Nasdaq-listed business intelligence firm MicroStrategy (MSTR) announced on December 21, 2020, that it has purchased an additional 29,646 bitcoins for approximately $650 million, at an average price of $21,925 per bitcoin. This latest acquisition brings the company's total bitcoin holdings to 70,470, purchased for an aggregate of $1.125 billion at an average price of $15,964 per bitcoin. As of the announcement, those holdings were worth more than $1.6 billion.
From Cash Reserves to Bitcoin Treasury
MicroStrategy began aggressively accumulating bitcoin in August 2020 via Coinbase's institutional platform, designating the cryptocurrency as its primary reserve asset. After exhausting its own excess cash, the company raised funds by selling $650 million worth of convertible senior notes to purchase additional bitcoins — a move that prompted Citigroup to downgrade its stock. Despite the criticism, MicroStrategy's management has remained steadfast in its belief that bitcoin is a more reliable store of value than cash.
CEO Michael Saylor tweeted the details of the purchase, stating: “MicroStrategy has purchased an additional 29,646 bitcoins for $650 million at an average price of $21,925 per bitcoin and now hodl an aggregate of 70,470 bitcoins purchased for $1.125 billion at an average price of $15,964 per bitcoin.” He added, “The acquisition of additional bitcoins announced today reaffirms our belief that bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value.” CFO Phong Le echoed this sentiment, saying, “The company continues to believe bitcoin will provide the opportunity for better returns and preserve the value of our capital over time compared to holding cash.”
Saylor Tries to Convince Elon Musk to Move Tesla's Funds into Bitcoin
Over the prior weekend, Michael Saylor made a public plea to Tesla CEO Elon Musk, urging him to allocate billions of Tesla's cash reserves into bitcoin. In a tweet on Sunday, Saylor wrote: “If you want to do your shareholders a $100 billion favor, convert the $TSLA balance sheet from USD to BTC. Other firms on the S&P 500 would follow your lead & in time it would grow to become a $1 trillion favor.” Saylor also offered to share his playbook with Musk privately.
While Musk did not immediately respond publicly, the high-profile exchange highlighted a growing debate among corporate treasurers about the viability of bitcoin as a corporate treasury asset. Since MicroStrategy's first bitcoin purchase in August, the price of bitcoin has surged from around $12,000 to over $22,000 — a gain of more than 80%.
Institutional Adoption Accelerates, Market Sentiment Strengthens
MicroStrategy's aggressive bitcoin acquisition strategy has been viewed as a bellwether for institutional adoption. At a time when many traditional financial institutions remain cautious about cryptocurrencies, a multibillion-dollar publicly traded company converting a significant portion of its cash reserves into bitcoin sends a strong signal to other corporations. As of the announcement date, MicroStrategy's stock had risen more than 130% year-to-date in 2020, far outpacing the S&P 500.
Analysts note that MicroStrategy's average purchase price of $15,964 per bitcoin provides a comfortable margin of unrealized profit, given the prevailing market price. Furthermore, the company's innovative financing model — using convertible bonds to fund bitcoin purchases — could serve as a template for other firms looking to gain exposure to the asset.
Nevertheless, critics warn that concentrating corporate cash reserves in a highly volatile asset carries significant risk. The U.S. Securities and Exchange Commission (SEC) has not issued explicit guidance on such strategies, but market participants are closely watching MicroStrategy and potential followers. The move has also spurred debate over whether other companies in the S&P 500 will follow suit, especially if bitcoin continues its upward trajectory.