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Microstrategy Surges 27% as Crypto Holdings Reach $11 Billion

Microstrategy stock shares surged by 27% as its crypto holdings soared to $11 billion.

Wed, 28 Feb 2024, 09:30 am UTC

MicroStrategy has maintained its strategy of accumulating Bitcoin, announcing on Monday its acquisition of an additional 3,000 Bitcoins, valued at approximately $155 million, between February 15 and February 25.

With this latest purchase, MicroStrategy, alongside its subsidiaries, now boasts a portfolio of around 193,000 Bitcoin, worth a staggering $11 billion.

Chairman Michael Saylor's Endorsement

Michael Saylor, the chairman and former CEO of MicroStrategy and a prominent advocate for cryptocurrencies, lauded the recent acquisition in a post on X, highlighting that the company's average purchase price for Bitcoin is $31,544 over time. As of Tuesday, Bitcoin is trading just below $57,000.

MicroStrategy's shares surged by 16% on Monday, followed by another 10% increase on Tuesday, culminating in a closing price of $871.80. Although established in 1989 with a primary focus on enterprise software and cloud-based services, MicroStrategy's shareholder value has become predominantly correlated with its Bitcoin ownership, effectively positioning the company as a proxy for the world's leading cryptocurrency.

Bullish Sentiment and Strategic Moves

Investor enthusiasm for Bitcoin has increased, particularly following the SEC's approval of several spot Bitcoin exchange-traded funds (ETFs) last month. Since introducing these new ETFs on January 11, Bitcoin has witnessed a 24% surge, with billions of dollars flowing into the market.

Additionally, anticipation surrounding the upcoming "halving" event scheduled for April has bolstered trader sentiment. This event, occurring every four years, slashes Bitcoin production in half, a measure intended to curtail the rate of new coins entering the network. Historically, such halving events have heralded significant bull runs in Bitcoin's price.

MicroStrategy's strategic decision to invest in Bitcoin dates back to mid-2020 when it pledged to allocate $250 million over the ensuing 12 months to "one or more alternative assets," including digital currencies like Bitcoin.

According to CNBC, this move has proven lucrative for the company, with its market capitalization surging to nearly $15 billion amid a 33% increase since the beginning of the year.

Unique Value Proposition

Despite the proliferation of ETFs offering alternative routes for investors to access Bitcoin, MicroStrategy's stock continues to present a distinctive value proposition.

According to Market Watch, the company possesses the flexibility to acquire Bitcoin using proceeds from debt and equity issuances, a strategy deemed accretive to shareholders over time by analysts at TD Cowen.

TD Cowen analysts emphasized MicroStrategy's evolution from a traditional enterprise software firm to a pioneering entity generating cash flow from cloud services and converting excess cash into Bitcoin. What initially began as a defensive measure to safeguard reserve assets has transformed into an opportunistic strategy to accelerate shareholder value creation.

Photo: Bryan Wangenheim/Unsplash

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