1 in every 138 Bitcoins are now owned by MicroStrategy, but it doesn’t make much sense

Key Takeaways

• MicroStrategy has purchased another thousand Bitcoin, taking their holdings to 140,000 at an average price of $28K
• The total investment is now $4.2 billion, with the company’s fate tied to the Bitcoin price
• CEO Saylor remains ultra-bullish, but has no regard for risk management
• For investors, someone may as well just purchase Bitcoin directly

MicroStrategy is at it again. 

The software company, which is now essentially a Bitcoin-holding company, has purchased another 1,045 Bitcoin. The company now holds 140,000 coins, with Michael Saylor’s now-trademark Twitter post announcing the latest investment to the world Wednesday. 

MicroStrategy has acquired an additional 1,045 #bitcoin for ~ $29.3M at an average price of $28,016 per bitcoin. As of 4/4/2023 @MicroStrategy holds 140,000 bitcoin acquired for ~$4.17 billion at an average price of $29,803 per bitcoin. $MSTR https://t.co/IBufTxalnv

— Michael Saylor⚡️ (@saylor) April 5, 2023

MicroStrategy’s 140,000 stash of Bitcoins is the largest holding of any public company. It constitutes 0.72% of the entire supply, meaning they own 1 in every 138 Bitcoins currently in circulation. 

A long way to go to Satoshi Nakamoto and his/her approximate stash of 1 million coins (5.2% of the supply), but Saylor is on his way. 

The latest purchase was locked in at average price of $28,016 per Bitcoin, bringing the average price to $29,803, meaning the company is slightly underwater on the $4.17 billion investment.

Michael Saylor doesn’t do risk management

CEO Saylor’s conviction remains unwavering, while his disdain for portfolio diversification is also unchanged. For me, regardless of your thoughts on Bitcoin as an investment, it is difficult to get on board with an investment of this scale. 

The risk is extreme, with the fate of the company now well and truly in the hands of the capricious crypto gods. A look at the share price action shows how tightly correlated it now is with Bitcoin. MicroStrategy shed three-quarters of its value last year as Bitcoin plummeted amid the bear market, but has doubled this year as Bitcoin has bounced back. 

Saylor’s conviction may be admirable, but his risk management not. This is especially pertinent when looking at his rhetoric regarding advising people on what to do with their funds – again, nothing to do with Bitcoin, but the failure to understand the risk tolerance and financial circumstances of everyday people is jarring:

“Take all your money and buy Bitcoin. Then take all your time to figure out how to borrow more money to buy more Bitcoin. Then take all your time to figure out what you can sell to buy Bitcoin. 

And if you absolutely love the thing and don’t want to sell it, go mortgage your house and buy Bitcoin with it. And if you’ve got a business that you love because your family works for the business – if it’s been in the family for 37 years and you can’t bear to sell it – mortgage it, finance it and convert the proceeds into the hardest form of money on earth, which is Bitcoin”

The interview occurred in March 2021. Bitcoin was trading north of $56,000 at the time, approximately double what it is currently. I sincerely hope that nobody listened to his advice of this billionaire and mortgaged their house or business. 

And again, this is not a discussion on the merits or price of Bitcoin. The same logic would hold if Bitcoin was now $200,000 per coin. Not that it needs to be said, but for the record, mortgaging your future and your entire financial well-being on one asset – and especially one as volatile as Bitcoin- is, well, not smart. 

Nonetheless, Saylor is intent on doing this with MicroStrategy. At least that is a little less perilous than betting one’s own personal future. But the reality is that with such a large investment – $4.17 billion! – MicroStrategy is now a Bitcoin holding company. 

For investors, I am not sure what the appeal is here, as one can just buy Bitcoin directly. For Saylor, however, he doesn’t seem to care. He’s all in.