MicroStrategy buys more bitcoins, loss on crypto bet widens to $1.3 billion
MicroStrategy has purchased another $10 million of Bitcoin, adding to its massive cryptocurrency holdings during a sharp drop in the price.
The Virginia-based business intelligence firm had added another 480 bitcoins to its strategic reserves at an average cost of $20,817 per coin, inclusive of fees and expenses.
The analytics software maker, run by bitcoin bull Michael Saylor, has taken advantage of any price drop in Bitcoin to continue beefing up its investment in the world’s most-traded cryptocurrency.
This strategy, however, turned out to be a risky gamble, with Bitcoin now moving in lockstep with other cryptocurrencies plunging amid fears of a looming”crypto winter.”
With its most recent purchase, MicroStrategy holds an aggregate of 129,699 bitcoins, which were acquired at a total cost of around $3.8 billion and an average purchase price of approximately $30,664 apiece.
MicroStrategy has purchased an additional 480 bitcoins for ~$10.0 million at an average price of ~$20,817 per #bitcoin. As of 6/28/22 @MicroStrategy holds ~129,699 bitcoins acquired for ~$3.98 billion at an average price of ~$30,664 per bitcoin. $MSTRhttps://t.co/leQYTXn817
— Michael Saylor⚡️ (@saylor) June 29, 2022
With bitcoin currently trading at $18,971, MicroStrategy’s crypto stash would now be worth just over $2.46 billion. That translates to an unrealized loss of more than $1.3 billion.
However, Microstrategy CEO, who expects the price of bitcoin to hit $6 million, said that the company will never sell its bitcoin holdings. The executive also revealed that he personally owns 17,732 bitcoins, noting that the primary cryptocurrency is “unstoppable” and will replace gold.
Bitcoin outperforms other investments
“We did a lot of backtesting and I’ve gone back and looked at the numbers. On August 10, 2020 when we announced our $250 million bitcoin buy, since then, bitcoin is up 72%,” Saylor explained in the interview.
In addition, Microstrategy CEO provided the returns of other typical assets held for the long-term which included: the NASDAQ (-2%) , gold (-9%), S&P 500 (+9%), and single-family homes (+26%).
MicroStrategy (NASDAQ:MSTR) stock is falling faster than the crypto’s price, just as it outpaced bitcoin’s climb last year. The stock lost nearly 80% of its value since it hit a record high above $1000 a year ago. Shares of business intelligence specialist and cryptocurrency investor have seen a monumental 800% during the period between October 2020 and February 2021 as bitcoin climbed.
The question now is if this slide triggers a margin call that would force Saylor’s business intelligence firm to sell part of its holdings.
The company was looking for new ways to generate yield on its massive crypto trove after its subsidiary raised $205 million via an interest-only term loan due 2025. Offered by the crypto-friendly bank Silvergate Capital, the fiat money was granted against a bitcoin holding worth around $820 million, which represents 12% of MicroStrategy’s total crypto holding. With 19,466 BTC held by the subsidiary pledged as collateral, the firm was looking to put its 95,643 “unencumbered” bitcoins to use in exchange for juicy yields.
