Bitcoin has recently shattered the $99,000 barrier, signaling a potential breakthrough past the $100,000 mark. This surge in price can largely be attributed to large-scale purchases by institutional investors, especially those linked to Bitcoin Exchange-Traded Funds (ETFs) and companies like MicroStrategy. Now, MicroStrategy copycats are buying Bitcoin in large quantities, hoping to replicate the company’s successful strategy.
MicroStrategy, under CEO Michael Saylor, has been committed to Bitcoin since 2020, making it a core part of its investment strategy. The company has spent over $16 billion to acquire 331,000 Bitcoins, worth nearly $33 billion. MicroStrategy’s strategy has been consistent, buying Bitcoin through both bull and bear market cycles. Its heavy investment stands out as one of the largest among corporate holders of Bitcoin, making it a key player in the current bull market.
MicroStrategy’s Bitcoin purchases are funded by two primary sources: Convertible Senior Notes and At-the-Market Equity Offerings. The former, which targets institutional investors, has provided significant capital, raising $7.26 billion. The latter involves issuing stocks in the secondary market, capitalizing on higher stock prices to generate more funds for Bitcoin purchases.
MicroStrategy’s Strategy
MicroStrategy copycats are buying Bitcoin, trying to mimic the corporate giant’s strategy of holding digital assets. MicroStrategy’s method of acquiring Bitcoin shares similarities with both Grayscale and Luna, but with a key difference. Unlike Luna, which faced collapse due to a failed algorithmic stablecoin system, MicroStrategy’s strategy is safer. The company can issue stock without the risk of a “death spiral,” making its approach more sustainable. Moreover, MicroStrategy’s stock issuance is a one-way mechanism, providing it with funds during market upswings while mitigating downside risks.
The launch of Bitcoin ETFs in early 2024 has further fueled the rally, with ETFs managing over 1.24 million Bitcoins and attracting $30.3 billion in net capital inflows. As the Bitcoin ETF market expands, MicroStrategy copycats are buying Bitcoin, hoping to ride the bull market. As one of the largest holders of Bitcoin, MicroStrategy has been benefiting from this trend, with its net asset value (NAV) premium rising as the price of Bitcoin increases. The company’s market value once exceeded $100 billion, reflecting the growing value of its Bitcoin holdings.
In July 2024, MicroStrategy CEO Michael Saylor presented his “Triple Maximalist” strategy at a Bitcoin conference. This strategy encourages companies to acquire Bitcoin through three channels: cash flow, issuing stocks when the stock price is high, and issuing debt when interest rates are low. As the Bitcoin market grows, MicroStrategy’s stock has risen nearly 600% this year, solidifying its position as a leading institutional player in the cryptocurrency space.
The Future of Bitcoin as a Treasury Reserve
MicroStrategy’s Bitcoin hoarding strategy has gained traction among other institutional investors, such as BlackRock, Fidelity, and ARK Invest. These firms believe that Bitcoin can serve as a hedge against inflation, especially as it becomes a more widely accepted asset class. While the long-term stability of Bitcoin as a treasury reserve remains uncertain, its current rise in value has caught the attention of both traditional investors and corporations.
Despite its recent success, Bitcoin remains a highly volatile asset. The current rally bears resemblance to the speculative surge in 2017 when Bitcoin briefly touched $20,000 before plunging. Investors are cautious, as history has shown that speculative manias can often lead to significant downturns.
MicroStrategy’s strategy of acquiring Bitcoin through convertible notes and stock offerings has set it apart from other corporate investors. With its substantial Bitcoin holdings and a strategy that capitalizes on market trends, the company has become a major player in the growing institutional interest in Bitcoin. However, with Bitcoin’s volatile nature, the future of this bullish run remains uncertain.
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