MicroStrategy’s Bitcoin Bet is on the verge of profitability again

by James · March 31, 2023

(Bloomberg) — MicroStrategy Inc. co-founder and executive chairman Michael Saylor’s more than $4 billion stake in Bitcoin is on the verge of turning a profit again after a first-quarter surge in the value of the native cryptocurrency.

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Saylor first revealed he bought Bitcoin in August 2020, saying the digital currency was a better place to invest his enterprise software company’s cash than traditional staples like short-term government bonds because of the threat of rising inflation. Since then, Bitcoin has seen large price swings resulting in quarterly paper gains of as much as $3.1 billion and cumulative write-downs of more than $2.1 billion for MicroStrategy. The company’s shares have been under water at the end of the last three quarters.

Bitcoin is up about 73% in the three months ending Friday, its biggest quarterly gain in two years. The price fell 64% last year amid a series of industry scandals and bankruptcies. Bitcoin hit $29,171 on Wednesday, just below the Tysons Corner, Virginia-based company’s average purchase price of $29,817.

MicroStrategy can avoid having to take a write-down to write down the value of its inventory for the first time in 10 quarters. By the end of the year, the company had written off about 50% of its Bitcoin investment.

Saylor’s decision to make the acquisition of Bitcoin part of the company’s strategic focus has made the slow-growing software maker a popular proxy for investing in crypto. The company’s shares have more than doubled since August 2020, significantly outperforming the benchmark S&P 500 index’s roughly 16% gain over the same period.

Despite the volatility of the stocks and the price of Bitcoin, Saylor has increased his bets on the cryptocurrency. The company even borrowed money from the now-failed crypto-friendly bank Silvergate to finance its Bitcoin purchases.

MicroStrategy announced Monday that it bought $150 million more of the cryptocurrency and paid off the rest of its $205 million loan partially backed by Bitcoin through the sale of shares. The latest purchase of 6,455 tokens from February 16 to March 23 was the largest acquisition by the company since April 2022.

The Bloomberg US Treasury Bill Index shows that short-term US Treasuries have yielded around 2.5% since Saylor first announced his Bitcoin purchase in August 2020.