Understanding the MicroStrategy Bitcoin Playbook: A Game of Chess

In a bold chess move that echoed through the financial world, MicroStrategy, a trailblazing software company, didn’t just dip its toes into the cryptocurrency waters—it made waves.

In late December 2023, the company committed over $615 million to acquire 14,620 bitcoins, catapulting its total bitcoin holdings to a staggering 189,150, with a market value exceeding $8.13 billion using today’s current exchange rate of $43,000.

MicroStrategy has acquired an additional 14,620 BTC for ~$615.7 million at an average price of $42,110 per #bitcoin. As of 12/26/23, @MicroStrategy now hodls 189,150 $BTC acquired for ~$5.9 billion at an average price of $31,168 per bitcoin. $MSTR https://t.co/PKfYY59sTW

— Michael Saylor⚡️ (@saylor) December 27, 2023

This strategic play has secured MicroStrategy a coveted spot among the top 10 global Bitcoin holders, alongside industry giants like Binance and the U.S. government. Meanwhile, it also posed a fascinating question: What drove MicroStrategy to bet big on Bitcoin, and what does this gamble mean for the company’s future?

Let’s unravel the intricacies of this cryptocurrency chess game.

MicroStrategy’s Core Business

While recent headlines may suggest that MicroStrategy has become synonymous with cryptocurrency, it’s imperative to recognize the company’s foundational identity as a provider of business intelligence software.

This software equips businesses to analyze and visualize intricate data, positioning MicroStrategy in direct competition with industry leaders like Tableau, Looker, Qlik Sense, Oracle Analytics Cloud, and G2 Deals.

• Business Intelligence Focus: MicroStrategy’s business intelligence software facilitates data analysis and visualization, streamlining decision-making processes for businesses.
• Market Performance: Despite a decline in revenues over the past decade, MicroStrategy’s stock (NASDAQ: MSTR) has surged by over 330% since the company commenced its bitcoin accumulation in 2020, outpacing the remarkable rise in bitcoin prices.

The MicroStrategy Bitcoin Gameplay

MicroStrategy’s CEO, Michael Saylor, isn’t merely incorporating Bitcoin into the company’s investment portfolio; he’s challenging established norms in corporate investing. This audacious move undeniably fueled MicroStrategy’s stock performance, which skyrocketed by an astonishing 240% as Bitcoin experienced a 160% surge in 2023.

Components of MicroStrategy’s Bitcoin Strategy

According to BMJ, these are the four main components of MicroStrategy’s Bitcoin game plan:

1. Narrative Shift: MicroStrategy aims to allure investors seeking indirect exposure to crypto by presenting a compelling narrative that bridges the gap between traditional assets and the crypto market. This strategy has proven successful, with MicroStrategy stocks surging by more than 240% in 2023.

   

2. Accounting and Reporting Challenges: The volatile nature of crypto assets like bitcoin necessitates MicroStrategy to navigate challenges in corporate accounting and financial reporting. Frequent impairment testing is crucial to accurately reflecting the ever-shifting valuation.
3. Risk Management: Acknowledging the irreversible and nearly anonymous nature of cryptocurrency transactions, MicroStrategy places a strong emphasis on risk management. The company opts for “cold” wallets for large-scale crypto holdings to mitigate the risk of theft and fraud.
4. Custody and Storage: To counter the high risk associated with “hot” wallets, MicroStrategy relies on U.S.-based qualified custodians for its bitcoin storage. Diversification is achieved through multiple custodial accounts, and significant transactions are handled by specialized brokers.

MicroStrategy’s Bitcoin Holdings in Context

As of January 2024, MicroStrategy boasts a remarkable Bitcoin stash of 189,150 BTC, valued at over $8.1 billion. Let’s compare this to various other entities with Bitcoin treasuries:

• Against other public companies: MicroStrategy surpasses other public companies in bitcoin holdings, commanding over 68% of the total BTC owned by publicly traded companies.
• Against governments: MicroStrategy’s bitcoin holdings position it as the third-largest government-owned BTC treasury globally, trailing only the USA and China.
• Against ETFs: Grayscale Bitcoin Trust surpasses MicroStrategy among bitcoin exchange-traded funds, holding over 643,000 BTC, but MicroStrategy remains ahead of other significant ETFs.

Final Word: The MicroStrategy Playbook

MicroStrategy’s venture into Bitcoin goes beyond a mere investment decision; it signifies a paradigm shift challenging traditional corporate strategies.

As the crypto market continues to evolve, MicroStrategy’s unique approach sparks curiosity and prompts questions about the future landscape of corporate investments

 

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