MicroStrategy Nearly Even on Bitcoin Buys After Latest Rally

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Bitcoin’s price is approach­ing the aver­age buy-in the largest pub­lic hold­er of bit­coin paid for its mas­sive BTC stash.

Busi­ness intel­li­gence firm MicroS­trat­e­gy held 132,500 bit­coins, as of Dec. 31. The orig­i­nal cost basis for the BTC pile was near­ly $4 bil­lion, reflect­ing an aver­age cost per bit­coin of about $30,137. 

The price of bit­coin was about $28,200 at 3 pm ET Mon­day, up rough­ly 26% from a week ago.

MicroS­trat­e­gy’s net loss was $250 mil­lion dur­ing the fourth quar­ter of 2022, the com­pa­ny report­ed in Feb­ru­ary. Its dig­i­tal asset impair­ment charges — which comes into play if the mar­ket val­ue of bit­coin decreas­es below its mar­ket-adjust­ed pur­chase val­ue — were $198 mil­lion dur­ing the quarter.

Exec­u­tives said on an earn­ings call last month that the firm planned to con­tin­ue its long­time strat­e­gy of buy­ing and hold­ing bit­coin on its bal­ance sheet.

Dan Weiskopf — a co-port­fo­lio man­ag­er of the Ampli­fy Trans­for­ma­tion­al Data Shar­ing ETF (BLOK) — told Block­works that bitcoin’s price is more rel­e­vant to traders than to MicroS­trat­e­gy co-founder Michael Say­lor.

Say­lor has made it clear his com­pa­ny will be a strate­gic longterm bit­coin owner.

“Some investors may mark the moment when MicroStrategy’s 132,500 BTC is at a breakeven lev­el; I don’t think Say­lor ever thought that was not a high prob­a­bil­i­ty,” Weiskopf told Block­works. “In fact, I am con­fi­dent for him it is a short-term mark and only the begin­ning for what he expects bit­coin will accomplish.”

A MicroS­trat­e­gy spokesper­son did not imme­di­ate­ly return a request for comment. 

Ana­lysts have been crit­i­cal of the com­pa­ny in the past about its buy­ing and hold­ing strat­e­gy amid mar­ket volatility. 

Edward Moya, a senior mar­ket ana­lyst for for­eign exchange com­pa­ny OANDA, said last June that MicroS­trat­e­gy “has failed to cap­i­tal­ize on the way up and find pro­tec­tion when things got ugly,” adding that the com­pa­ny has been “reck­less with their port­fo­lio management.”

The company’s unre­al­ized loss­es when bit­coin dropped to below $16,000 in Novem­ber, MicroStrategy’s totaled near­ly $2 billion. 

New bull indicator 

Bitcoin’s ral­ly of late has closed that unre­al­ized gap.

“Micros­trat­e­gy has sur­vived a cryp­to ice age and now has an oppor­tu­ni­ty to take advan­tage of grow­ing inter­est in DeFi and all the oth­er cryp­to pro­to­cols with bet­ter growth poten­tial,” Moya told Block­works Mon­day. “With no true bit­coin ETF com­ing, Micros­trat­e­gy is still posi­tioned to attract new investors.”

MicroStrategy’s stock price was $261.50 at 3 pm ET Mon­day — up about 80% year to date, but down rough­ly 2% on the day. 

Weiskopf said the lat­est bit­coin price gains have been caused in part by the broad­en­ing of BTC use cas­es — such as bit­coin ordi­nals — that could spur MicroS­trat­e­gy to buy even more of the asset. 

Mar­cus Sotiri­ou, a mar­ket ana­lyst at Glob­al­Block, said in a research note that bit­coin reach­ing $28,000 over the week­end sig­nals the start of a new bull trend. 

“The recent clo­sures of US bank­ing giants have act­ed as a cat­a­lyst for bitcoin’s price increase,” Sotiri­ou wrote. “The draw­backs of the bank­ing sys­tem are a key pro­po­nent for decen­tral­ized assets such as bitcoin.”

Morn­ingstar senior research ana­lyst Made­line Hume said MicroS­trat­e­gy has vowed to add to its bit­coin posi­tion while cash flows are in excess of work­ing cap­i­tal— and while equi­ty rais­es are feasible. 

MicroStrategy’s work­ing cap­i­tal is neg­a­tive, Hume said, sug­gest­ing addi­tion­al pur­chas­es are unlike­ly in the short term.

“Across the cap­i­tal mar­kets, liq­uid­i­ty rais­es have ground to a halt giv­en the jit­tery macro envi­ron­ment,” she told Block­works. “Any addi­tion­al tac­ti­cal moves, includ­ing a liq­ui­da­tion of some por­tion of the bit­coin hold­ings, would depend on the firm’s abil­i­ty to finance its activ­i­ties in oth­er ways, includ­ing the firm’s abil­i­ty to borrow.”

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