Data analytics firm MicroStrategy, led by staunch bitcoin bull and former billionaire Michael Saylor, has announced its first bulk bitcoin purchases since the crypto market began its heavy selling in the past two months, revealing that it has once again doubled its stakes. commitment to the world’s largest cryptocurrency despite investors’ concerns about its position in the midst of the sharp decline in prices.
On Thursday, Virginia-based MicroStrategy, which owns more bitcoins than any company in the world, announced that it had purchased nearly 480 bitcoins between May 3 and Tuesday for $10 million in cash, or $20,817 per coin.
The company, which started buying cryptocurrencies for its balance sheet in August 2020, says it currently holds about 129,699 bitcoins, purchased for around $4 billion, or an average price of $30,664 per coin; this implies that the firm’s investment has incurred a roughly 33% loss. far.
The recent purchase of MicroStrategy has since bitcoin dropped 70% from a high of over $69,000 in November, amid concerns about industry job cuts, potential bankruptcy at major crypto companies, and the Federal Reserve’s economic tightening measures pushing prices to 18-%. came as he struggled to make up for losses. earlier this month, it fell below $20,000.
MicroStrategy has previously used debt and equity sales proceeds to purchase bitcoin, and in March the company took out a $205 million loan backed by cryptocurrency to finance additional purchases.
Bitcoin’s recent sale sparked speculation earlier this month that MicroStrategy would have to liquidate some bitcoin holdings to cover losses, but Saylor claimed on CNBC that the bitcoin price should drop below $3,500, raising concerns “too much about nothing.” ‘ as he refused. Additional collateral will be required first.
MicroStrategy shares, which rose 800% to $1,030 at one point during the pandemic, are down 79% since Bitcoin’s November high and dropped another 6% to $175 on Wednesday morning.
Trading at around $20,090 on Wednesday morning, Bitcoin is down 1% in the last 24 hours and about 32% in the last month, but it’s still up an astonishing 115% over the past two years.
“We feel we have a quality balance sheet,” Saylor told CNBC. Squawk Box earlier this month. “We are comfortable and the margin load is well managed.”
In a recent note to clients, BTIG analyst Mark Palmer said MicroStrategy shares were down nearly 40% this month as media reports and social media “buzzed” over a potential margin call. “The issue has become disproportionate,” he said, saying the company has about 100,000 bitcoins worth about $2 billion ready to issue as additional collateral to help avoid a margin call. Still, others continue to decline in strategy. “If they don’t improve the core operations of the software business, they can’t continue to buy more bitcoin,” Jefferies analyst Brent Thill said in a note to investors this month, noting that the company’s software business is losing market share to the giants. It’s like Microsoft as Bitcoin investment is depreciating. “You have an investment strategy in Bitcoin that is not working financially for the company.”
Backed by government stimulus efforts and institutional adoption, the cryptocurrency market briefly eclipsed its record $3 trillion market cap last year, but the escalating decline has pushed the value below $900 billion this month, roughly halving since early May. In the latest sign of turmoil for the emerging market, Singapore-based digital asset hedge fund Three Arrows Capital (3AC), which at one point allegedly had more than $18 billion in assets, went bankrupt, prompting a British Virgin Islands court to take action. Sky News on Wednesday ordered its assets liquidated. On Monday, crypto broker Voyager Digital said it has issued a notice of default to 3AC for failing to pay off a loan of approximately $675 million.
Court Reports Liquidation of Crypto Hedge Fund Three Arrows Capital, Threats Market Turmoil (Forbes)
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