Strategy's Bitcoin Bet Pays Off With 36% Gain This Year

MicroStrategy, now known as Strategy, released its earnings report on May 1. The company, led by Michael Saylor, has pioneered the "bitcoin treasury" model, which has been adopted by numerous other companies. Strategy has announced plans to raise $84 billion through a combination of equity and fixed income instruments.

The term "earnings" for Strategy is somewhat misleading, as it primarily reflects the price of bitcoin and the company's financing activities. Analysts and pundits should be clear about this distinction. The company's name change from MicroStrategy to Strategy has also led to some confusion, with many still referring to it as MicroStrategy.

Strategy's approach is all-in on bitcoin, with a market capitalization of $107 billion supported by $53 billion in bitcoin holdings and significant goodwill. The company's strategy relies heavily on the success of bitcoin, and any failure could have broader implications for the bitcoin market. Despite criticisms, Strategy's capital raises have been impressive, and the company has seen a 36% increase in value this year, compared to less than 5% for bitcoin.

Strategy has cleverly utilized stock price volatility to its advantage, issuing convertible securities and attracting options volume. The company's preferred shares have also found favor with some investors. Strategy has created a movement and a category, with levered ETFs and other investment vehicles tracking companies that hold bitcoin.

The trend of adding bitcoin to corporate treasuries is notable, but it is currently limited to bitcoin. Despite regulatory developments and the filing of new ETFs, bitcoin still dominates the conversation. This focus on bitcoin may be limiting the education and understanding of other blockchain assets and their potential.

While bitcoin's role as a store-of-value asset in corporate treasuries is understandable, the growing number of bitcoin exposure options may be overshadowing the importance of other digital assets. As the market matures, it is hoped that investors and traders will have more opportunities to explore and invest in a broader range of digital assets. If not, the U.S. crypto investing narrative may become too narrowly focused on bitcoin, potentially missing out on other valuable opportunities.