What You Need To Know
MicroStrategy Inc. (NASDAQ: MSTR), a software maker that includes buying Bitcoin in its corporate strategy, has made its second large purchase of the cryptocurrency in a week. The company bought 9,245 Bitcoin for $623 million, adding to its holdings, which now amount to over 1% of all Bitcoin that will ever be issued. Now, MicroStrategy has a total holding of 214,246 tokens, valued at around $14 billion.
The company's chairman and co-founder, Michael Saylor, began buying Bitcoin in 2020 as a hedge against inflation and a cash alternative. The recent purchases were financed through the sale of convertible notes. The average price for the latest acquisition was $67,382, while the average price for MicroStrategy's total holding is $35,160. This trend of companies taking advantage of Bitcoin's rising prices and popularity is also seen in Coinbase Global Inc. (NASDAQ: COIN), which recently raised $1.26 billion through a convertible note offering.
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Why This Is Important for Retail Investors
Validation of Bitcoin: MicroStrategy's ongoing Bitcoin purchases add credibility and validation to the cryptocurrency as a legitimate investment option for retail investors. It signifies growing acceptance and confidence in Bitcoin's long-term potential.
Hedge against inflation: MicroStrategy's decision to allocate a significant portion of its treasury reserves to Bitcoin highlights its use as a hedge against inflation. This can be important for retail investors who are concerned about the erosion of their purchasing power and seeking alternative stores of value.
Potential for capital appreciation: MicroStrategy's continuous Bitcoin purchases indicate its belief in the cryptocurrency's potential to increase in value over time. If retail investors choose to include Bitcoin in their investment portfolios, this can provide an opportunity for them to potentially benefit from capital appreciation.
Increased institutional interest: MicroStrategy's substantial Bitcoin purchases reflect institutional players' growing interest and involvement in the cryptocurrency market. This can bring more liquidity, stability, and mainstream awareness to Bitcoin, creating a more favorable ecosystem for retail investors to participate in.
Diversification opportunities: MicroStrategy's strategic move diversifies its treasury reserves away from traditional cash holdings. Similarly, for retail investors, Bitcoin can serve as an alternative asset class, offering diversification benefits with a low correlation to traditional investments like stocks and bonds. It allows retail investors to expand their investment allocations and enhance their overall portfolio performance.
How Can You Use This Information?
Here are some of the investing ideas that can be explored using this information:
Growth Investing
MicroStrategy's continuous Bitcoin purchases indicate a belief in the cryptocurrency's potential for long-term growth, making MSTR stock, or Bitcoin, an area of interest for growth-focused investors.
Growth investing focuses on stocks of companies expected to grow at an above-average rate compared to other stocks in the market; learn more in our article titled 'What is Growth Investing?'.
Diversification
MicroStrategy's strategic move to allocate a significant portion of its treasury reserves to Bitcoin highlights the importance of diversifying investment holdings. Retail investors can consider diversifying their portfolios by including Bitcoin or other cryptocurrencies.
Diversification spreads investments across various assets to reduce risk and volatility in a portfolio.
Speculative Investing
Bitcoin is known for its volatility, making it an appealing choice for speculators seeking high-risk, high-reward investment opportunities. MicroStrategy's significant Bitcoin purchases can pique the interest of speculative investors who are comfortable with the inherent risks in the crypto coin or MSTR stock.
Speculative investing engages in high-risk investments with the potential for substantial rewards, often over a short time frame.
Innovation-Focused Investing
With MicroStrategy's deep involvement in Bitcoin, investors interested in innovation and emerging technologies may find it compelling to explore the cryptocurrency market. Bitcoin's disruptive potential can align with an innovation-focused investment strategy.
Innovation-focused investing seeks out companies that are leaders in technological advancement, offering potential for significant growth as they develop new products and services.
Read What Others Are Saying
Bloomberg: MicroStrategy Owns About 1% of All Bitcoin With Latest Purchase
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What you should read next:
Popular ETFs
Some investors prefer to invest in stocks via an exchange-traded fund for ease and reduced risk. Some popular ETFs include the following:
ProShares Bitcoin Strategy ETF (BITO) - This ETF seeks to provide investment results, before fees and expenses, that correspond to the performance of Bitcoin. BITO primarily invests in Bitcoin futures contracts and does not directly invest in Bitcoin itself.
Valkyrie Bitcoin Strategy ETF (BTF) - Similar to BITO, BTF aims to track the performance of Bitcoin through futures contracts. This fund is designed for investors seeking Bitcoin exposure through a regulated financial product.
VanEck Bitcoin Strategy ETF (XBTF) - XBTF offers exposure to Bitcoin futures contracts. It's another way for investors to access the Bitcoin market indirectly through a product that trades on a major stock exchange.
Global X Blockchain & Bitcoin Strategy ETF (BITS) - While not exclusively a Bitcoin ETF, BITS invests in a mix of Bitcoin futures and blockchain technology companies. This approach provides diversified exposure to the broader blockchain and digital asset ecosystem.
Bitwise 10 Crypto Index Fund (BITW) - Although not a pure Bitcoin ETF, BITW provides exposure to the top 10 cryptocurrencies by market capitalization, of which Bitcoin is a significant component. It's a way for investors to get broader exposure to the cryptocurrency market.
