MicroStrategy invests 210 million in BTC cash reserves

Business Intelligence software company MicroStrategy bought 21,454 BTC (+/- ??210 million) on Tuesday as a hedge against inflation. Bitcoin is now the main reserve asset for this multimillion-dollar company .

The publicly traded MicroStrategy announced via a press release that it has bought no less than 21,454 BTC on Tuesday, for a total amount of approximately $ 250 million dollars (+/- ?? 210 million). MicroStrategy develops business software for analytic purposes and has renowned customers around the world.

The investment in bitcoin is part of an investment and diversification strategy aimed at reducing the company’s exposure to the mainstream ( fiat ) money system; a hedge against inflation. By building reserves in bitcoin, MicroStrategy hopes to be less vulnerable to fluctuations in traditional financial markets.

“Since its inception over a decade ago, Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions. MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.” – Michael J. Saylor, MicroStrategy CEO, press release

Economic uncertainty

According to MicroStrategy CEO Michael J. Saylor, macroeconomic factors were behind the decision to build the company’s reserves in bitcoin. He mentions the COVID-19 crisis, the global political and economic uncertainty and the unprecedented scale on which governments are creating new money through measures such as quantitative easing. MicroStrategy foresees that the value of money and other investments may decrease as a result.

“MicroStrategy spent months deliberating to determine our capital allocation strategy. Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program ? risks that should be addressed proactively. Those macro factors include, among other things, the economic and public health crisis precipitated by COVID-19, unprecedented government financial stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty. We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.” – Michael J. Saylor, MicroStrategy CEO, persbericht

Potentieel

MicroStrategy also considered other investment options, but says it has identified a number of unique properties in bitcoin that convinced them that bitcoin not only protects against inflation, but also has the potential to generate a higher return on investment.

By this, they presumably refer to the extremely predictable and controlled monetary inflation in the bitcoin economy, which is invariably declining and limited to a maximum of 21 million bitcoin.

This pre-programmed scarcity makes bitcoin attractive for storing wealth, as it prevents unbridled monetary inflation. In this it has similarities with other and more traditional economic havens such as gold.

However, Bitcoin differs from other markets because the bustling Bitcoin market is relatively small and therefore there is a lot of room for growth. The return on an investment in bitcoin can therefore – in theory at least – be higher than an investment in other and more mature markets.

“We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility, and community ethos of Bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value. Bitcoin is digital gold and harder, stronger, faster, and smarter than any money that has preceded it.We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fueled the rise of so many category killers in the contemporary era.” – Michael J. Saylor, MicroStrategy CEO, press release

Yet that potential also goes hand in hand with greater risk. However, these risks are probably not unknown to Saylor, because during the height of an earlier bitcoin bubble in 2013 he already tweeted about bitcoin and at the time he saw no point in it and even predicted that the end was in sight.

In the meantime, that distrust seems to have turned into an ironclad confidence; enough to build up the main cash reserves of his multimillion-dollar company in bitcoin.

In any case, investors on the stock markets reacted positively to the news. Almost immediately after the announcement, the share price of MicroStrategy rose by more than 10%.

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