MicroStrategy is a business intelligence company that made headlines in 2020 for its significant investment in Bitcoin. The company’s CEO, Michael Saylor, has been a vocal advocate for Bitcoin and publicly stated that he believes it is a better store of value than traditional assets like gold. MicroStrategy’s (MSTR) Bitcoin holdings are significant, and the company has been steadily adding to its position over the past year.
As of March 2023, the company holds 138,955 Bitcoins — worth billions of dollars at current market prices. According to Saylor’s recent announcement, MicroStrategy not only made a repayment at a 22% discount on its $205m Silvergate loan but also bought an additional 6,455 BTC for $150 million. This brings the company’s total BTC grand total to the figure quoted above — acquired for some US$4.14 billion, at an average price of US$29,817 per Bitcoin.
The biggest investor in any asset class usually results in an increased demand for the underlying asset — sending a message to other investors, which in this case is that the digital asset is a legitimate investment and one holding promise for the future. Having said that, there are other factors at play too which can affect the price of the asset. For this purpose, we try to ascertain how the MSTR Bitcoin buys have affected the price of the premier digital asset.
Looking at the price of Bitcoin falling 4% this morning was a little perplexing for me — especially in the absence of any external catalyst. It was also a little more head-scratching considering the U.S. stock market was in the green. Eventually, news started to filter through that MSTR had made another significant addition to its BTC holdings, between Feb. 16 and March 23.
On the face of it, this should have had a positive impact on BTC’s price, but the price actually fell. This is where the K33 research (chart above) provides some insights. As the data suggests, an adverse market reaction following MicroStrategy purchase announcements is typical, with BTC averaging -2.2% on MicroStrategy announcement days. The average 7-day return is more balanced at -0.2%.
Talking about other factors, The US Securities and Exchange Commission (SEC) has been increasing its regulatory crackdown against cryptocurrencies recently. Some argue that the SEC’s increased regulatory crackdown against cryptos is a response to some of the big-name failures we have seen in the nascent industry and how this could create significant risks for investors. This could also be contributing to the recent weakness in Bitcoin and the associated cryptos.
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