Billionaire Michael Saylor of MicroStrategy Is Buying Bitcoin Hand Over Fist
Wednesday, Nov 20, 2024 11:23 am ET
4min read Michael Saylor, the billionaire founder and executive chairman of MicroStrategy Inc., has been on a Bitcoin buying spree that has left investors and analysts alike wondering if he's onto something big or simply gambling with his company's future. Since August 2020, MicroStrategy has acquired 279,420 Bitcoins, worth approximately $25 billion at current prices. To put that number into perspective, that's nearly 1.5% of all Bitcoin currently in circulation.
Saylor's aggressive strategy, which involves converting cash and issuing debt to buy Bitcoin, has significantly boosted MicroStrategy's stock performance. Since August 2020, MSTR stock has surged over 2,500%, outperforming major US stocks like Nvidia and even Bitcoin itself, which gained around 660% in the same period. MSTR's stock has quadrupled year-to-date, while Bitcoin has nearly doubled.
But is Saylor's Bitcoin bet a smart move or a risky gamble? On one hand, Bitcoin's past decade of performance has been nothing short of awe-inspiring. For many years, it has been the best-performing asset class in the world, and it hasn't even been close. Bitcoin is up another 115% this year after turning in 150% gains last year. And, if you exclude a down year in 2022, then Bitcoin delivered annualized returns of 230% in the decade from 2011 to 2021.
On the other hand, Bitcoin's volatility is well-known, with at least five periods in which it has lost 77% or more of its value. Some analysts warn that Bitcoin could see a retracement that takes it all the way back to $60,000 per coin. Moreover, MicroStrategy's heavy allocation to Bitcoin exposes the portfolio to significant volatility, which could negatively impact the overall portfolio.
MicroStrategy's approach to Bitcoin acquisition and leverage has significantly impacted its debt-to-equity ratio. In Q3 2024, MicroStrategy raised $21 billion in equity and debt, increasing its Bitcoin holdings by 11% and raising its BTC Yield to 17.8%. However, this also led to a $24 million increase in annualized interest expense. As of Q3 2024, MicroStrategy's digital assets were valued at $6.851 billion, with an average cost per Bitcoin of $39,266 and a market price of $63,463.
Saylor's long-term vision for Bitcoin is clear: he predicts that the cryptocurrency could reach $13 million by the year 2045, making it a potential multi-decade investment. However, Bitcoin's volatility requires a cautious approach. Allocating less than 5% of a portfolio to Bitcoin is recommended, balancing upside potential and diversification. A long-term horizon, at least 5-10 years, is crucial to weather Bitcoin's volatility and capture its potential upside.
In conclusion, Michael Saylor's aggressive Bitcoin buying spree has significantly boosted MicroStrategy's stock performance, but it also exposes the portfolio to significant volatility. While Bitcoin's long-term trajectory appears to be heading up, it probably won't be without a lot of volatility along the way. Investors should consider allocating a strategic, but modest, portion of their portfolio to Bitcoin, balancing growth and value stocks to manage risk and enhance long-term returns.
Saylor's aggressive strategy, which involves converting cash and issuing debt to buy Bitcoin, has significantly boosted MicroStrategy's stock performance. Since August 2020, MSTR stock has surged over 2,500%, outperforming major US stocks like Nvidia and even Bitcoin itself, which gained around 660% in the same period. MSTR's stock has quadrupled year-to-date, while Bitcoin has nearly doubled.
But is Saylor's Bitcoin bet a smart move or a risky gamble? On one hand, Bitcoin's past decade of performance has been nothing short of awe-inspiring. For many years, it has been the best-performing asset class in the world, and it hasn't even been close. Bitcoin is up another 115% this year after turning in 150% gains last year. And, if you exclude a down year in 2022, then Bitcoin delivered annualized returns of 230% in the decade from 2011 to 2021.
On the other hand, Bitcoin's volatility is well-known, with at least five periods in which it has lost 77% or more of its value. Some analysts warn that Bitcoin could see a retracement that takes it all the way back to $60,000 per coin. Moreover, MicroStrategy's heavy allocation to Bitcoin exposes the portfolio to significant volatility, which could negatively impact the overall portfolio.
MicroStrategy's approach to Bitcoin acquisition and leverage has significantly impacted its debt-to-equity ratio. In Q3 2024, MicroStrategy raised $21 billion in equity and debt, increasing its Bitcoin holdings by 11% and raising its BTC Yield to 17.8%. However, this also led to a $24 million increase in annualized interest expense. As of Q3 2024, MicroStrategy's digital assets were valued at $6.851 billion, with an average cost per Bitcoin of $39,266 and a market price of $63,463.
Saylor's long-term vision for Bitcoin is clear: he predicts that the cryptocurrency could reach $13 million by the year 2045, making it a potential multi-decade investment. However, Bitcoin's volatility requires a cautious approach. Allocating less than 5% of a portfolio to Bitcoin is recommended, balancing upside potential and diversification. A long-term horizon, at least 5-10 years, is crucial to weather Bitcoin's volatility and capture its potential upside.
In conclusion, Michael Saylor's aggressive Bitcoin buying spree has significantly boosted MicroStrategy's stock performance, but it also exposes the portfolio to significant volatility. While Bitcoin's long-term trajectory appears to be heading up, it probably won't be without a lot of volatility along the way. Investors should consider allocating a strategic, but modest, portion of their portfolio to Bitcoin, balancing growth and value stocks to manage risk and enhance long-term returns.
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