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

Author: Felix, PANews

On November 30, the US tech company MicroStrategy announced in an 8-K filing that from November 1 to November 29, the company and its subsidiaries purchased 16,130 bitcoins, worth approximately $593 million, at an average price close to $36,000. This is the largest transaction since the company purchased 19,452 bitcoins for slightly over $1 billion in February 2021. (Note: An 8-K form is required to be submitted to the US SEC when a publicly traded company experiences significant events related to shareholders, such as major disputes, bankruptcy, or takeovers, rather than waiting for the next periodic report.)

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

As early as the beginning of November, during the company's earnings call, MicroStrategy founder Michael Saylor stated that the approval and launch of a Bitcoin spot ETF would be a "catalyst event" beneficial to his company and other entities holding Bitcoin.

Michael Saylor said during the earnings call: "I believe that as these ETPs (exchange-traded products) provide exposure to Bitcoin, we will see more and more analysts from traditional Wall Street banks reporting." "More reporting means more education, which in turn sparks more buying interest."

While it is unclear what has led MicroStrategy to be so optimistic about Bitcoin in November, there has been a significant amount of news related to Bitcoin spot ETFs. Additionally, there are about five months until the next Bitcoin halving. Both of these factors are considered potential positive catalysts affecting Bitcoin's price.

While MicroStrategy was preparing to submit its 8-K filing on November 28, the US SEC opened a comment period for the Franklin Templeton Bitcoin spot ETF proposal, a move that was unexpected as it started earlier than anticipated.

MicroStrategy first purchased Bitcoin during the COVID-19 pandemic in August 2020, shortly before the bull market began. Michael Saylor believes that the asset can hedge against inflation and is the best strategy for maximizing returns for shareholders, as the company holds a large amount of cash.

Despite incurring significant losses in 2022 due to Bitcoin purchases, Michael Saylor stepped down as CEO and moved to the background to focus on a new Bitcoin strategy. However, Michael Saylor's plans seem to be working. Since the company began purchasing Bitcoin, MicroStrategy's stock (MSTR listed on NASDAQ) has risen by 238%. The current share price is approximately $493.15, up 17% in the past month.

MicroStrategy's stock price fluctuations since the first Bitcoin purchase; Source: Bloomberg

Michael Saylor believes that buying the company's stock is a way for investors to gain exposure to cryptocurrency. He has repeatedly mentioned that Bitcoin is an asset superior to real estate and gold, and is a "reliable store of value and an attractive investment asset with greater long-term appreciation potential than holding cash." Other companies have followed suit, most notably the electric vehicle company Tesla. This clean energy company, led by the world's richest man Elon Musk, holds 9,720 BTC, worth $366 million.

It is worth noting that on November 30, MicroStrategy also reached an agreement with Cowen and Company, Canaccord Genuity, and BTIG to issue up to $750 million in common stock. The company initially announced plans to raise funds through stock sales in August, stating that the proceeds would be used for purchasing Bitcoin, working capital, and debt repurchase.

Related reading: Exclusive Interview with MicroStrategy CEO: With halving and ETF together, Bitcoin will rise in the next year

References: Decrypt, Blockworks, Bloomberg