U.Today – MicroStrategy's Ongoing Bitcoin Acquisition

MicroStrategy, the business intelligence firm known for its insatiable appetite for Bitcoin (BTC), has recently purchased more BTC. The acquisition cost approximately $561 million for 5,262 BTC, at an average price of $106,662 per BTC.

Bitcoin’s Price Drop Implications for MicroStrategy

Given recent developments in the broader cryptocurrency market, it is easy to consider this recent purchase a misstep. Generally, Bitcoin's price is facing volatility as the leading digital asset struggles to breach the historic $100,000 mark and convert it into support.

As of this writing, Bitcoin is trading at $94,238.21, an increase of 1.52% in the last 24 hours. Despite trading volume surging by 34.12% to $54.58 billion, investor confidence has not positively impacted the price.

This slump has cost MicroStrategy over $65 million from its last purchase alone. At Bitcoin's current rate, the company has suffered a loss of $65,375,088. Given that MicroStrategy typically enjoys significant profit margins on previous purchases, this is substantial. If Bitcoin does not rebound quickly, MicroStrategy could face substantial loss.

MicroStrategy’s Financing and Obligations

It is important to recognize that MicroStrategy’s Bitcoin purchases are financed through capital raised from issuing convertible notes, securing credit lines, selling shares, and using corporate bonds. The company recently announced plans to raise $42 billion from equity and fixed-income securities in the coming years.

Thus, to fulfill obligations to investors who bought these convertible notes, the price of Bitcoin needs to remain high. A price slump could trigger panic, causing its shares and MSTR stock prices to drop, negatively affecting MicroStrategy’s capital base.

Additionally, as the largest corporate holder of Bitcoin—with approximately 2.2% of the total supply—MicroStrategy’s actions can significantly impact the asset's price outlook.

Analysts suggest that with a pending change of administration in the U.S. by January 20, 2025, bullish sentiment may support Bitcoin's recovery. Only time will reveal how this situation evolves.

This article was originally published on U.Today