury management and capital allocation strategies. Under the new Policy, treasury reserve assets will consist of (i) cash, cash equivalents, and short-term investments (“Cash Assets”) held by the Company that exceed working capital needs and (ii) bitcoin held by the Company, with 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.

This is a forward looking statement, this is not an announcement, but doing such a communication they are sort of "buying the option" to do an additional purchase.
No need to tie your hands if you really want to increase your stake.
Guessing how many BTC do they need to buy before they became a BTC company and not a software company.

[JayJuanGee]

Guessing how many BTC do they need to buy before they became a BTC company and not a software company.

Another 21,000?  That's a guess.      

[fillippone]

Guessing how many BTC do they need to buy before they became a BTC company and not a software company.

Another 21,000?  That's a guess.      

I hardly doubt so. In addition to that, you should know that every 21,000 become more difficult to snap. I can assure you.
Also I think it will be difficult to justify given their overall cash balances. I think half of that sum could be a huge move.

[fillippone]

This was faster (and bigger) than expected!


https://twitter.com/michael_saylor/status/1305850568531947520?s=20

They now own more than 0.2% of the total bitcoin in circulation. This is massive.

[Mauser]

This was faster (and bigger) than expected!


https://twitter.com/michael_saylor/status/1305850568531947520?s=20

They now own more than 2% of the total bitcoin in circulation. This is massive.

Wow this is really massive, no wonder bitcoin price is picking back up again.

Great news to see more institutional investors getting into crypto market. I still believe there is a lot of upside potential for bitcoins. I wouldn't sell my coins right now to investors. Better to just hold them.

[justdimin]

It makes sense that they use the reserves in bitcoin because first of all OTC market is very crowded and they can get rid of all of 250 million dollars very quickly, they could just pay 1 million for it and they could find a ton of people who will buy it, however at the same time they are not really losing money neither, they could make a profit.

In regular life, with fiat, you keep cash aside for reserves and the money stays as the same amount, even losing purchasing power, but in bitcoin form you both have cash ready for anything you want, even on urgent situations but on top of that you are also making sure that bitcoin could go up in price and make you profit while it is only considered as a reserves for something urgent. It is a great idea for them honestly.

[The Sceptical Chymist]

On August 11, when this thread was started, MSTR closed for the day at $134.89.  At today's close, it's at $155.75. 

I have no idea if MicroStrategy's acquisition of bitcoin for their treasury had anything to do with that rise, but it was a pretty substantial one.  Obviously if analysts had thought that it was a really bad idea for MSTR to buy bitcoin, it would be reflected in the stock price--and quickly, too.  Obviously that hasn't happened.

Guessing how many BTC do they need to buy before they became a BTC company and not a software company.

Lol, they're not going to become a bitcoin company.  They're just holding bitcoin as their cash reserve, and I think most corporations in good financial health have cash or cash equivalents on hand--the only difference is that MSTR isn't keeping that reserve in fiat.

This was faster (and bigger) than expected!
<snip>
They now own more than 0.2% of the total bitcoin in circulation. This is massive.

Wow, no kidding!  I'm just hoping they do end up holding it for a long time and don't get into a situation where they have to dump it onto the market all at once.  That's a fear I have with people/institutions that own large amounts of bitcoin. 

Thanks for the update on this, OP.

[Lucius]

If I'm not mistaken, the first purchase was around $11 600, and now they bought at a slightly lower price although generally looking at their timing there were much better moments for the investment when the price was much lower. Maybe some other things were at stake, but if they had invested in BTC before or around the halving for $425 million they could have bought a lot more than has been the case in the past month.

I'm really wondering if it's just bad timing, because if you're planning to spend $400+ million on something then it makes a big difference whether you pay $7000 or almost $12 000 for it. I don't believe this is the end of their investment in BTC, maybe they're targeting some nice round number like 50 000 or maybe 100 000.

[fillippone]

If I'm not mistaken, the first purchase was around $11 600, and now they bought at a slightly lower price although generally looking at their timing there were much better moments for the investment when the price was much lower. Maybe some other things were at stake, but if they had invested in BTC before or around the halving for $425 million they could have bought a lot more than has been the case in the past month.

I'm really wondering if it's just bad timing, because if you're planning to spend $400+ million on something then it makes a big difference whether you pay $7000 or almost $12 000 for it. I don't believe this is the end of their investment in BTC, maybe they're targeting some nice round number like 50 000 or maybe 100 000.

As per @JayJuanGee calculation you see the average price is 425,000,000/38,250 =11,111.11
Pretty decent.
I guess they are hodling, so it doesn't make a big difference, in the big scheme of things, to buy at 7,000 or at 11,000 when you are aiming at 500,000.

[Lucius]

I guess they are hodling, so it doesn't make a big difference, in the big scheme of things, to buy at 7,000 or at 11,000 when you are aiming at 500,000.

Everyone has their reasons why they made something one way or another, but it is still a significant difference in the amount of BTC that could be bought for the same amount of money : $425 000 000/$7000 = 60 714.28 BTC which is the difference of as much as 22 464 BTC.

It’s clear to me that they don’t buy for some short-term profit, but with a little better timing they could have had a lot more for the same money. Yet it is impressive that someone is showing so much interest and trust in Bitcoin, and at the same time doing great advertising for Bitcoin in the business world.

[gentlemand]

I like this quote of his - “We just had the awful realization that we were sitting on top of a $500 million ice cube that’s melting,”

However if I were him I'd be easing up on the evangelical angle. If you are going to talk about it then lay it out in a cold and calculating manner. That speaks louder to their own investors and others.

[Upgrade00]

<snip>

Bitcoin is at its infancy stage and anyone who gets in now still counts as an early adopter, and that is great timing.

Going back a couple of months from before the halving, they would have got a good deal, and a couple of more months back a better deal (maybe, my recollection of the chart is a bit rusty) - In a couple months time they could yet get a better deal. While everyone would want to profit more and timing is very important in investing, the price variation was not quite much and they could have been tired of hesitating on hitting the buy switch - Get In when you get It

And you are right, it is quite impressive and great promotion. Bitcoin has been trending on Twitter intermittently in my location for a while now.

[JayJuanGee]

<snip>

Bitcoin is at its infancy stage and anyone who gets in now still counts as an early adopter, and that is great timing.

Going back a couple of months from before the halving, they would have got a good deal, and a couple of more months back a better deal (maybe, my recollection of the chart is a bit rusty) - In a couple months time they could yet get a better deal. While everyone would want to profit more and timing is very important in investing, the price variation was not quite much and they could have been tired of hesitating on hitting the buy switch - Get In when you get It

And you are right, it is quite impressive and great promotion. Bitcoin has been trending on Twitter intermittently in my location for a while now.

I just heard Michael Saylor interviewed on Pompliano's podcast  (episode just released today and interview seems to be just done), and Saylor really describes his recent contemplations and calculations in regards to bitcoin (including some of his past business practices that led him up to being receptive to bitcoin), and really he had disclosed that he had only really been looking into BTC for about 1 year (since July 2019) after his company had sold the Voice domain name, and I am not sure whether Saylor personally invested in BTC or just got his company "onboard" the BTC train.

Saylor does describe a bit of a process of his own personal learning, his efforts at teaching his board members (and regularly discussing the matter with board members) and then to get the systems in place for their company in order that his company could pull the "buy bitcoin" trigger that seems to take a number of months to get those systems in place.

Saylor suggests that it could take maybe 6 months for a streamlined company to be able to get these kinds of systems in place in order to be able to buy bitcoin, as compared with an individual that could act in 1 month or so ... and presumably some companies likely have more bureaucratic obstacles too, but he expects more companies to follow down the Buy / (hedge in BTC) path.

[exstasie]

On August 11, when this thread was started, MSTR closed for the day at $134.89.  At today's close, it's at $155.75. 

I have no idea if MicroStrategy's acquisition of bitcoin for their treasury had anything to do with that rise, but it was a pretty substantial one.  Obviously if analysts had thought that it was a really bad idea for MSTR to buy bitcoin, it would be reflected in the stock price--and quickly, too.  Obviously that hasn't happened.

There is already a pretty strong correlation between stocks, especially tech stocks, and BTC. Both are in strong uptrends on higher time frames, ever since the March lows.

The way I see it, these BTC acquisitions will just amplify the correlation between MSTR and BTC. It was the same way with RIOT when they became a crypto investment and mining company.

So it's all happy days until there is a mid-term correction or an actual bear market. A downtrend would hit BTC much harder than stocks. Now it will probably hit MSTR harder than the rest of the market too.

[24Kt]

Yes, the institutional demand for Bitcoin is increasing significantly, especially during the COVID-19 crisis. I expect that more institutions will start investing in Bitcoin in the next few years to diversify their investment portfolios and hedge inflation risks, especially during the economic downturn.

I believe there are already other companies investing on bitcoin, they are just silent about it. Even known personalities are also secretly stashing bitcoin and other crypto. And this is actually good for the btc market, the more people or institution that are into bitcoin, the better for crypto market.

[Lucius]

I'm just hoping they do end up holding it for a long time and don't get into a situation where they have to dump it onto the market all at once.  That's a fear I have with people/institutions that own large amounts of bitcoin. 

On the one hand, we find it positive that such large companies invest in Bitcoin, but again we wonder what if at some point they decide to sell everything they have - and we hope at least that they will do that through OTC. However, judging by what the CEO of MicroStrategy says, this investment is in the long run, definitely not something that aims at short-term profit.

“I want something that I could put $425 million into for 100 years,”

Is there any information on how MicroStrategy stores its Bitcoin? What can be read is that the company has long considered all aspects of this investment, so it is mentioned "custodial and security issues" as something to which special attention has been paid. I hope it didn’t all end up in some custodial wallet.

[gentlemand]

Is there any information on how MicroStrategy stores its Bitcoin? What can be read is that the company has long considered all aspects of this investment, so it is mentioned "custodial and security issues" as something to which special attention has been paid. I hope it didn’t all end up in some custodial wallet.

It probably did. Since security is such a potential minefield you're likely to settle on the most public and proven storage option. I'd rather go with that than the CEO's secretary's 15yr old nephew who got the job cos he hacked his school's fridge a while back.

[beerlover]

The extra purchase really rubbed it in right now. I knew that microstrategy was fond of crypto and I really knew that with grayscale they were highest leaders in the corporations that buy bitcoin, however they are really kicking up the gear nowadays. I feel like the number of companies like these two will go up soon, depends on what the returns will be like for them and how they pay up their customers, they will definitely do something major.

Considering all of these together I also feel like crypto prices will go up as well, if a lot of companies end up buying bitcoin because these two small (comparatively) companies managed to do it, I feel like that would basically be a call for major ones and when they start to buy a ton of it, we will end up with 20k+ once again.

[fillippone]

Something to consider is the snowball effect this decision could have on other, bigger, companies.

PlanB yesterday twitted:

What are the odds ... that other cash-rich companies like Google, Apple, Microsoft will not get serious questions about #bitcoin


 at the next shareholder meeting, or even get sued for breaching their fiduciary obligation for not buying bitcoin BTC and letting all that cash melt away?

https://twitter.com/100trillionUSD/status/1306664228284227586?s=20

Of course this Mircostrategy move is being scrutinised by every CFO in the street. And many will follow, slow at start, then all of a sudden.

[Xembin]

I think business is all about pumping and dumpling. Today you will see bitcoin rising up and tomorrow you will see it going down which bitcoin is volatility.
Many companies with the help of Microstrategy they are into exchange of purchasing bitcoin to enable them to grow more profit to do other challenges in the organization.
Crypto can be superior to cash, it depends the way you invest and manage them to bring you a good result.