Bitcoin Backer Strategy Forms $1.4 Billion Reserve Amid Criticism

Business intelligence firm MicroStrategy has set up a $1.44 billion reserve in U.S. dollars funded through at-the-market (ATM) sales of its MSTR stock. While the reserve aims to manage dividend payments and interest on existing debt, it has faced criticism from Bitcoin enthusiasts who believe it contradicts the company's Bitcoin-focused philosophy.

Key Takeaways

MicroStrategy has created a $1.44 billion USD reserve funded by selling its MSTR stock.
The reserve is designated for covering dividend payments on preferred stocks and interest on debt.
This move has garnered criticism from Bitcoin maximalists, raising concerns about its impact on Bitcoin holdings.
MicroStrategy now holds over 650,000 Bitcoins, with a recent purchase of 130 BTC marking a significant milestone.
Critics, including gold advocate Peter Schiff, suggest that this reserve signals trouble for MicroStrategy's future.

Bitcoin Backer Strategy Creates $1.4 Billion Reserve, But There's Major Twist

MicroStrategy's New Reserve

MicroStrategy, a leading business intelligence company, has announced the formation of a substantial $1.44 billion reserve in U.S. dollars. This reserve is primarily financed through at-the-market (ATM) sales of its stock, identified by the ticker MSTR.

The purpose of this reserve is to ensure the company can meet its dividend payments on preferred stocks and cover interest on existing debts. However, the decision to establish a USD reserve has not resonated well with some Bitcoin maximalists. Detractors argue that maintaining a large reserve of U.S. dollars contradicts the firm's self-proclaimed “Bitcoin maximalist” stance.

Investor Confidence and Bitcoin Holdings

On a positive note, the creation of this reserve could help alleviate some of the investor anxiety regarding CEO Michael Saylor's potential need to liquidate Bitcoin assets. The reserve is sizable enough to sustain dividend payments for approximately 21 months.

As of now, MicroStrategy has exceeded total Bitcoin holdings of over 650,000 coins. The firm made headlines with its most recent acquisition of 130 BTC, which was valued at around $12 million at current market prices. This purchase pushed MicroStrategy past its notable Bitcoin holding milestone, which began back in August 2020.

Criticism from Bitcoin Advocates

Notably, Peter Schiff, a vocal critic and gold investor, has publicly stated that the establishment of the dollar reserve marks a turning point for MicroStrategy. He remarked, “Today is the beginning of the end of $MSTR. Saylor was forced to sell stock not to buy Bitcoin, but to buy U.S. dollars merely to fund MSTR's interest and dividend obligations. The stock is broken.”

In response to this announcement, MicroStrategy's stock has faced a severe downturn, coinciding with another dip in Bitcoin prices. This situation underlines the precarious balance MicroStrategy must maintain between its Bitcoin investments and its obligations to shareholders.