Amid the Covid-19 pandemic, MicroStrategy, an enterprise software maker, made a decision that was little noticed at the time, investing its cash in Bitcoin.
The value of MicroStrategy's BTC assets, led by Michael Saylor, has exceeded $10 billion as of today.
MicroStrategy, co-founded by Michael Saylor, had about $500 million invested mostly in short-term U.S. government bonds before this shift in mid-2020. But Saylor began to question this traditional strategy when yields collapsed in the wake of the pandemic. He correctly predicted that inflation would rise after the Fed eased policy and referred to the cash pile-up as a “melting ice cube.”
Now, almost four years later, Saylor has become one of Bitcoin's most prominent advocates. MicroStrategy's Bitcoin holdings are worth a staggering $10 billion after the latest price rally, with unrealized gains of almost 70% relative to the cost of Bitcoin owned.
Earlier this month, MicroStrategy disclosed that as of February 5 it had 190,000 Bitcoins purchased at a cost of $31,224 each, worth a total of $5.93 billion. Bitcoin is up around 25% so far this year, reaching a two-year high of $52,749 today.
MicroStrategy's shares moved with Bitcoin prices, and stock investors viewed the company as an easier-to-trade proxy for BTC. Since Saylor decided to hold Bitcoin, the stock has risen more than 500% to nearly $770, outperforming the Standard & Poor's 500 Index's nearly 60% gain in the same period.
The company took advantage of the price increase by selling shares and issuing bonds to purchase large amounts of Bitcoin. Saylor said in a recent interview that MicroStrategy's status as a Bitcoin steward will not be affected by the newly launched spot exchange-traded funds because it does not charge any fees when offering a leveraged transaction on BTC.
*This is not investment advice.