Bitcoin firm MicroStrategy soars 27% as crypto stake hits $11 billion

Micro strategyThe HODL strategy continues to reward investors.

The company said Monday it had acquired an additional 3,000 bitcoins for a total of $155 million between February 15th and February 25th. MicroStrategy, along with its subsidiaries, now owns about 193,000 bitcoins, worth $11 billion.

Michael Saylor, the company’s chairman and former CEO and one of the main cryptocurrency evangelists, distinguished the latest purchase in a post by X, noting that MicroStrategy’s average purchase price over time was $31,544. As of Tuesday, bitcoin was trading just under $57,000.

Shares of MicroStrategy jumped 16% on Monday and another 10% on Tuesday to close at $871.80.

Founded in 1989, MicroStategy has a business in enterprise software and cloud-based services, but its shareholder value is almost entirely tied to its ownership of Bitcoin, effectively making the company a proxy for the world’s largest cryptocurrency.

During MicroStrategy’s latest earnings call on February 7, CFO Andrew King said the company is “the largest corporate holder of bitcoin in the world, and we remain committed to our bitcoin acquisition strategy with the utmost conviction.”

Bitcoin has jumped about 35% this year to its highest level since December 2021. Etherthe next largest cryptocurrency, is up 42% in 2024, climbing to around $3,250 on Tuesday.

Investors are increasingly bullish on bitcoin trading following the SEC’s approval of multiple exchange-traded spot bitcoin funds last month. Bitcoin is up 24% since the new ETFs began trading on January 11, and the funds have brought in billions of dollars in inflows.

“The demand that ETFs bring to the bitcoin spot market is significantly more than the new supply produced each day,” said Ryan Rasmussen, an analyst at Bitwise Asset Management. “Institutional capital is still gaining momentum with Bitcoin ETFs. I expect that much more demand is still under the surface and yet to be seen.”

Also boosting traders’ sentiment is the halving event, which occurs every four years and is scheduled for April. At this point, Bitcoin production is halved, a process designed to reduce the rate at which new coins can enter the network.

MicroStrategy announced its plan to invest in bitcoin in mid-2020, disclosing in an earnings call that it will commit $250 million over the next 12 months to “one or more alternative assets,” which could include digital currencies like bitcoin. At the time, the company’s market capitalization was around $1.1 billion.

In the fourth quarter of 2023, the company had its largest single-quarter increase in bitcoin holdings since late 2020. Meanwhile, its software and services business generated about $124.5 million in sales in the fourth quarter.

The company is up 33% so far this year, taking its market cap to nearly $15 billion.

Benchmark wrote in its report that even with ETFs providing more ways for investors to access bitcoin, “MicroStrategy stock continues to offer investors a unique value proposition.” For example, MicroStrategy has the ability to acquire bitcoins using proceeds from debt and equity issues, the firm said.

Analysts at TD Cowen wrote in a note on Tuesday that they expect bitcoin transactions “to prove accretive to shareholders over time.”

“MicroStrategy represents a new kind of firm that generates dollar-based cash flow from enterprise software and cloud services, but then converts its excess cash flow — based on effective leverage — into bitcoin,” TD Cowen analysts wrote. “What began as a defensive strategy to protect the value of its reserve assets has turned into an opportunistic strategy designed to accelerate shareholder value creation.”

— CNBC’s Dylan Butts and Ari Levy contributed to this report.