Bitcoin and MicroStrategy Pushed MSTR Into the Top 100 Club

MicroStrategy’s top 100 breakthroughs are powered by Bitcoin and in turn fuel Bitcoin. How does this feedback loop continue to push both higher?

MicroStrategy is among the top 100 Clubs

MicroStrategy (MSTR), a company famous for Bitcoin’s (BTC) wild ride, has reached a major milestone. As of the Nov. 20 trading session, it had jumped 48 spots in two days to rank 85th on the elite list of the top 100 publicly traded U.S. companies by market capitalization.

As of November 20, MSTR’s market cap has risen to approximately $111 billion following a 12% increase in its stock price on November 19, coupled with an additional increase of 15% as of this writing. Currently, the stock is trading at $482 per share, marking a remarkable close to an already explosive year of growth.

Top 100 US companies by market cap | Source: Market Value of Companies

Simultaneously, Bitcoin, the cornerstone of MicroStrategy’s institutional strategy, rose to a new all-time high, breaking $94,000 and trading at $94,850 as of November 20.

For context, MicroStrategy’s shares are up 620% year-to-date in 2024, while BTC itself is up over 125%.

BTC 3-month price chart | Source: crypto.news

Shares of MicroStrategy have risen a staggering 2,739% since adopting Bitcoin as a treasury asset in 2020, narrowly outpacing NVIDIA’s (NVDA) gain of 2,688% in the same period, indicating that Bitcoin-heavy strategies are pushing MSTR to the tech giants’ reshaped how he pushed into a league he dominated. banks and energy companies.

This achievement, when comparing performance over the past five years, puts MSTR ahead of NVDA, which is now the world’s largest publicly traded company with a market capitalization of more than $3.6 trillion and is celebrated as a leader in artificial intelligence and gaming innovation.

So what does all this mean for Bitcoin? Let’s take a deeper dive into the relationship between MSTR and Bitcoin and explore how their paths influence each other in ways that will rewrite financial history.

How did MicroStrategy become Bitcoin’s biggest supporter?

MicroStrategy has redefined its identity over the past few years, evolving from a business software company to a leader in enterprise Bitcoin adoption. His strategy is simple: accumulate as much Bitcoin as possible and use it as a long-term asset.

Since its initial acquisition in 2020, MicroStrategy has continued to expand its Bitcoin reserves through bold acquisitions and innovative financing methods, closely tying its growth to the performance of BTC.

As of November 20, the company holds approximately 331,200 BTC, for a total cost of $16.5 billion, or an average of $49,874 per Bitcoin.

Amid the current bull run, the company purchased 51,780 BTC for $4.6 billion between November 11 and November 17, at an average price of $88,627 per Bitcoin.

MSTR’s BTC holdings, currently valued at over $31 billion, are more than 10 times the Bitcoin holdings of Marathon Digital (MARA), the second largest publicly traded asset at nearly 27,000 BTC, and far exceed Tesla’s 11,500 BTC.

MicroStrategy relies heavily on capital raising strategies to finance its acquisitions. The company disclosed in a filing with the SEC on Nov. 18 that it sold approximately 13.6 million shares under a pre-existing agreement for net proceeds of $4.6 billion.

Despite this, it still has $15.3 billion worth of shares available for future issuance, giving it significant flexibility for continued investment in Bitcoin.

And the company’s bold moves aren’t over yet. Just two days ago, MicroStrategy announced $1.75 billion of convertible senior notes due in December 2029 with a 0% coupon rate.

Convertible senior notes are a unique type of debt instrument that allows investors to lend money to a company and have the option to convert that debt into shares at a later date, usually at a pre-agreed price.

What’s interesting here is that MicroStrategy’s bonds come with a 0% coupon rate, meaning they don’t pay investors any regular interest.

In a new twist, MicroStrategy announced that it increased its convertible bond offering from $1.75 billion to $2.6 billion due to high demand, including a $400 million green shoe option with a 55% conversion premium.

We increased our capacity upon popular demand $MSTR It introduced a 0% convertible bond offering from $1.75 billion to $2.6 billion due in 2029, including a $400 million green shoe option, and priced it at a 55% conversion premium.

— Michael Saylor⚡️ (@saylor) 20 November 2024

Widely used to meet excess demand, the green shoe option allows underwriters to sell additional bonds beyond the initial offering. The 55% conversion premium represents the percentage above MicroStrategy’s current stock price at which bonds can be converted into shares.

This suggests that investors are willing to pay a significant premium to bet on the company’s long-term growth even if its shares continue to rise; This actually attributes their fortune to the company’s Bitcoin-focused strategy.

A vision beyond Bitcoin assets

MicroStrategy’s story is far from over, and its next chapter is shaping up to be bolder than the last.

MicroStrategy’s leadership, led by Chief Executive Officer Michael Saylor, is not content to make Bitcoin the cornerstone of its strategy; is working to bring this vision to the broader corporate world.

On November 19, Saylor confirmed that during X Spaces hosted by VanEck, he would make a three-minute presentation to Microsoft’s board of directors to advocate for the adoption of BTC as part of their investment strategy.

Saylor has made it clear that he believes Bitcoin should be on the agenda of every major company, from Apple to Meta to Berkshire Hathaway.

Saylor argues that holding Bitcoin as a tangible asset can help companies stabilize their stock values, especially compared to relying heavily on quarterly earnings performance.

For example, Microsoft’s enterprise value is currently tied to 98.5% of its earnings, with only a small portion backed by tangible assets. Saylor believes BTC can offer a more balanced approach and potentially preserve shareholder value over the long term.

Beyond influencing others, MicroStrategy is doubling down on its own Bitcoin strategy with a bold initiative called the “21/21 Plan.”

This ambitious plan, announced in late October, aims to raise $42 billion over the next three years, $21 billion through equity and $21 billion through debt. The goal is to buy more BTC and solidify its position as the world’s leading Bitcoin treasury company.

According to CEO Phong Le, the capital raised will allow MicroStrategy to deploy its BTC more strategically, creating opportunities for higher returns while maintaining a strong reserve.

Bitcoin-MSTR feedback loop

MicroStrategy’s strategy has created a fascinating and controversial feedback loop that ties its performance directly to Bitcoin’s trajectory, strengthening both assets in the process.

The more Bitcoin MicroStrategy buys, the tighter the circulating supply becomes and the higher the price of Bitcoin rises, especially in bull markets. Supported by the increasing value of Bitcoin assets, the company’s shares are attracting investors’ attention and increasing their price.

A higher stock price allows MicroStrategy to raise more capital through share sales or debt, and that capital is directed to purchasing more Bitcoin.

It’s a self-reinforcing cycle, and while it’s proven to be extremely effective so far, it also raises important questions about its sustainability.

Critics are starting to sound the alarm about how sustainable this strategy is. For example, Peter Schiff, a well-known Bitcoin skeptic, questioned whether this self-reinforcing cycle was creating an unsustainable bubble.

The higher the price $MSTR stocks, more stocks @Saylor can sell. The more shares he sells, the more #Bitcoin can buy. The more Bitcoin he buys, the higher the Bitcoin price goes. When the price of Bitcoin increases, MSTR’s share price also increases further. When does it end?

— Peter Schiff (@PeterSchiff) 19 November 2024

But what makes this feedback loop particularly unique and potentially risky is the scale of MicroStrategy’s Bitcoin holdings.

The company currently controls more than 1% of Bitcoin’s total supply; This is a staggering figure that gives it a huge impact in the market. Each large purchase tightens the available supply and potentially triggers upward price pressure on the price of BTC.

If MicroStrategy’s strategy is successful, it could encourage other companies to follow suit, further strengthening the cycle. However, if the price of Bitcoin falls, the entire mechanism may unravel and both the stock and Bitcoin may suffer as a result.

This also means that the price of Bitcoin is increasingly dependent on the actions of large institutional players such as MicroStrategy, which did not exist as a decentralized asset in its early days.

The bigger question is whether this symbiotic relationship between MicroStrategy and Bitcoin can remain beneficial in the long run, or whether it is a fragile structure that depends too much on continued upward momentum.

Disclosure: This article does not constitute investment advice. The content and materials on this page are for educational purposes only.