The Nasdaq-listed firm MicroStrategy (MSTR) is remaining to purchase hundreds of millions of dollars worth of Bitcoin (BTC), resulting in its company stock worth to increase over 9% on Sep 16.
MSTR stock recuperates to pre-COVID levels afterwards buying Bitcoin
MicroStrategy first publicized the firm is buying Bitcoin on Aug 11, after which its stock price flowed by over 10%. Nowadays, MSTR value has once again increased similarly after authorizing yesterday that it doubled down on accepting a “Bitcoin standard,” buying over 38,000 BTC value $425M at an average value of $11,111.
“We just had the awful realization that we were sitting on top of a $500M ice cube that’s melting,” said CEO Michael Saylor
“This is not a speculation, nor is it a hedge. This was a deliberate corporate strategy to adopt a bitcoin standard.“
Datavetaren, a pseudonymous software engineer, held other companies would follow MicroStrategy. He penned:
“MicroStrategy is adopting a #bitcoin standard. Other companies will follow. Lastly, central banks will follow (Switzerland likely to be the first.) A new gold standard for the digital age. A neutral store of value will create more check and balances for governments.“
What are the dangers of MicroStrategy’s Bitcoin accrual strategy?
Conferring to Joe Weisenthal, the host of What’d You Miss”on Bloomberg, the revenue of MicroStrategy gradually declined since 2013. The company needed new ways to vamp-up & gaining exposure to Bitcoin and making BTC its primary treasury asset is quickly fetching one of its major strategies. Classically, safe-haven assets like gold and real estate are perceived as a hedge against inflation. They are like insurance rather than investment, providing balance to the portfolio.
Bitcoin is probable to realize both; it could act as a hedgerow contrary to inflation and hypothetically outperform many asset classes over time. Barry Silbert, the CEO of Grayscale, said the purchase might become the poorest of the smartest CEO decision of all time.
There is a massive amount of risk MicroStrategy is taking to secure such a large holding of BTC. Nevertheless, if BTC explosively raises over the long term, it could be an essential catalyst for the stock. Silbert held:
“This will go down in history as one of the smartest or worst CEO decisions of all time. Case studies & books will be written about it. Either way, it took enormous guts for a public company CEO, and I commend him for the courage.“
Don’t celebrate MSTR stock like an ETF
One problematic sentiment around MSTR stock is that some celebrate it as a loophole for an exchange-traded fund (ETF). While the company has considerable exposure to Bitcoin, CompoundFinance’s general counsel Jake Chervinskey held such ambiguity is non-existent. He similarly noted that if the firm continues to buy more BTC, the U.S. Securities and Exchange Commission (SEC) may perhaps begin inquiring about it. He said:
“No, there isn’t a loophole in the federal securities laws allowing a publicly-traded company to convert itself into a bitcoin ETF without SEC approval. The further bitcoin $MSTR buys, the more probable the SEC is to start asking questions that @Nasdaq doesn’t want to answer.“