MicroStrategy, known for its substantial investments in Bitcoin, saw its shares increase by almost 200% in 2024 alone.
Year to date, the business intelligence, mobile software, and cloud-based services company saw its shares soar by 194.3%.
But wait. There is more! Year-on-year, Microstrategy’s shares grew 519% as of 15 October 2024.
So what is this software company’s winning strategy? MicroStrategy is one of the largest holders of Bitcoin globally. It possesses over 250,000 bitcoins, representing approximately 1.2% of the total Bitcoin supply.
Related: MicroStrategy Announces $500 Million Private Offering To Acquire More Bitcoin
Company Raised $3.9 billion, Used It To Purchase Bitcoin
Spearheaded by co-founder Michael Saylor, at the heart of MicroStrategy’s Bitcoin acquisition is its innovative use of convertible notes.
These financial instruments function like bonds, but with an added bonus! They can be converted into company stock at a discounted rate if MicroStrategy’s stock price rises beyond a certain threshold. This feature offers investors more upside potential compared to regular corporate bonds, making them an attractive proposition.
MicroStrategy has leveraged this mechanism to raise approximately $3.9 billion, which it used to purchase Bitcoin.
The convertible notes allow the company to benefit from low interest rates while providing investors with the opportunity to gain from potential stock price increases.
Essentially, these notes act as a call option on both MicroStrategy’s stock and Bitcoin’s price.
How MicroStrategy’s Stocks Outperformed Bitcoin?
There have been times when the stock of MicroStrategy (MSTR) has outpaced Bitcoin by multiples. Cryptocurrency fans and investors who want exposure to Bitcoin without holding the coin have generally positive opinions about MicroStrategy’s approach.
According to experts, by borrowing funds through convertible notes and investing in Bitcoin, the company effectively removes a significant amount of Bitcoin from circulation. This reduction in supply can potentially drive up Bitcoin’s price, which in turn boosts MicroStrategy’s stock value due to its substantial Bitcoin holdings.
MicroStrategy's stock has indeed been reported to outperform Bitcoin significantly. Here are some insights based on general trends and sentiments expressed up to October 15, 2024:
1. Investment Strategy: MicroStrategy, under the leadership of Michael Saylor, adopted a strategy… pic.twitter.com/i5w320tK9A
— Arounded Tech (@AroundedTech) October 15, 2024
If more firms follow suit and integrate Bitcoin into their treasuries using convertible notes or other instruments, could it amplify the positive feedback loop effect on Bitcoin’s price?
Could such a trend position Bitcoin as an increasingly mainstream asset within corporate finance?
Related: How and Where to Buy Bitcoin With PayPal Instantly in 2024
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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