How does one publicly listed company become one of the biggest Bitcoin proponents in less than 6 months? This is the story of Michael Saylor, a bold entrepreneur who chose to buy Bitcoin with his company’s cash reserves, sparking a whole new movement - that of institutional adoption.
Background
Before we delve into Microstrategy’s bold decision to convert more than 85% of its balance sheet into Bitcoin, it is important to understand the context.
Michael Saylor, the founder of Microstrategy had not always been a fan of Bitcoin. He saw it as one more gamble, a new for of “tulip mania” if you may, and chose to avoid it for the longest time possible.
#Bitcoin days are numbered. It seems like just a matter of time before it suffers the same fate as online gambling.
— Michael Saylor (_saylor) December 19, 2013
Much like any investor with limited understanding of the popular cryptocurrency, Saylor failed to see the fundamental possibilities of the popular cryptocurrency, and the reason why so many people chose to buy it. Everyone came for the profits, but everyone chose to stay for the revolution it proposed.
In 2020, the COVID19 situation escalated, and the pandemic-related lockdowns caused an global economic stir. People started losing their jobs, get unemployed; all while the economy started printing money unconditionally. In a few short months, the US alone had printed nearly $3 Trillion USD to bail out large corporations and hand out its first round of stimulus checks.
All these events led to the realization that the USD was posed to devaluate massively in the next few years. The excessive printing would lead to double-digit annual inflation rates for multiple years to come.
In his search for a way out, Michael finally decided to take a closer look into Bitcoin, when he finally understood its value proposition. Bitcoin, in the words of Christine Lagarde, is the “Exit valve” from the financial system, and large companies with enormous cash reserves would need this in order to store their value.
MSTR buys Bitcoin
In August of 2020, Microstrategy announced its first massive purchase of 21,454 BTC for a total cost of $250 million.
A short while later, and with Bitcoin growing rapidly in value, the company announced another purchase. This time they purchase 16,800 BTC for a total of $183 million.
Later, the company made another announcement. They had now purchased an additional 29,646 Bitcoin for $650 million, paying more than double for the popular cryptocurrency compared to their first purchase.
Over the next few months, both the company its its founder would continue buying up Bitcoin in smaller portions, even raising a credit to acquire more. Microstrategy now owns 70,470 BTC, valued at $2,4 Billion. This means that the company has earned more than $1 Billion in profit over the past 6 months.
Their massive bet didn’t go unnoticed
With cryptocurrency prices rising rapidly, and more institutions choosing to convert (part of) their cash reserves into BTC, we saw a massive institutional move towards the popular cryptocurrency. Companies like Square, Grayscale, Paypal, Cashapp, are now all involved with Bitcoin, buying up more daily than the total amount that is being created by miners.
This will inevitably lead to a supply shock, where there will no longer be any Bitcoin to sell. We already see massive amounts of BTC being taken off exchanges and stored into cold wallets. We see more retail investors showing interest after wondering why institutions place such massive bet on a virtual currency.
Michael Saylor and MSTR are now preparing to host a seminar to help other institutions purchase BTC with their cash reserves as well, sharing their agenda and the exact steps they took to do so themselves. The event, which will be held in early February, is already oversubscribed, and is projected to cause a massive spike in the price of Bitcoin.
In the meantime, we already see many tech giants welcoming the new reality of Bitcoin. Over the past few days we saw Anthony Scaramucci, Ray Dalio, Elon Much, and even Reddit founder Alexis Ohanian, all promoting Bitcoin each in their own way.
For many, the recent events indicate the massive shift of wealth that is about to occur. Some are already confident, while others try to understand BTCs fundamentals. The real question here is - if you know the winning horse before the race started, who would you bet on?