Not many assets can compete with Bitcoin. However, MicroStrategy did something unexpected. The company, which holds the most bitcoins in the world with 92,079 BTC in its wallet, has beaten Bitcoin when it comes to being a better investment. Will MicroStrategy completely overshadow Bitcoin in the future? Or will Bitcoin be the sole reason MicroStrategy exists?
MicroStrategy’s strategy on Bitcoin
MSTR (MicroStrategy) has been optimistic about the king coin for years. Since BTC has shown potential, MSTR has acquired it in unprecedented amounts. In a way, it built its entire future on the back of Bitcoin. This claim is also based on the company selling its shares to buy BTC. In fact, in the last episode, $ 1 billion worth of shares were sold for the acquisition of the cryptocurrency.
At the moment this strategy seems to have paid off as MSTR currently outperforms BTC itself. MSTR returns outperform BTC by nearly a 200% difference
Not only does it sell stocks, however, the company has used other methods to satisfy its interest in crypto. In fact, debt has become the main source of MSTR for BTC purchases. Of the $ 2.7 billion spent buying the cryptocurrency, $ 2.15 billion came from debt. The 3 bond offers were the main source of the 92k BTC acquisition.
Additionally, MSTR’s business has grown exponentially in double digits due to its BTC acquisitions, according to the company’s Q2 report. But could it be that MSTR is relying on BTC to grow its profits as it is the one who is pumping the price of Bitcoin?
MSTR “manipulates” BTC?
Not in the way you imagine. To understand this, consider the stock-to-flow (S2F) ratio here. The S2F model runs on the scarcity basis. The tighter the supply, the higher the price. Based on this algorithm, it predicts where the price of Bitcoin could be at any given point in time.
However, since it has recently deviated from its path, there is a possibility that MSTR is trying to correct this deviation. MSTR buying BTC in such large quantities would create the necessary scarcity. This would, in fact, drive up the price of Bitcoin.
Put simply – MSTR buys = BTC price goes up | The price of BTC goes up = MSTR stocks become profitable.
Thus, it can be argued that their codependency is the only thing that ensures longevity and profitability. In many ways, this explains MSTR’s own bullish stance on the cryptocurrency. Whether you invest in BTC or MSTR as an investor depends on your position on the future of the currency.