A Quick Look Into MicroStrategy’s Bitcoin Strategy

Crypto investments are undoubtedly sought-after by investors today, and for many reasons - but they largely revolve around young investors recognising crypto as a hedge against inflation and its underlying use cases and potential across industries like financial services. In India, a survey by a crypto exchange revealed that 63% of Indian crypto investors are between 20 and 35 years old.

Institutional crypto investors have also had a huge role to play in this transformative journey of the crypto space. At this juncture, it is impossible to talk about institutional crypto investors without mentioning MicroStrategy. The firm and its Bitcoin strategy have been at the forefront of the rise of the crypto market in the last few years. This blog unravels the interesting link between MicroStrategy, its co-founder Michael Saylor, and Bitcoin.

Who are MicroStrategy and Michael Saylor?

Michael J. Saylor, an American entrepreneur, founded MicroStrategy back in 1989 as a software solutions and services company. He met his co-founder, Sanju Bansal while studying at the Massachusetts Institute of Technology. Over the years, MicroStrategy has grown to be a business intelligence and software behemoth, with a market cap of over $25 billion and thousands of employees. Michael Saylor currently serves as the company’s Executive Chairman. Michael Saylor plays an important role in the Bitcoin community, reasserting his belief through his X account, and speaking at large Bitcoin conferences such as Bitcoin 2024.

So, how did Bitcoin emerge as a core part of its investment strategy?

It all started back in August 2020 when MicroStrategy published a press release announcing its first Bitcoin investment. Kicking off its Bitcoin strategy, it acquired 21,454 BTC at about $250 million. At the time, Bitcoin was trading just above $11,000. The press release also quoted Michael Saylor, “This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.”

The next four years saw Bitcoin climbing up steadily, hitting new all-time highs, and also experiencing a few dips. Along the way, the Microstrategy stock has also been on an upward trajectory, while the company continued to procure more Bitcoin. Michael Saylor's core belief is Bitcoin will be the fastest-growing asset henceforth, and he sees it as the best way to preserve wealth. Hence, he encourages via Microstrategy that large S&P companies put Bitcoin on their balance sheets.

How much Bitcoin has MicroStrategy accumulated till date?

Since August 2020, MicroStrategy has focused heavily on its Bitcoin strategy and picked up even more BTC. According to its latest quarterly report, the company holds 226,500 BTC, which is almost worth around $14 billion today. The report noted that the current value of its Bitcoin holdings was 70% more than its cost to acquire it. The second quarter of 2024 alone saw MicroStrategy buying 12,222 BTC. At the same time, the company has aimed to maintain a positive BTC yield as a part of its Bitcoin strategy, with a target between 4-8% in the next three years. In 2024, on a year-to-date basis, it achieved a BTC yield of 12.2%.

MicroStrategy’s Bitcoin investments have made it the biggest among all institutional crypto investors. Meanwhile, Michael Saylor maintains a personal portfolio in BTC, which is valued at around $1 billion.

The impact on the Microstrategy stock

Bitcoin’s rise has also resulted in a rally in the Microstrategy stock since August 2020. At the time it unveiled its Bitcoin strategy, the company’s shares were trading at around $14. Four years later, it is trading above $132 as of August 29, 2024, even after a recent stock split. The Compound Annual Growth Rate (CAGR) for the MicroStrategy stock has averaged around 75% for the last four years.

Let's compare the performance of the MicroStrategy stock with that of Apple and Microsoft. Apple’s stock was trading at roughly above $110 in early August 2020. It is currently trading above $226 on August 29, 2024. Its CAGR in the last four years is just above 19% (approximately). Similarly, Microsoft’s stock has risen from about $215 to above $400 in the last four years, at a CAGR of around 16%

In the same period, BTC has also gone up from 11,500 to around $60,000, which presents a CAGR of above 50%. It is also up by around 30% on a year-to-date basis. While MicroStrategy is up by 92% this year, Apple and Microsoft are up by around 22% and 10%, respectively. Hence, MicroStrategy has emerged as a clear multi-bagger, even compared to BTC!

But this upward trajectory of the MicroStrategy stock was also mired in difficult instances in the four-year period since 2020. A dip in mid-2022, coinciding with Bitcoin’s sharp decline, raised concerns about the company’s Bitcoin investments. The stock has clearly overcome those hurdles and looks set to surge even higher owing to Bitcoin’s bullish outlook at present.

Can Bitcoin still be the best-performing asset in the next decade?

Crypto investments could surely rise further in the upcoming years, marking a possibility for Bitcoin’s price to go higher. Moreover, the introduction of spot crypto ETFs in geographies like the US and Hong Kong will likely help the crypto market mature and attract new investors to the market. Michael Saylor has also been bullish on the crypto ETFs, which is an indicator of their significance.

However, the regulatory landscape around crypto will be a deciding factor for their adoption, along with technological advancements and global macroeconomic conditions. Summing it up, MicroStrategy’s Bitcoin strategy has truly been one of the major factors for the fanfare around crypto.

Head to India Crypto Research for a more detailed perspective on crypto and blockchain!