MicroStrategy, Square Bought Bitcoin High, Then the Price Fell
Some think bitcoin is too volatile to be a popular treasury reserve asset. MicroStrategy and Square seem to be in it for the long haul.
At stake
A big day for bitcoin balance sheets
MicroStrategy purchased another $1.026 billion in bitcoin Wednesday, bringing its total hoard to 90,531 BTC, worth some $4.78 billion. The business intelligence company, which is now better known for its bitcoin evangelism than its actual products, issued zero-interest debt to finance the purchase – in some sense making it a de facto bitcoin exchange-traded fund. CoinDesk’s Danny Nelson gives an overview of CEO Michael Saylor’s increasingly bombastic bitcoin pitch.
Square also bought more bitcoin, paying approximately $170 million for 3,318 BTC. It executed the deal with an average price per coin of $51,235.70, meaning the investment is in the red. It should be said, MicroStrategy’s most recent BTC allocation is also worth less than the dollars invested.
Why does this matter? Square putting 5% of its balance sheet into bitcoin is a huge vote of confidence for the asset. However, as CoinDesk’s Nathan DiCamillo notes, buying at market tops could prove JPMorgan’s theory that few non-crypto companies are likely to follow in MicroStrategy, Telsa or Square's footsteps given bitcoin’s volatility.
Still, as Square proved, there are ways to make money with bitcoin that don’t involve direct investment. The revenue it made from selling bitcoin on Cash App swelled to $4.57 billion in 2020, clocking $97 million in gross profit.
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