MicroStrategy bought $593 million in Bitcoin in November, why did it choose to "buy the bottom" at this time?

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On November 30, MicroStrategy, a U.S. technology company, announced in its 8-K filing that from November 1 to November 29, the company and its subsidiaries purchased 16,130 bitcoins, worth about $593 million, with an average price of nearly $36,000. This is the company’s largest transaction since February 2021, when it bought 19,452 BTC for just over $1 billion. (Note: Form 8-K means that when a listed company has a material shareholder matter, such as a major dispute, bankruptcy or receivership, it must file an 8-K report with the U.S. S**EC, rather than waiting for the next periodic report)*

According to the announcement, the Virginia-based company MicroStrategy currently holds a total of 174,530 bitcoins, worth about $6.6 billion. MicroStrategy has spent a total of $5.28 billion on cryptocurrencies at an average purchase price of around $30,252 per Bitcoin, making it the largest corporate holder of crypto assets to date.

Back in early November, during the company’s earnings call, MicroStrategy founder Michael Saylor said that the approval and launch of a Bitcoin spot ETF would be a “catalyst event” that would be beneficial to his company and other entities that hold Bitcoin.

“I think we’re going to see more and more analyst coverage from traditional Wall Street banks as these ETPs* (exchange-traded products)* provide exposure to Bitcoin,” Michael Saylor said on the earnings call. “More coverage means more education, which in turn sparks more buying interest.”

While it’s unclear what made MicroStrategy so bullish on Bitcoin in November, there has been plenty of news related to Bitcoin spot ETFs. In addition, there are about five months left until the next Bitcoin halving. Both of these are considered potential positive catalysts to influence the price of Bitcoin.

As MicroStrategy prepares to file an 8-K filing on November 28, the SEC opened a comment period on the Franklin Templeton Bitcoin spot ETF proposal, a move that came as a surprise as it started earlier than expected.

MicroStrategy first bought Bitcoin in August 2020 during the pandemic. Soon after, a bull market followed. Michael Saylor believes that the asset is a hedge against inflation and is the best strategy to maximize returns for shareholders as the company is sitting on a large amount of cash.

Despite the fact that MicroStrategy may have lost a lot of money in 2022 due to the purchase of Bitcoin, Michael Saylor resigned as CEO and moved behind the scenes to focus on the new Bitcoin strategy. But Michael Saylor’s plan seems to be working. MicroStrategy stock (NASDAQ-listed MSTR) has risen 238% since the company started buying Bitcoin. The current price per share is about $493.15, up 17% over the past month.

MicroStrategy stock price has fluctuated since the first Bitcoin purchase, Source: Bloomberg

Michael Saylor believes that buying shares in the company is a way for investors to gain exposure to cryptocurrencies. Michael Saylor has repeatedly spoken of Bitcoin as an asset superior to real estate and gold, as well as a “reliable store of value and an attractive investment asset with greater potential for long-term appreciation than holding cash.” Since then, other companies have followed suit. The most famous is Tesla, an electric car company. The clean energy company, led by Elon Musk, the world’s richest man, holds 9,720 BTC worth $366 million.

Notably, on November 30, MicroStrategy also entered into agreements with Cowen and Company, Canaccord Genuity, and BTIG to issue up to $750 million of common stock. The company initially announced plans to raise funds through a share sale in August, saying the proceeds would be used for things like buying Bitcoin, working capital and debt buybacks.

Related Reading: Interview with MicroStrategy CEO: Bitcoin is set to rise in the coming year with the help of halving and ETFs

References: Decrypt, Blockworks, Bloomberg