by CNBCTV18.com Nov 08, 2022, 06:47 PM IST (Updated)
When MicroStrategy entered the crypto market in August 2020, its first investment in BTC was worth $250 million. According to sources, if these investments had been in Ethereum, over the same period, during those same times, for those exact amounts, MSTR’s crypto stockpile would have been in the green by more than $1.5 billion instead of nearly the same amount that is now in the red.
American business intelligence firm, MicroStrategy, is the largest institutional investor in Bitcoin. It currently holds around 130,000 BTC worth approximately $2.62 billion. The company amassed this gigantic stockpile under the leadership of its ex-CEO, Michael Saylor, who purchased the coins in several installations across BTC’s highs and lows over the last two years.
However, the ongoing crypto winter has been extremely harsh on MicroStrategy’s BTC investment, which is currently at a paper loss of over $1.3 billion. To make matters worse, someone recently created a website that shows how much the investment would have been worth if MicroStrategy purchased ETH instead of BTC, and the results are pretty surprising.
According to this website, MSTR’s investment would have been worth more than double its current value. In this article, we unravel the mathematics of this calculation, the mindset behind MicroStrategy’s investment and the probable reasons why Bitcoin remains an excellent investment for the company.
The BTC vs ETH comparison
When MicroStrategy entered the crypto market in August 2020, its first investment in BTC was worth $250 million. In the two years that followed, more investments have raked in, with MSTR spending nearly $4 billion overall.
According to sources, if these investments had been in Ethereum, over the same period, during those same times, for those exact amounts, MSTR’s crypto stockpile would have been in the green by more than $1.5 billion instead of nearly the same amount that is now in the red.
The investment would add up to 3,542,000 ETH, currently valued at $5.25 billion. This is because ETH surged by a whopping 399 percent in 2021, that’s 5X more than BTC’s rise of 59 percent, which is also quite impressive.
In addition, Ethereum can also be staked. So, whatever amount the company had in Ethereum could also have been used to generate a passive income in the millions. Therefore, the losses aren’t restricted to funds in the red but also to missed staking opportunities.
Michael Saylor’s logic behind BTC
The founder of MicroStrategy, Michael Saylor, is a Bitcoin maximalist and has repeatedly reinforced his “Bitcoin or nothing” investment strategy. While he has recently stepped down from his position as CEO of MSTR, the bad rep he is getting for his BTC investment might be a little illogical.
Firstly, there will always be better investment avenues. If he had invested in Ethereum, we’d still see many calling him out for not investing in Solana, which went up 10x during that period. If he had invested in Solana, we’d be comparing it to Shiba Inu, which went to the moon in its heyday. If not the investment itself, people would have criticized the timing of the investment as Saylor purchased Bitcoin through its highs and lows.
Second, the rationale behind the Bitcoin investment was that it would be better than holding cash. Saylor always spoke of the limited supply of Bitcoin, which is not the case with Ethereum. The circulation cap makes Bitcoin a great hedge against inflation. Finally, despite the volatility, Bitcoin is still the biggest crypto and might remain so in the coming decades. Saylor invested in BTC only after understanding what Bitcoin is, its purpose and what it stands for in the larger scheme of things.
The following quote from him describing Bitcoin could easily give us an idea of how high he held BTC. “Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, growing exponentially ever smarter, faster, and stronger behind a wall of encrypted energy.”
Investors today think of the MSTR stock as an investment in Bitcoin, but that’s not the case. Their actual business, which is completely separated from anything crypto, is still running just as well. It turned into a profit of over $500 million last year. If MSTR sticks to its cause of BTC over cash, it could pay handsome dividends in the future.
Finally, everyone knows of the short-term fluctuations surrounding crypto. Therefore, an investment decision like this should be assessed in the long term, perhaps after a decade or so. Until then, it’s too early to tell whether MSTR’s BTC investment is a masterstroke or if the company was better off putting their money elsewhere.
(Edited by : Priyanka Deshpande)
First Published: Nov 08, 2022, 06:45 PM IST