Microstrategy’s Bitcoin Investment Turns Green Again

Fortune 500 company Microstrategy’s investment in Bitcoin has once again turned profitable as the leading cryptocurrency hit a new 10-month high of $30,163. The firm started investing in Bitcoin in the second quarter of 2020 when the BTC price was trading around $10,000. Since then, it has made a series of BTC purchases over a period of two years and accumulated a total of 140,000 BTC for nearly $4.17 billion at an average price of $29,803 per BTC.

Microstrategy co-founder Michael Saylor introduced the Bitcoin strategy as a treasury hedging asset over the US dollars, and the firm has held BTC both personally and on its balance sheet. Saylor also convinced several public companies, including Tesla and SpaceX, to accumulate BTC on their balance sheets.

The Bitcoin bet made by Microstrategy looked lucrative throughout the bull market in 2021, with the BTC price hitting an all-time high of nearly $65,000 in April 2021. However, the prolonged crypto winter in 2022 fueled by multiple crypto contagions crashed BTC price by over 70%, resulting in a loss for Microstrategy’s Bitcoin investment.

Critics of Microstrategy’s Bitcoin investment were quick to point out the losses incurred during the bear market in 2022. However, the BTC price has shown strength throughout 2023, with a 55% increase in the first quarter of the year. The price has closed above the previous month’s high for three months in a row, considered to be a bullish market indicator and a sign of another bull run on the horizon.

Bitcoin has outperformed most traditional stocks and bonds this year and has even eclipsed the losses incurred from the crypto contagions caused by FTX and Terra-Luna saga. The resilience of Bitcoin and its increasing adoption by public companies like Microstrategy and Tesla is a testament to the growing importance of cryptocurrencies in the global financial ecosystem.

Background information on Microstrategy’s Bitcoin investment strategy:

Microstrategy’s investment in Bitcoin is unique and unconventional, given that it is a business intelligence firm and not a financial institution. However, the company’s CEO, Michael Saylor, is a vocal proponent of Bitcoin and believes that it has the potential to replace fiat currency in the long term.

Saylor introduced the Bitcoin strategy as a treasury hedging asset over the US dollars, which are subject to inflation and depreciation. By holding BTC on its balance sheet, Microstrategy can protect its treasury against the devaluation of fiat currency and earn higher returns on its investment.

The company’s Bitcoin investment has attracted criticism from some analysts who view it as a risky bet that could potentially harm the firm’s financial health. However, Saylor has defended the strategy, stating that Bitcoin is a store of value that has appreciated over time and that the company’s long-term investment horizon mitigates short-term price fluctuations.

Microstrategy’s Bitcoin investment has also inspired several other public companies to add BTC to their balance sheets, including Tesla, Square, and Marathon Digital Holdings. 


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Bitcoin metrics demand BTC price gains as analysis calls for ‘near-term caution’

Bitcoin (BTC) has a “possibility” of winning back more lost ground this month, but a retest of $40,000 may test bulls beforehand.

In its latest market update on Feb. 11, trading suite Decentrader voiced cautious optimism over BTC price action.

Derivatives turn complementary

After rallying above $45,500 on the back of U.S. economic data, BTC/USD has since dropped back into the range which has defined it this week.

For Decentrader, the chances of a low-timeframe decline are there, even if on-chain metrics are putting in rare bull signals.

“Bitcoin is at a relatively neutral level with clear zones of resistance and support above and below,” the update summarized.

Acting in bulls’ favor is sentiment, now in “neutral” rather than “fear” territory, and encouraging signs from derivatives markets — low funding rates and a negative long/short ratio.

“We have now finally had a sustained period of negative funding rates, seen OI drop over time, and importantly, saw Long/Shorts ratio go negative,” Decentrader continued.

An accompanying chart showed that under such rare circumstances, BTC/USD went on to rally three times since late 2020.

Funding rates are still overall negative as of Friday, data from monitoring resource Coinglass shows.

BTC funding rates chart. Source: Coinglass

“Nothing changed” on short-term outlook

Moving to the forecast, a downturn could produce a rebound at $39,000 should bulls not be too shaken by the $40,000 mark being broken.

Related: Exchange stablecoin reserve hits $27B as Bitcoin rises toward $50K ‘fair value’

“To the upside, there are resistance levels on either side of the important point of breakdown from the summer crash at $47,950 and $52,660,” the update added.

For the meantime, however, it is yet another case of “wait and see.”

“Nothing changed,” popular trader and analyst Crypto Ed argued in his latest social media update.

“Expecting a move towards $40k. Bullish scenario indicates a bounce to 48k. Bearish comes in play when we break 40k.” 

BTC/USD chart with expected trajectories. Source: Crypto Ed/ Twitter