Michael Saylor’s Approach is Struggling, Yet His Bitcoin Investment Remains Strong

Michael Saylor's company, MicroStrategy, is facing significant challenges this year, leading some to speculate about the viability of its Bitcoin-focused strategy. However, a deeper analysis reveals that while the company’s stock has dropped significantly, its Bitcoin investments are still profitable.

Key Takeaways

MicroStrategy’s stock has fallen nearly 60% over the past year but retains strong profits from its Bitcoin holdings.
The company acquired Bitcoin at an average price of $74,430, with current prices around $86,000, leading to a 16% profit on those investments.
Despite the stock slump, MicroStrategy's long-term equity performance has significantly outpaced major tech companies.
Investors are using MicroStrategy stock as a hedge against Bitcoin exposure, impacting its stock price.
The overall liquidity in the crypto market is declining, affecting Digital Asset Treasuries.

Michael Saylor’s Approach is Struggling, Yet His Bitcoin Investment Remains Strong

Overview of MicroStrategy’s Situation

MicroStrategy, an investment firm heavily involved in Bitcoin, has seen its stock price plummet nearly 60% over the last year, declining over 40% year-to-date (YTD) as per Google Finance data. The stock, which was priced close to $300 in October, has fallen to approximately $170 at the time of this writing.

While some market analysts interpret this downturn as indicative of flaws in MicroStrategy’s Bitcoin investment model, it’s important to note that the firm still enjoys substantial profits from its Bitcoin purchases. Despite current stock woes, its longer-term equity performance continues to surpass that of leading technology stocks.

Data from BitcoinTreasuries.NET indicates that MicroStrategy acquired its Bitcoin at an average cost of $74,430 per coin. With Bitcoin currently trading at around $86,000, the company’s investment is up by nearly 16%. Over a five-year period, MicroStrategy shares have risen by more than 500%, in stark contrast to Apple and Microsoft, which saw gains of 130% and 120%, respectively. Even over a shorter two-year stretch, MicroStrategy stock demonstrated a 226% increase, far exceeding Apple’s 43% and Microsoft’s 25% rises during the same timeframe.

MicroStrategy stock has surged by over 500% in the past five years. Source: Google Finance

Market Dynamics and Investor Strategies

The current drop in MicroStrategy's stock may be influenced less by Bitcoin's underlying fundamentals and more by broader investment strategies among significant players in the crypto market. In a recent interview on CNBC, BitMine chairman Tom Lee pointed out that MicroStrategy has become a preferred choice for hedging Bitcoin investments.

Lee explained, “Someone can use MicroStrategy’s options chain, which is very liquid, to hedge all of their crypto.” As a result, shorting MicroStrategy or purchasing puts have become necessary tactics for investors looking to mitigate risk in their Bitcoin positions. This has inadvertently created a situation where MicroStrategy acts as a buffer for the crypto market, absorbing selling pressure that may not directly reflect its Bitcoin strategy or long-term goals.

Despite ongoing difficulties in stock prices, MicroStrategy's chairman, Michael Saylor, remains unwavering, expressing his determination on social media platform X with the message that he "won't back down."

On November 17, MicroStrategy announced the acquisition of 8,178 BTC for a total of $835.6 million, marking a significant increase from prior purchases, which typically ranged from 400 to 500 coins weekly. This latest purchase brings its total Bitcoin holdings to 649,870 BTC, valued at nearly $56 billion.

Related: Metaplanet eyes $135M raise via new Class B shares to fuel more Bitcoin buys

Challenges in Crypto Liquidity

The overall liquidity situation in the cryptocurrency market faces challenges. On November 6, market-maker Wintermute highlighted stablecoins, exchange-traded funds (ETFs), and digital asset treasuries (DATs) as the main sources of crypto liquidity, noting a recent slowdown in these inflows that has contributed to the current market slump.

According to the data aggregator DefiLlama, the inflow into DATs began to decline in October after $20 billion in crypto positions were liquidated. The DAT inflow plunged from nearly $11 billion in September to roughly $2 billion in October, marking an 80% reduction. The trend continued into November, with DAT inflows restricted to about $500 million thus far—a staggering 75% drop compared to the previous month.

Digital Asset Treasury inflows over the last three months. Source: DefiLlama

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