Let's talk about MicroStrategy Chief Executive Officer (CEO) Michael Saylor and his purchase of bitcoins - and he is adamant about it. This is an extraordinary story, one of those stories that will either end up being a remarkable gambit to the history books or be one that was terribly in the wrong.
For those who be reminded, MicroStrategy has evangelized Bitcoin for a long time. Michael Saylor transferred $425 million from the company's cash reserve funds to Bitcoin purchase. Then, Saylor appropriated a loan backed by the company's assets to purchase more billions of dollars of Bitcoin for the company reserves.
In the past, MicroStrategy has spent about $4 billion purchasing Bitcoin However, at current market prices, its holdings are only worth about $2.5 billion. This is why this new purchase is so intriguing. Saylor has a $1.5 billion loss on its books, and he still is purchasing more. Is this a sign of crypto market conviction?
In the longer run, I agree with Saylor; Bitcoin will rise in value, but given current market volatility and MicroStrategy's heavy leveraged bitcoin market position, we must ask ourselves if Saylor will be able to endure the storm.
This is so intriguing because of the SEC's (Security and Exchange Commission) inability to authorize and approve Bitcoin spot ETF (exchange-traded fund).
As far as we know, the sole Bitcoin ETFs that have been approved are exchange-traded funds for futures. They do not hold bitcoins per se. They are just derivatives that are designed to replicate bitcoin's price movement.
Therefore, MicroStrategy is the closest thing to a Bitcoin spot exchange-traded fund. Although MicroStrategy is a legitimate software and services firm with a reported 500 million dollars in annual revenue, it trades in a manner that is essentially the same as Bitcoin due to its many frontages to the crypto coin.
This means that investors looking to gain the opportunity to experience Bitcoin without having to open an account with a crypto exchange could purchase MicroStrategy (MSTR) stock: No Security and Exchange Commission blessing is necessary.
Recently, there have been rumors and speculations that MicroStrategy may be at risk of being a victim of a margin call due to the amount that Bitcoin's price has dropped. However, Saylor insists that this is indeed not the case.
No one knows for sure, which is why this could go down terribly wrong for him. Nevertheless, consider this scenario: MicroStrategy currently holds close to 130,000 bitcoins. This means that if the coin reaches a $100,000 price, the company will have close to $13 billion of Bitcoin value. That is quite a bit of money.
Apart from Saylor's directionally-oriented wager, There is a trend taking shape in the world of Treasury Management.
Businesses have historically kept the cash in funds for money markets or Treasury instruments. When interest rates were high and more precise, this was an excellent place to park the capital and earn an additional income.
These days, treasury securities are offering very little because of low-interest rates, their purchasing power is decreasing due to rising inflation, and the treasury portfolio is being diversified, seeking more lucrative returns. Additionally, "reserve" digital assets like bitcoin and ethereum offer an exciting way to achieve this.
This article was printed from TradingSig.com