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Business intelligence firm MicroStrategy has significantly increased its bitcoin (btc) purchases this month in response to bullish sentiment following President-elect Donald Trump's victory on November 5. The company's recent acquisitions have brought its total bitcoin holdings to approximately $38 billion.
Convertible banknotes drive massive bitcoin purchases
On November 25, co-founder Michael Taylor announced via social media that MicroStrategy had acquired 55,500 btc between November 18 and 24 for $5.4 billion.
This purchase was financed with proceeds from a $3 billion convertible note issuance and sales of common stock, as detailed in a <a target="_blank" href="https://x.com/saylor/status/1861033309934862601″ target=”_blank” rel=”nofollow”>presentation with the United States Securities and Exchange Commission (SEC).
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Since beginning its bitcoin acquisition strategy in 2020, Saylor has pivoted from using corporate cash to a more complex financing model involving the sale of debt and convertible equity.
The latest convertible note was issued at a zero percent interest rate, reflecting lenders' confidence that MicroStrategy shares will appreciate beyond the conversion price in the future.
Jeffrey Park, portfolio manager at Bitwise Asset Management, <a target="_blank" href="https://www.bloomberg.com/news/articles/2024-11-25/microstrategy-purchases-another-5-4-billion-in-bitcoin?utm_content=crypto&utm_medium=social&utm_campaign=socialflow-organic&utm_source=twitter” target=”_blank” rel=”nofollow”>noted that Saylor has effectively leveraged financial arbitrage within the corporate treasury structure, allowing MicroStrategy to borrow funds at virtually no cost.
Saylor too <a target="_blank" href="https://x.com/saylor/status/1861051328690094121″ target=”_blank” rel=”nofollow”>revealed That MicroStrategy's treasury operations have returned a substantial 59.3% in bitcoin returns so far this year, translating into a net profit of approximately 112,125 btc for shareholders, or around 341 btc per day.
At a projected price of $100,000 per btc, Saylor stated that this could mean an impressive $11.2 billion for the year, which is equivalent to approximately $34.1 million per day.
Analyst warns of risks in leverage strategy
Since its foray into bitcoin, MicroStrategy has acquired a total of 386,700 tokens, with an average purchase price significantly lower than today. commercial value.
The latest acquisitions came as bitcoin prices neared all-time highs, with the company purchasing the new tokens at approximately $97,862 each, slightly above their current trading price.
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However, this leveraged strategy has raised concerns among some analysts, particularly after MicroStrategy Stock (MSTR) fell 16% last Thursday.
Critics warn that if the price of bitcoin falls sharply, the company's shares could suffer similarly, recalling the crisis of 2022, when the cryptocurrency market experienced significant losses.
TD Cowen analyst Lance Vitanza highlighted the risks associated with leveragestating, “When you apply leverage to anything, it amplifies returns both up and down.” He highlighted that MicroStrategy is a pioneer in applying this leverage strategy specifically to bitcoin.
At the time of writing, the market-leading cryptocurrency is trading at $95,350, recording a 1.7% price decline in the 24-hour period.
Featured image of DALL-E, chart from TradingView.com
