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MicroStrategy’s Bitcoin treasury exceeds cash held by 80% of S&P 500 non-financial companies

The Nasdaq-listed company recently announced it added another 5,050 Bitcoin to its coffers for about $242.9 million.

The value of MicroStrategy’s massive Bitcoin (BTC) holdings has surpassed what most S&P 500 companies hold in their cash treasuries.

The Nasdaq-listed enterprise software firm purchased an additional 5,050 Bitcoin for about $242.9 million, raising the value of its 114,042 BTC holdings to nearly $5.3 billion. That comes out to be higher than what 80% of non-financial S&P 500 companies hold in their cash coffers, as per data compiled by Bloomberg.

Cash spending up among corporations

MicroStrategy made buying Bitcoin its official corporate strategy in 2020, with its celebrated CEO, Michael Saylor, calling the move a defense against the U.S. dollar’s potential devaluation. Companies like Tesla and Square later copied the strategy to replace a portion of cash reserves with Bitcoin.

On the other hand, firms with lower risk appetites continued to increase their cash holdings. For instance, in the second quarter, non-financial companies on the S&P 500 boosted their treasuries by 12% from a year ago due to escalating uncertainty caused by the COVID-19 pandemic.

Cash holdings by non-financial S&P 500 companies in recent quarters. Source: Bloomberg

Some of those firms — including General Electric, Ford and Boeing — started spending the cash during the ongoing third quarter. For instance, in July, non-financial S&P 500 companies slashed their dollar reserves by $30 billion, or 2%, from a year ago.

At the same time, companies like Amazon and Alphabet (Google’s parent company) were still amassing cash but did little to change overall dollar spending. The total cash stockpiles held by United States corporations fell to $1.52 trillion from $1.55 trillion as they acquired new businesses, bought back shares and increased dividends, Bloomberg data reveals.

Overall, the declining cash holding trend shows that publicly traded companies have become more comfortable with spending their money, led by expectations that the COVID-19 pandemic is almost over.

MSTR gives de facto Bitcoin exposure

Shares of MicroStrategy have surged by almost 359% in the past 12 months, in lockstep with Bitcoin, whose value has surged by 314% in the same period.

Since MSTR appreciation has outpaced Bitcoin’s price growth, some analysts believe that owning shares gives investors easier exposure to the benchmark cryptocurrency market through traditional infrastructure.

MicroStrategy vs. Bitcoin vs. Nasdaq. Source: Ecoinometrics

“It’s no secret that MSTR is being valued above the NAV [net asset value] of coins currently owned, and I don’t think investors are buying it for the legacy business upside,” said analyst Kingdom Capital.

“The [clearest] reason I can see is it is one of the few companies with a large market capitalization in the BTC space.”

For instance, the Amplify Transformational Data Sharing ETF, which manages $1.2 billion worth of investments, has gained 6.5% exposure in MSTR after snubbing Grayscale Bitcoin Trust, the leading Bitcoin investment vehicle in the U.S. that trades over-the-counter, which restricts it from receiving capital from certain funds and exchange-traded funds.

Similarly, the Siren Nasdaq NexGen Economy ETF has exposure to MSTR but holds no GBTC.

Related: MicroStrategy stock flips bullish with MSTR a Bitcoin ‘proxy’ for institutional investors

As a result, MicroStrategy stock and Bitcoin prices are expected to trend in sync, unless more crypto stocks become available. Kingdom Capital weighed in:

“There appear to be better vehicles available to investors for BTC equities, and as they become more widely accessible I expect some ETFs will reduce their MSTR exposure.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, and you should conduct your own research when making a decision.

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MicroStrategy stock flips bullish with MSTR a Bitcoin ‘proxy’ for institutional investors

The bullish setup has appeared after MSTR’s increasingly positive correlation with Bitcoin, the flagship cryptocurrency that has surged 339% year-on-year and is now struggling to close above $50,000.

MicroStrategy’s stock, MSTR, is preparing to undergo a massive bull run in the sessions ahead.

So shows a technical setup, dubbed inverse head and shoulder, that has a history of predicting upside moves with an accuracy of 83.44%, as per Samurai Trading Academy’s research. MSTR appears to have formed a similar bullish structure, as shared by independent market analyst Bob Loukas.

MicroStrategy stock daily chart featuring inverse head and shoulder setup. Source: Bob Loukas, TradingView

In detail, an inverse head and shoulder (IH&S) is when the price forms three troughs in a row, with the middle one (head) deeper than the other two (shoulders). Meanwhile, all the troughs hang by a price ceiling (neckline).

Traditional chartists consider IH&S as bullish if the price breaks above the neckline with higher volumes. In doing so, the price expects to rise by as much as the distance between the middle trough’s bottom and neckline.

Applying the classic definition to the MSTR chart, the next profit target for the stock appears near $1,478, almost twice the current bid range.

Is MSTR a shortcut to gain Bitcoin exposure? 

The upside outlook for MSTR appears as it continues to stay positively correlated to Bitcoin (BTC), a highly volatile cryptocurrency propagated as “digital gold” by its hardcore enthusiasts.

MicroStrategy owns 105,085 BTC worth around $5.23 billion as Bitcoin’s price returns to $50,000. In fact, the Nasdaq-listed company’s exposure to Bitcoin has made MSTR a quasi-proxy for the flagship cryptocurrency.

MSTR daily price chart versus BTC/USD. Source: TradingView

MSTR has gained momentum, especially amid aggressive traders — those with a higher appetite for risks — with its year-to-date returns now at 65.21%.

At the same time, Bitcoin prices have climbed 68.22%, with many analysts now anticipating the BTC/USD rates to have doubled by the end of 2021 and hit $100,000.

But MSTR and BTC/USD showed signs of decoupling after June. In the period, the MicroStrategy stock limited its downside moves against a comparatively aggressive bearish trend in the Bitcoin market. Financial analyst Alexander J Poulos spotted the deviation, noting that it could have been due to Capital Group’s investment in MicroStrategy.

In June, the United States-based financial services company, which runs the American Funds family of mutual funds, bought a 12.2% stake in MicroStrategy. Poulos stressed that Capital Group’s $600-million investment was an indirect way for it to gain exposure to Bitcoin.

“With the SEC not approving a pure-play BTC ETF [exchange-traded fund], MSTR will continue to serve as a proxy for fund families,” he said, adding:

“The move by the Capital Group is not an outlier. I expect others to initiate or add to their existing positions.”

A high-risk play

MicroStrategy has amassed heavy debts to purchase Bitcoin. Therefore, considering it could sell its crypto holdings to respect its financial commitment to bond investors could be a potentially negative event for MSTR.

In his SeekingAlpha op-ed, Joshua Sorto, the staff accountant at MNCPA, wrote that MicroStrategy could easily pay back the debt on its first $650-million convertible note — MSTR is already trading above $517 to convert notes into shares that do not require MicroStrategy to sell the Bitcoin inventory.

But the second convertible note has a conversion rate benchmark set at $1,432.46. That said, MicroStrategy would need to have tripled its market valuation by 2027, which means MSTR would need to rise over 100% before the bond’s maturity.

“In order for MSTR to do that, the analytics business will have to produce cash flows of $125 million per quarter; at the moment, it’s running at less than half that level,” Sorto said while referring to MicroStrategy’s second-quarter earnings.

The third note is not convertible. MicroStrategy has bought 13,005 BTC with nearly half a billion dollars worth of proceeds. So, whether or not the firm will pay off its debt depends majorly on Bitcoin’s performance until 2026.

Related: MicroStrategy stock slides after announcing new $400M debt raise to buy Bitcoin

In its filings with the U.S. Security and Exchange Commission, MicroStrategy revealed a total of 49 risks, 47% of which concerns finance and corporates. Also, the risk tally comes to be higher than the S&P Average of 31. 

MicroStrategy risk disclosures. Source: TipRanks

Poulos admitted that he is bullish on Bitcoin in the coming years, which, in extension, means he is also bullish on MicroStrategy. Sorto also expressed a similar outlook, noting that MSTR’s association with a booming Bitcoin industry would have the stock retain its upside outlook long term.

“There are no storm clouds on the horizon, but a few clouds in the distance are worth monitoring,” Sorto wrote.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Capital International Buys Nearly 1 Million Shares of Bitcoin-Focused Microstrategy

Capital International Buys Nearly 1 Million Shares of Bitcoin-Focused MicrostrategyMajor asset management firm Capital International has gained exposure to bitcoin through investing in almost 1 million shares of Microstrategy which now holds more than 100K bitcoins. Capital International Investors (CII) informed the SEC in a filing dated July 12 that it has purchased shares of Microstrategy’s Class A common stock (MSTR). The filing states: […]

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Microstrategy Selling up to $1 Billion of MSTR Stock to Buy Bitcoin

Microstrategy Selling up to  Billion of MSTR Stock to Buy BitcoinMicrostrategy Inc. is selling up to $1 billion of its common stock, MSTR, with the aim to use some of the net proceeds to buy bitcoin. The Nasdaq-listed company also recently completed a $500 million secured notes offering and will use the proceeds to acquire bitcoins. Selling MSTR Stock to Buy Bitcoin Microstrategy Inc. has […]

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MicroStrategy stock slides after announcing new $400M debt raise to buy Bitcoin

The company's stock has dropped by more than 60% after topping out at $1,135 in early February.

A lackluster balance sheet, excessive debt load and over-leveraged exposure to Bitcoin have crashed MicroStrategy stock by more than 63% since February already. Nevertheless, the business intelligence company has ignored the risks of its frothy valuations, and it now wants to raise more debt and buy Bitcoin with proceeds (BTC).

MicroStrategy announced on June 7 that it "intends to raise $400 million aggregate principal amount of senior secured notes in private offering [...] to acquire additional Bitcoins." The company already holds more than 92,000 BTC, worth about $3.31 billion at current exchange rates — almost 1.5x its principal investment.

BTC/USD (blue) vs. MSTR (orange) YTD performance. Source: TradingView

MSTR plunged 2.17% to $469.29 per share after the New York Stock Exchange's opening bell on June 7. At its year-to-date high, it was changing hands for $1,135.

Not making money

In previous statements, MicroStrategy clarified that it is building up a Bitcoin portfolio as an insurance policy against the continuing devaluation of the world's major currencies. But with its back-to-back Bitcoin purchases, the company has effectively protected itself from more than just the U.S. dollar decline. Here's a hint: unprofitable business lines.

MicroStrategy's net income growth plunged 121.90% in 2020. Source: Wall Street Journal

A look into MicroStrategy's alternative asset holdings also shows that the company is overly skewed toward Bitcoin, with real estate accounting for less than 0.2% of the total investments.

Its latest quarterly report also shows a weaker balance sheet as of March 31, with a debt-to-equity ratio of 4.55 — a significant debt load of $1.66 billion against an equity valuation of $0.37 billion.

MicroStrategy is holding assets worth $2.44 billion as of March, out of which $1.947 billion is Bitcoin. Source: WSJ

That is particularly risky when Bitcoin's price volatility is taken into account. MicroStrategy does not generate sufficient income to service its debt load and hugely relies on Bitcoin profits to do so. Atop that, it now wants to raise another $300 million, although its convertible notes are not due to mature until 2028.

Juan De La Hoz, a closed-end fund/exchange-traded fund strategist, fears that MicroStrategy risks becoming insolvent should Bitcoin fall by more than 50% in the future, noting the flagship cryptocurrency's massive declines in the years 2014 and 2018. The analyst added that MicroStrategy would most likely liquidate its Bitcoin holdings to avoid insolvency.

Hoz added that he would neither invest in cryptocurrencies through leverage nor invest in a company that did so, hinting at his extremely bearish outlook for MicroStrategy and Bitcoin.

"It is simply too risky, you could lose it all, and I'd rather not take that chance."

Bitcoin prices sleepwalked through MicroStrategy's announcement early in the U.S. morning before trading began on the NYSE. The BTC/USD exchange rate continued trading sideways while maintaining support above $36,000.

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Crypto-exposed stocks slide as BTC-bolstered treasuries shed value

Many stocks of publicly traded firms that are exposed to Bitcoin have suffered significant drawdowns this month.

The fallout from this month’s violent crypto market meltdown appears to have flowed into the stock markets, with publicly-listed firms with exposure to crypto assets seeing significant losses during May.

The month saw Bitcoin and other leading cryptocurrencies crash by at least 50%, with BTC plummeting from roughly $60,000 on May 10 before bouncing off support at $30,000 last week.

The largest publicly traded firm by number of BTC held in its reserves, MicroStrategy (MSTR) saw its share price slump from $657 at the end of April to roughly $450 as of May 21 — a 31.5% drawdown in three weeks. However, MSTR appears to have benefited from Bitcoin’s 50% bounce from the weekend’s lows, having gained nearly 5% in the last 24 hours to last change hands for $472.45.

According to Bitcointreasuries.org, MicroStrategy’s 92,000 Bitcoin have appreciated in value by roughly $1 billion combined despite the crypto crash.

Tesla (TSLA) also took a beating this month, with its shares tanking 18% from $709 at the end of April to $581 on May 21. TSLA has also rallied 4.4% in the past day to last trade for $606.44.

Despite Tesla suspending Bitcoin as an accepted method of payment for its vehicle fleet on May 12, the firm is yet to announce it has sold any of the 43,200 BTC from its reserves. Bitcointreasuries estimates Tesla’s BTC stash has increased in value by 10% since the vehicle manufacturer invested $1.5 billion into Bitcoin.

However, not every firm that purchased Bitcoin in recent months is sitting in profit, with Chinese smartphone manufacturer and app developer, Meitu, having invested $49.5 million near BTC’s all-time highs during March and April. While the firm’s BTC hodlings are now worth $35.9 million, Meitu has also seen its share price plummet 19% from roughly $0.31 to $0.26 since the end of April.

Japanese online gaming firm Nexon also announced an ill-timed $100 million BTC purchase on April 28, with the firm’s Bitcoin stash now valued at just $67 million. Nexon’s share price has since tanked 29.5% from $33.35 at the end of April to $23.49 today.

However, some analysts believe the sell-off in the tech and crypto sectors may be exacerbated by concerns regarding inflation.

Speaking to Reuters, David Mazza, the managing director of leverage ETF issuer, Direxion, speculated that “Higher-risk assets, whether in the form [...] of cryptocurrencies or the more speculative growth stocks, are seeing their multiples taken down markedly as investors begin to reassess what impact the potential for inflation will have.”

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Microstrategy Buys $10M Worth of Bitcoin, MSTR Shares Down Over 60% Since February

Microstrategy Buys M Worth of Bitcoin, MSTR Shares Down Over 60% Since FebruaryOn Tuesday, the publicly-listed business intelligence company, Microstrategy, announced the purchase of 229 bitcoins adding to the firm’s current stash of crypto. The company’s CEO Michael Saylor told his Twitter followers that Microstrategy now holds 92,079 bitcoins. Microstrategy Stocks Up on More Bitcoin, Buys $10 Million Worth to the Balance Sheet Microstrategy (Nasdaq: MSTR) has […]

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MicroStrategy sees up to 52% revenue surge as Saylor confirms more Bitcoin buys ahead

New figures show certain revenue sectors boomed by over 50% in Q1 2021 compared to the same quarter last year.

MicroStrategy, the company which owns over 91,000 Bitcoin (BTC), saw an astounding surge in revenues in Q1, its latest figures confirm.

In a press release on April 30, CEO Michael Saylor revealed that the company's success had gone far beyond its Bitcoin profits.

Saylor: Hodling BTC creates "substantial value"

MicroStrategy has continued to hit the headlines for its flatly bullish position on Bitcoin and its future, adding to its reserves regardless of sentiment or price. 

Its advocacy has seemed to endear it to a new sector of clientele — nine months after beginning to convert its cash reserves to BTC, sales of its products and services have also boomed.

"Product licenses and subscription services revenues for the first quarter of 2021 were $31.3 million, a 52.3% increase, or a 49.8% increase on a non-GAAP constant currency basis, compared to the first quarter of 2020," the press release states.

Total revenues for Q1 were just over $122 million, representing a 10.3% increase over the same period in 2020.

"MicroStrategy’s first quarter results were a clear example that our two-pronged corporate strategy to grow our enterprise analytics software business and acquire and hold bitcoin is generating substantial shareholder value," Saylor commented.

He said that the company was "still happy" with its approach to BTC acquisition, adding that it would be adding to its already substantial reserves.

"We will continue to acquire and hold additional bitcoin as we seek to create additional value for shareholders," he concluded.

BTC (orange) vs. MSTR (blue). Source: Tradingview

As Cointelegraph reported, the company's stock price has experienced volatility this year, something which has echoed Bitcoin's own price discovery.

Bulls have "nothing to worry about"

The numbers are a familiar boon for Bitcoin bulls, who have been left hanging this week as rumors of major corporate buy-ins from the likes of Facebook went unsubstantiated.

This combined with equally familiar ranging price action has hit enthusiasm in some quarters, while analysts argue that there is nothing to be bearish about.

"So far, so good for Bitcoin. Still nothing to worry (about)," popular trader Michaël van de Poppe summarized to Twitter followers on Thursday.

An accompanying chart highlighted resistance beginning at $55,000 for the largest cryptocurrency to overcome as altcoins began to accelerate their own gains.

BTC/USD 1-hour candle chart (Bitstamp). Source: Tradingview

At the time of writing, BTC/USD traded at around $54,700, having come full circle over the past 24 hours which included a drop below $53,000.

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BNY Mellon fund laments it should have bought Bitcoin, not gold

SEC filings show that America’s oldest bank has attributed the underperformance of its small-cap ETF to failing to buy MicroStrategy shares after the firm invested heavily in BTC.

U.S.-based financial institution BNY Mellon, the world’s largest custodian bank and asset servicing company, states that the recent performance of one of its exchange-traded funds, or ETFs, was significantly impacted by its lack of exposure to companies investing in Bitcoin.

The BNY Mellon Opportunistic Small Cap Fund (DSCVX) gained 35% from September 1, 2020, through February 28, 2021, underperforming its benchmark, the Russell 2000 Index — which produced roughly 41.7% over the same period.

Filings with the U.S. Securities and Exchange Commission indicate the firm laments not purchasing shares in leading business intelligence firm MicroStrategy (MSTR) — which invested billions into Bitcoin last year, holdings that have since grown to more than $4.8 billion. The filings state:

“Fund performance was hurt as well by a decision not to own MicroStrategy, whose stock surged when it announced it had invested in Bitcoin.”

The document also notes that the fund’s position in gold mining company, Alamos Gold, “hampered performance as shares were hurt by weak gold prices.”

According to ETF.com, 88 ETFs are currently exposed to MicroStrategy, including the sixth-strongest performing fund of 2021 so far, the Amplify Transformational Data Sharing ETF (BLOK) — which is heavily exposed to crypto firms and is the single-largest holder of MSTR by percentage allocation with 5.20% of its portfolio invested in Microstrategy.

On average, U.S.-based ETFs have allocated 0.57% of their capital to MicroStrategy.

Since announcing its first Bitcoin investment in August 2020, MicroStrategy has accumulated $2.2 billion worth of BTC — with the firm’s crypto stash having appreciated in value by 120%.

Over the same period, the price of MSTR has skyrocketed by 385% from $135 to $655 at the time of writing. In early February, MSTR was trading at record highs above $1,270.

MSTR/USD since August 2020: TradingView

BNY’s small-cap ETF typically invests a minimum of 80% of its assets into the stocks of companies with a low market capitalization from the Russell 2000 Index. Some of the fund’s largest allocations include North American airline SkyWest, enterprise cloud provider Cloudera, and healthcare provider Acadia. Roughly 23% of its investments are in the industrial sector, 17.5% are in healthcare, 15.9% are in technology, and 14.2% are in financial services

After opening 2020 trading at roughly 27.5%, DSCVX crashed as low as $16 during March as the economic impacts of the coronavirus became apparent globally. Since then, the fund has more than doubled in price to trade for more than $37.

Despite regretting the lack of MSTR exposure of its Opportunistic Small Cap Fund, BNY Mellon is making significant investments in the crypto sector, leading the $133 million Series C funding round of institutional crypto custodian Fireblocks last month.

In February, BNY Mellon also announced plans to offer Bitcoin custody services.

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Binance to launch Microstrategy, Apple, and Microsoft stock tokens

The upcoming listings will bring the total number of stock tokens supported by Binance to five.

Top crypto asset exchange Binance has announced it will list three new stock tokens over the coming week, following the launch of tokens tracking the performance of Tesla and Coinbase shares earlier this month.

On April 26, Binance announced it will launch tokenized stock pairings for leading business intelligence firm, Microstrategy (MSTR), in addition to multinational tech firms Apple (AAPL) and Microsoft (MSFT).

The tokens will allow users to trade fractionalized units of the share tokens, with minimum trade sizing set at one one-hundredth of a token.

Binance’s MSTR tokens are slated to go live at 1:30 pm UTC on April 26, while the AAPL tokens will launch at the same time on April 28, and MSFT tokens will be tradable from April 30.

The exchange asserts its stock tokens are “fully backed by a depository portfolio of underlying securities” held by German financial services provider, CM-Equity AG. The tokens will observe traditional stock trading hours.

The tokens will only be tradable against Binance’s stablecoin BUSD. Binance’s stock tokens are not available to residents of mainland China, the United States, Turkey, and other jurisdictions restricted by CM-Equity.

Binance launched its first stock token on April 12, allowing its customers to speculate on the price of Tesla (TSLA). The exchange also listed fractional shares for Coinbase (COIN) on April 15.

Binance’s expansion into stock tokens appears to demonstrate increasing competition between it and Hong Kong-headquartered crypto derivatives platform, FTX — which launched fractionalized stock trading in October 2020, including derivatives tracking Tesla and Apple shares.

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