MicroStrategy's Bitcoin Stack Up: Brilliant Moves or Risk?

Godfrey  |  Feb 27, 2021

In its latest S-1 filing with the United States Securities and Exchange Commission (SEC), the Coinbase cryptocurrency exchange revealed a swift jump in the transaction volume by institutional investors, as against previous quarters. As per the figures, $57 billion of total transactions in Q4 2020 rose up from $9 billion in the year-ago period.

Though not outrightly confirmed, it has been rumored that Coinbase is responsible for facilitating the bulk purchasing of bitcoins by Michael Saylor’s business intelligence firm MicroStrategy Incorporated. The takeaway here is that the company has been tagged with huge Bitcoin stack-ups, with many beginning to wonder whether the firm is gradually turning into a hedge fund.

MicroStrategy Investments into Bitcoin Despite the Volatility

Just this week, MicroStrategy announced that it had acquired another 19,450 BTC worth $1.026 billion. With the latest purchase, the company now holds 90,531 bitcoins in its reserves.

“We’ve been pretty clear that we’ll consider equity and debt financings,” to buy more Bitcoin, Saylor said at the Bloomberg Crypto Summit during an interview with Joe Weisenthal. “It makes sense to buy as much of that asset class as we can,” he said.

The unwavering belief in the potential of Bitcoin as MicroStrategy’s Treasury Reserve Asset may come questioned owing to the coin’s volatility, which most of the time may trend below the purchase amount. Based on this, many may wonder if MicroStrategy’s BTC agenda is a risk or a perfectly calculated strategy.

The Factor of Time in Judging

When considered on a short time frame, MicroStrategy may be wrong for risking investor’s funds in what many analysts have regarded as a speculative asset. With the latest purchase, the price of Bitcoin has been unusually nosediving, a completely different move the coin makes when such huge transactions are announced.

So anyone judging the firm’s decisions based on these micro-timeframes may find the moves as uncalculated, but the company has often maintained its readiness to hold Bitcoin for a much longer time frame that will eventually negate the immediate effects of Bitcoin’s extreme volatility.

At a rate of growth of about 400% per annum, Bitcoin’s price at the time of writing is above $47,000 and may quadruple in the next five years. If this happens, MicroStrategy’s accumulation of Bitcoin today will not just be applauded by the public, it would have generated a massive return for its shareholders across the board.

Furthermore, it is the season of institutional investors, and while MicroStrategy is one of the common names making headlines with its Bitcoin investments, there is a big probability or at least the companies believe their return on investment is guaranteed with the hopes of a bigger fortune to follow.

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