In late August 2020, MicroStrategy, an enterprise analytics and mobility software company, announced it was buying $250 million worth of Bitcoin. This has been described by some as a bold move, indicative of the growing acceptance of cryptocurrencies by mainstream organizations. This event has sparked debate on the future of Bitcoin and its fundamentals, and has spotlighted major investors such as the Crypto Whales and Tesla.
With Bitcoin coming off the highs of December 2020 and now trading underwater to its 2020 prices, it begs whether or not MicroStrategy’s bet on Bitcoin was wise.
Crypto Whales Tesla, MicroStrategy Underwater as Bitcoin Crashes to 2020 Prices
The cryptocurrency market has experienced tremendous growth over the past few years and is transforming the traditional finance market. By leveraging digital assets, ledger technologies, and digital tokens it allows users to conduct anonymous transactions that are decentralized, secure, and immutable. Cryptocurrencies such as Bitcoin, Ethereum, Litecoin and many others have become very popular in recent years with their prices reaching all-time highs.
In 2020 alone, the overall cryptocurrency market capitalization has tripled from around $190 billion to over $650 billion. And industry giants such as IBM and Microsoft have started offering blockchain-as-a-service solutions to their customers. To tap into this market further, on January 11th 2021 MicroStrategy announced its decision to purchase approximately $250 million worth of Bitcoin for its treasury reserves with 71000 bictcoins being purchased at an average of about $34900 per coin.
Besides traditional payment gateways such as PayPal, more Wall Street heavy hitters are investing in Bitcoin providing further recognition for cryptocurrency legitimacy—shifting from a “get rich quick” idea to a tried and true digital asset similar to ones like gold or stocks in traditional markets. Such moves are seen by many investors as significant progress towards accepting cryptocurrencies into mainstream markets thereby legitimizing their value even further.
Tesla’s Bitcoin Bet
Tesla’s investment in Bitcoin earlier this year sparked a crypto frenzy, with investors rushing to get in on the action. MicroStrategy was hottest on the scene, buying more than $1 billion worth of Bitcoin. But since then, the cryptocurrency’s price has dived, leaving MicroStrategy’s investment underwater – and many investors wondering what the future holds for the crypto market.
Let’s look at Tesla’s bitcoin bet and what it says about the future of cryptocurrency.
Tesla’s purchase of Bitcoin
In 2021, Tesla, Inc. made the unprecedented move of investing 1.5 billion dollars in Bitcoin, becoming the most high-profile company to make a major crypto investment. The move ignited a flurry of speculation and discussion about what this signifies for the future of cryptocurrencies and other similar technologies.
Tesla’s decision reflects a growing acceptance of digital assets amongst institutions and large businesses, as well as a shift in investment strategies towards more digital curriencies. Tesla has made it known that it intends to use its treasured cryptocurrency for increasingly larger financial transactions to position itself as an early adopter of this technology-driven currency revolution.
It’s worth noting that Tesla is more than just another company making some crypto investments; it is setting itself up to be a leader in the crypto revolution by making such a bold statement about its faith in the security and value of Bitcoin and other cryptocurrencies. By acquiring such a large amount of Bitcoin, Tesla has put its money where its mouth is and sent the message that it sees Bitcoin, or at least cryptos in general, as valuable investment opportunities with real potential for growth.
Ultimately, only time will tell what long-term implications Tesla’s purchase will have on both the company itself and cryptocurrency markets as a whole. Nevertheless, it’s clear that by investing such an impressive amount in Bitcoin they are sending an unmistakable message regarding their confidence in this new asset class–one which many investors won’t be able to ignore moving forward.
Tesla’s rationale for investing in Bitcoin
In late January, Tesla made headlines when it disclosed that it purchased $1.5 billion in Bitcoin and may accept it as payment for its electric vehicles soon. The announcement sent shockwaves throughout the retail world and a tsunami of speculative buying has continued to fuel skyrocketing valuations across the cryptocurrency markets. One of the primary rationales for Tesla’s investment in Bitcoin is likely related to Michael Saylor, CEO of MicroStrategy, a business intelligence platform.
Saylor has been an outspoken advocate for cryptocurrency and since August 2020, has led his company on a $1.7 billion Bitcoin shopping spree. Following Tesla’s news, Saylor explained the rationale behind embracing digital assets over traditional reserves such as gold and US dollars: “You can’t buy what you can’t price…you can’t touch it with an institutional balance sheet…if you want to preserve your wealth with something that’s known to not lose value you have to go digital.” By investing in Bitcoin, Saylor believes Microstrategy is providing customers with stability and security as opposed to opting for stocks, bonds or commodities whose values fluctuate wildly in response to inflationary or deflationary risk factors; specifically he argues against considering gold or cash reserves due to their correlation with global markets which makes them vulnerable during turbulent times.
It appears that Elon Musk concurs; his commitment of such a large amount of capital into crypto-assets validates the argument presented by executives such as Saylor that suggest significant financial potential exists within this market sector; however one must remember while digital currencies have higher growth potential many risks still exist especially volatility related ones due increased speculation within this space.
MicroStrategy’s Bitcoin Bet
MicroStrategy’s bet on Bitcoin in August 2020 has been seen as a prominent move in the cryptocurrency world. The business intelligence firm which has Tesla, Apple, and Twitter as its clients, made a big splash by investing a quarter of a billion dollars into Bitcoin, leading to many people to look to MicroStrategy for guidance when it comes to cryptocurrency investments.
Despite the recent Bitcoin crash, MicroStrategy still stands strong with their investment and this can tell us a lot about the future of cryptocurrency.
MicroStrategy’s purchase of Bitcoin
MicroStrategy’s recent announcement that it has invested more than $250 million in Bitcoin, with plans to add up to an additional $250 million in the coming months, is a clear signal of confidence in the future of cryptocurrency. Its move comes as other big institutional players cautiously explore the crypto market as a viable portfolio option.
In August 2020, MicroStrategy’s CEO Michael Saylor said that he viewed Bitcoin “as a dependable store of value and an attractive investment asset” and proceeded to purchase 21,454 BTC. Not long after, they added 16,796 more BTC to their holdings. At current prices, the company holds almost 90k BTC which makes them one of the largest Bitcoin holders in the world by market capitalization.
The purchase was conducted through both direct purchases from cryptocurrency exchanges and through Grayscale’s Bitcoin products. Grayscale is owned by Digital Assets Group LLC; a wholly-owned subsidiary of Barry Silbert’s Digital Currency Group (DCG). The executives at DCG have been active investors in blockchain tech and cryptocurrencies for years — most notably investing in Ethereum-based companies such as Coinbase and Ripple back when their prices were significantly lower than today.
MicroStrategy’s purchase has been seen as an endorsement from institutional investors that alternative investments such as cryptocurrencies have legitimate potential going forward — they are not only safe havens during uncertain economic times but also provide good long term returns when compared to traditional investments such as stocks or bonds. Additionally, its decision to invest on its balance sheet rather than via third party funds – like Grayscale – speaks volumes about how confident it is regarding its views on digital assets going forward.
MicroStrategy’s rationale for investing in Bitcoin
MicroStrategy has been a major proponent of Bitcoin investment in recent years, becoming the first publicly-traded company to do so. The firm purchased approximately $425 million worth of Bitcoin in August and September 2020, with Chief Executive Officer Michael Saylor championing the move as a pioneering decision. An additional $50 million was reportedly added to their portfolio this week to further strengthen their commitment.
MicroStrategy’s rationale for investing in Bitcoin centers on the idea that it is superior to gold and fiat currencies in several ways. The company states that Bitcoin is easier to acquire and store than gold, and its volatility is much lower than other assets or currencies such as the US Dollar. As an investment vehicle, they believe that it can provide greater returns than more conventional options. Additionally, they cite potential stability benefits as quantitative easing continues worldwide; with uncertain times ahead, investors may increasingly flock towards a decentralized currency with a limited supply like Bitcoin as an inflation hedge.
In addition to these advantages for large investors in the macro economy, MicroStrategy has hinted at other possible implications for its operations if their bet pays off. Since there are virtually no transaction fees associated with Bitcoin payments unlike other payment methods used within their business model (like credit card payments or wire transfers), this could lead to cost savings — expanding margins or creating new opportunities — which could benefit shareholders.
Impact of Tesla and MicroStrategy’s Bitcoin Bet
Recent moves by Tesla and MicroStrategy to invest in Bitcoin have made many people question the future of cryptocurrency. Both companies have seen a drop in their stock prices as Bitcoin has crashed to 2020 prices, leaving them underwater.
While a few Crypto Whales have cashed out and made a profit, it is worth looking at the impact of their decisions on the future of cryptocurrency.
Impact on the cryptocurrency market
MicroStrategy’s highly publicized decision to invest 1.3 billion dollars’ worth of capital reserves into Bitcoin has had a significant impact on the cryptocurrency market, both in terms of investor confidence and public perception. The company’s CEO, Michael Saylor, has also advocated for wider adoption of Bitcoin, appearing on podcasts and interviews to discuss the project’s prospects.
Tesla’s recent decision to invest $1.5 billion in Bitcoin and later accept it as a form of payment has gone even further to legitimize the cryptocurrency market by showing the viability of investing in and spending with digital currencies. The news sent shockwaves through traditional markets: investors saw Tesla’s move as a sign that Bitcoin was becoming an investment alternative like any other asset class.
The two companies’ moves have made cryptocurrencies more tangible for investors who may not have otherwise considered them for their portfolio. MicroStrategy and Tesla’s bets on Bitcoin also indirectly fueled investments into other types of alternative currencies like Ethereum, Dogecoin and Filecoin, significantly increasing trading volumes across all exchanges worldwide over the past few months.
The increasing interest in cryptos from general investors will likely lead to regulatory clarity on digital assets through clear regulations about investments such as taxation on profits made from trading or ownership gains when holding cryptocurrencies for extended periods. The rise in demand also shows that institutions are ready to move some portion of their portfolios into crypto; thus making digital currencies less speculative than before.
Impact on Tesla and MicroStrategy’s stock prices
The surprising decision by electric car giant Tesla (TSLA.O) and business intelligence software provider MicroStrategy (MSTR.O) to invest billions of dollars in the volatile cryptocurrency Bitcoin has sent shockwaves through not only the stock markets but also the cryptocurrency market.
Tesla announced it would be investing $1.5 billion in Bitcoin, equating to about 8% of its total cash on hand, with CEO Elon Musk further confirming this move by tweeting “Indeed” and a single bitcoin emoji from his account. Following this announcement, Tesla’s stock prices rose almost 4%, reaching a new all-time high of $882 per share, a remarkable increase from its pre-cryptocurrency trading value of $641 per share.
Not to be outdone, MicroStrategy jumped onto the Bitcoin bandwagon shortly afterwards and announced it had purchased around 17 million worth of Bitcoin for $250 million as a corporate treasury reserve asset — just days later they invested an additional $175 million in Bitcoin too bringing their total investment up to almost 469 million dollars. Not surprisingly, this news saw the company’s stock price rise by 11%, reaching a peak of over $510 per share compared to its original pre-Bitcoin investment price of just under $470 per share before closing around 11% up from that level at $524.60 . This was reflected in their quarterly report with strong profits posted for Q4 2020 due to these investments and gains from their other business operations.
These bold moves by two major multinational companies into the world of digital assets have immensely increased impact on the stock prices for both Tesla and MicroStrategy —asserting cryptocurrency’s legitimacy and power within mainstream finance.
Conclusion
As the cryptocurrency market rises, so does the interest of investing institutions. Companies such as Tesla, MicroStrategy and the so-called “crypto whales” have come to the forefront of the cryptocurrency markets and are investing significantly in the industry.
Despite the recent price crash of Bitcoin, these investments signal a potential new direction of the industry and optimism that crypto assets are here to stay.
In this article, we’ll analyze some of the potential implications of these investments, and conclude with a few thoughts on the future of cryptocurrencies.
What the future may hold for cryptocurrency
Cryptocurrency is still an emerging asset class and its future trajectory remains to be seen. Microstrategy’s announcement that it has purchased over $400 million-worth of Bitcoin underscores the growing popularity of digital currencies as alternative investments. Cryptocurrency adoption in various ways may continue to rise over time.
The trends in cryptocurrency can be complex and difficult to predict, given how its value is highly volatile and driven primarily by speculation among buyers and sellers. Nevertheless, there are some indications of where cryptocurrency may be heading in the coming years. Rapid technological changes suggest that more people will access digital currencies through simpler means such as user-friendly wallet applications or debit cards linked to cryptocurrencies accounts. This could accelerate mainstream adoption, particularly among consumers uncomfortable investing directly in crypto assets due to their fluctuating nature.
Additionally, growing confidence in the underlying technology will likely lead more businesses—as well as institutional investors—to accept cryptocurrencies as a form of payment with increasingly higher value transactions. With improved security protocols for storage and transaction settlements, businesses may adopt crypto payments for larger purchases through various platforms pointing at an even greater acceptance level for these emerging asset classes over time.
