MicroStrategy purchased $593 million worth of Bitcoin in November, why did they choose to buy the dip at this time?

Why Did MicroStrategy Decide to Buy the Dip and Purchase $593 Million of Bitcoin in November?

Summary: Felix, LianGuaiNews

On November 30th, the US technology company MicroStrategy announced in an 8-K filing that from November 1st to November 29th, the company and its subsidiaries purchased 16,130 bitcoins worth approximately $593 million, at an average price of around $36,000. This is the largest transaction the company has made since buying 19,452 bitcoins in February 2021 at a slightly higher price of over $1 billion. (Note: Form 8-K is a report that must be submitted to the US SEC when a listed company experiences significant events related to shareholders, such as major disputes, bankruptcy, or takeovers, instead of waiting for the next regular report.)

According to the announcement, MicroStrategy, headquartered in Virginia, currently holds a total of 174,530 bitcoins, worth about $6.6 billion. MicroStrategy has spent a total of $5.28 billion on cryptocurrencies, with an average purchase price of about $30,252 per bitcoin, making it the largest holder of cryptocurrency assets to date.

As early as the beginning of November, during the company’s earnings conference call, MicroStrategy founder Michael Saylor stated that approving and launching a bitcoin spot ETF would be a “catalytic event” beneficial to his company and other entities holding bitcoin.

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Michael Saylor said during the earnings conference call, “I think as these exchange-traded products (ETPs) provide bitcoin exposure, we’re going to see more and more analyst reports from traditional Wall Street banks.” “More reports mean more education and thus more buying interest.”

Although it is not yet clear what made MicroStrategy so bullish on bitcoin in November, there has been a lot of news related to bitcoin spot ETF. In addition, there are about five months until the next bitcoin halving. Both are considered potential positive catalysts for bitcoin prices.

While MicroStrategy was preparing to submit its 8-K filing on November 28th, the US SEC began the solicitation period for the Franklin Templeton bitcoin spot ETF proposal, which was unexpected as it started earlier than expected.

MicroStrategy first bought bitcoin in August 2020 during the COVID-19 pandemic. Soon after, the bull market followed. Michael Saylor believes that the asset can hedge against inflation and is the best strategy to maximize returns for shareholders as the company holds a large amount of cash.

Although MicroStrategy may suffer huge losses in 2022 due to bitcoin purchases, Michael Saylor has resigned as CEO and shifted his focus to a new bitcoin strategy. But Michael Saylor’s plan seems to be working. Since the company started buying bitcoins, MicroStrategy’s stock (listed on Nasdaq as MSTR) has risen by 238%. It is currently priced at around $493.15 per share, up 17% in the past month.

Since its first purchase of Bitcoin, MicroStrategy's stock price has been fluctuating; Source: Bloomberg

Michael Saylor believes that buying the company’s stock is one way for investors to get exposure to cryptocurrency. Michael Saylor has repeatedly mentioned that Bitcoin is an asset superior to real estate and gold, as well as a “reliable store of value and an attractive investment asset with greater long-term appreciation potential than holding cash.” After that, other companies followed suit. The most famous one is the electric vehicle company Tesla. Led by the world’s richest person, Elon Musk, this clean energy company holds 9,720 BTC, worth $366 million.

It is worth noting that on November 30th, MicroStrategy also reached agreements with Cowen and ComLianGuainy, Canaccord Genuity, and BTIG to issue up to $750 million of common stock. The company initially announced plans to raise funds through stock sales in August, stating that the proceeds would be used for purposes such as purchasing Bitcoin, operating funds, and debt repurchases.

Related reading: Interview with MicroStrategy CEO: Bitcoin expected to rise in the next year with halving and ETF

References: Decrypt, Blockworks, Bloomberg

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