© Reuters. MicroStrategy made its first Bitcoin purchase a year ago, ushering in a new era
On August 11, 2020, then-unknown software company MicroStrategy (NASDAQ:) was taking a bombastic step. On that day, the company spent the equivalent of R$1.6 billion on its first purchase of (BTC).
The total acquired at the time was 21,454 BTC and would be used as a capital allocation strategy. For the first time since its creation, a large company used BTC for this purpose.
Nobody knew at the time, but the company would come to play a central role in the cryptocurrency market. Its CEO, Michael Saylor, then an unknown and formerly critical of the BTC, has become an ardent supporter of cryptocurrency. And a year later, their courage and vision would be rewarded.
BTC as an allocation strategy
Initially, it is worth highlighting part of the market context. In global terms, the Covid-19 pandemic still generated uncertainties and crises. There was no vaccine, economies were at a standstill, and governments continued to print money at an exponential rate.
As for BTC, well, the scenario was “less worse” than earlier that year. The cryptocurrency had left its worst moment, when the price dropped to US$ 3,000, and returned to the level of US$ 11,000, the highest value since June 2019.
It was precisely at this stage that MicroStrategy entered the scene and made its first investment. The first time a listed company bought BTC. The first time that cryptocurrency was used to compose a company’s cash register.
It was also the first time a CEO had been publicly detailing his BTC investment strategy. That day, the world met the figure of Michael Saylor and his philosophy as an investor:
“Our investment in Bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our shareholders. This investment reflects our belief that Bitcoin, as the most widely used cryptocurrency in the world, is a reliable store of value and an investment asset with more potential for long-term appreciation than holding cash,” says Saylor.
Yes, it was a big game. It wasn’t just a whale taking advantage of the boom to make money, but someone who actually had a strategy. A strategy that was not just a single purchase.
Pre and post-MicroStrategy
At the time, the purchase represented about 0.1% of all BTC in circulation, a percentage that only grew over 365 days. As of this writing, MicroStrategy has approximately 105,000 BTC in its reserve, which represents 0.5% of all outstanding offerings.
Along with the initial acquisition, the company made at least four more major purchases of BTC. Typically, Saylor used times of devaluation to buy, although he also bought in times of greater euphoria.
The main purchases made during this period are listed below. The value in reais corresponds to the price determined at the time of purchase:
- 12/21/2020. Purchase of 29,646 BTC. Value: BRL 3 billion;
- 02/03/2021. Purchase of 295 BTC. Value: R$54 million;
- 02/24/2021. Purchase of 19,452 BTC. Value: R$5.5 billion;
- 06/21/2021. Purchase of 13,005 BTC. Value: R$2.4 billion.
It is worth noting that purchases, with the exception of one, were of high values. In other words, the company made a strong bet, even issuing debt securities to acquire more BTC.
The attitude, although criticized by many investors, has proved to be correct so far, as indicated by the valuation of the shares. Since August 11, 2020, MicroStrategy’s (MSTR) stock has seen a strong 501% increase in .
The movement was of such intensity that it even surpassed the valuation of the BTC itself, whose increase was 300% in the same period. So it’s no wonder that CryptoTwitter jokes that MicroStrategy has become an authentic “Bitcoin ETF.”
Company set precedent
According to Saylor, BTC serves as a protection for MicroStrategy, as its use as a reserve protects the purchasing power of the company’s cash. For Alam Schram, co-author of the book “Bitcoin: The Red Pill”, the entrepreneur perfectly understood the spirit of the cryptocurrency.
“Michael Saylor decided to jump in after he understood the completeness of Bitcoin amidst a world of negative interest rates and economic distortions caused by governments. In this sense, the BTC is the opportunity for companies to protect their balance sheets”, said Schram.
However, the company accumulates a loss of $689 million with its BTCs. Since no sales were made, the loss is an unrealized loss. But Saylor assured him that these losses don’t frighten him; rather, MicroStrategy will stick to its policy.
After MicroStrategy broke ground, other companies and funds followed in the trail it left behind. Currently, more than 30 companies have added BTC to their balance sheet, according to the Bitcoin Treasuries website. Tesla (NASDAQ:) (SA:), Square (NYSE:) and Mercado Libre (NASDAQ:) (SA:) are the most notable examples of this list.
Finally, investment and pension funds also entered this market, which brought great increases in the price of cryptocurrency. MicroStrategy thus opened the so-called “phase 4” in BTC adoption.
“This moment of companies, especially those listed on the stock exchange and other institutional ones, has a lot to do with what Barry Silbert (Digital Currency Group and Grayscale), in his famous thesis entitled “5 phases of Bitcoin adoption”, where we are going through the “phase 4” moment when “Wall Street” would start to expose itself to the BTC”, concluded Schram.
By Easy Crypt