MicroStrategy's Bitcoin Strategy Beats Even Bitcoin

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Numbers don't lie. Maybe they do. But they do tell an interesting story.

I think it is safe to say bitcoin has been the most valuable asset of this century so far. Its growth has been more than remarkable. Going from zero, then pennies, then dollars, to tens of thousands of dollars worth in a decade is has not just been impressive but disruptive in many ways. The bitcoin phenomenon not only paved the way for new type of thinking about money and technology, but also demonstrated the power of decentralization. It is a simple, yet one of the best innovations of our times. There have been many innovations in our history, but not many carry benefits of this scale. I can go on an on talking about bitcoin, but his post is about something else. It is about bitcoin strategy. Perhaps, MicroStrategy should rebrand to BitcoinStrategy.

It has been three years since MicroStrategy has decided to buy bitcoin with their cash in the treasury. It was the first publicly traded company that made such move. Michael Saylor have explained this strategy extensively in many talks. It just made sense for the company to buy bitcoin to preserve its assets. Today, we can see how bitcoin have outperformed almost everything within last three years. What is more impressive is that MicroStrategy outperformed bitcoin too. MSTR is up 206% since they first put bitcoin into their balance sheet. In crypto world 206% up may not mean much, when there are occasions of assets going 10x, 20x, etc. But in general terms doubling the value in three years is really good. Especially, when these results are presented in bearish market, and better price action is yet to come.

The original plan for MicroStrategy was to preserve the company's wealth. They have half a billion dollars that wasn't being used for anything. If not invested, this cash would just lose its value over time. Saylor was quick to realize that. Not only he wanted to come up with a solution for the problem of preserving the value in their treasury, he needed a long term strategy that would work continuously with future profits. He has described at one time that the company was profitable and would generate $50 million a year. Reinvesting this money into the company wouldn't add any benefits. He had to come up with a way that they couldn't continue accumulating their profits and don't worry about losing the value of assets in their treasury. Otherwise, their profits would be negated with the inflation and dollar losing its value. After long and extensive research, Saylor concluded bitcoin was the way.

Since the moment Saylor came to the conclusion that bitcoin would be the best strategy fo the company, he never backed down, but continued improving company's bitcoin strategy. After realizing the potential of the bitcoin, the true nature of network and the asset, Saylor wasn't going to limit MicroStrategy's involvement in bitcoin only to its treasury cash and annual profits. They decided to borrow billions more of cash from banks and buy more bitcoin. Why not? If this strategy is as good as Saylor believe to be, why not get more loans at super low rates, buy more bitcoin, and wait. Especially when they can afford waiting for a very long time. There was a time when bitcoin's price was below the average price MicroStrategy paid for their total bitcoins. But that time was short lived, and it didn't take long for them to be in net profit. However, the strategy isn't even about net gains in bitcoin. We the retail hodlers may measure the gains by how much we bought the asset and what the current price is. But for MicroStrategy, the price doesn't matter. Their strategy seems, if price drops buy more, if price goes up buy more. It seems they will continue buying as long as they have some cash to do so.

It didn't take long for MicroStrategy and Saylor to realize that in the environment when there is no clarity regarding bitcoin as an asset from politician's and regulator's points of view, many funds that would like to be exposed to bitcoin wouldn't be able to directly invest in bitcoin. Not only the uncertainty may cause psychological barrier, legal policies or fund rules would prevent them to buy bitcoin. Until such legislative or regulative clarity is introduced, the only way for such funds to be exposed in bitcoin would be to buy stocks like MSTR. Some CEOs and executives have criticized this strategy. Because they emphasize focus on core business companies involved in. Additional investments to make money or make the stocks more valuable would serve as distraction in their views. But also many more executives praised the strategy, perhaps may have adopted similar ones themselves. At the very least, MicroStrategy being the first company to utilize bitcoin for its own advantage and executing it successful, may have opened the doors for others to follow.

Bitcion strategy may not be the right path for many companies. It is true focusing on core business, products and services may serve many companies better. But there companies in possession of cash that they don't utilize, just like MicroStrategy once did. Sooner or later they will have to realize the risks they have taking by not implementing bitcoin strategy. Some may have been implementing it in a stealth mode. Either way, the test phase for MicroStrategy has passed. While it may have seem to be a risky move three years or even two years ago, now MicroStrategy have positioned itself well and ready to surprize the rest that haven't been impressed so far.

It programmed for bitcoin to make significant moves in a year or two. This time is well below MicroStrategy's bitcoin strategy. Saylor have repeated many times when they first got into bitcoin that, they were in for long term, at least ten years. Over time this ten year timeframe turned into infinity. If anybody deserves to be rewarded for their bitcoin investment, it sure is MicroStrategy.