The bank of Bitcoin: MicroStrategy's share price rides high on the back of cryptocurrency investment

Deposits $1bn+ real world greenbacks into digital dosh, may borrow to buy more


MicroStrategy, a company once well known for making enterprise software, has extended its investment in Bitcoin, buying 19,452 units of the cryptocurrency for around $1.026bn in cash at an average price of about $52,765 per coin, including fees and expenses.

With users of its "intelligence everywhere" software including Hyatt Hotels, the American Red Cross, and Whole Foods Market, MicroStrategy has decided that Bitcoin was a good bet, at least in terms of finding somewhere to put unused cash. It might even borrow every now and then to feed the crypto-habit, suggested CEO Michael Saylor.

"We will continue to pursue our strategy of acquiring Bitcoin with excess cash and we may from time to time, subject to market conditions, issue debt or equity securities in capital raising transactions with the objective of using the proceeds to purchase additional Bitcoin," he said in a pre-canned statement.

MicroStrategy has been partaking in the habit since last summer, when it bought 21,454 Bitcoin at an aggregate purchase price of $250m, inclusive of fees and expenses, but clearly, that was not enough to sate the appetite. It went back in for more in December, when it hoovered up 29,646 Bitcoin for approximately $650m in real-world dosh.

Cynics among The Register's readership may be quick to point out that, with all this money going into Bitcoin, is it worth investing in software at all?

They might point to its calendar Q4 2020 revenues of $131.3m, a 1.7 per cent drop on the same period a year earlier. Third-quarter 2020 results had, however, offered $127.4m [PDF], a 6.4 per cent increase on a year earlier. Annual revenue has exhibited a steady if undramatic decline in the last three years.

Any suggestion that MicroStrategy's Bitcoin sideline would interfere with the serious business of software investment was dismissed by president and CFO Phong Le.

"MicroStrategy remains dedicated to our enterprise analytics customers and our goal of operating a growing profitable business intelligence company. We believe our Bitcoin strategy, including our Bitcoin holdings and related activities in support of the Bitcoin network, is complementary to our software business, by enhancing awareness of our brand and providing opportunities to secure new customers," he said.

Given the stratospheric rise in cryptocurrency in recent years, it might seem a good bet. But borrowing money and putting it into Bitcoin does not come without its risks.

Bloomberg has calculated that if MicroStrategy bought its most recent Bitcoin before prices hit a low of $45,000 on Tuesday, it could be looking at as much as a $151m loss based on their average purchase price.

Not that such a possibility has affected the company's share price, which is five times the value it was when the Bitcoin strategy first emerged. Clearly, the CEO has an eye for what he will be measured against.

MicroStrategy is not alone in acquiring a taste for crypto-coin. The world's media swivelled its collective heads when earlier this month a $1.5bn investment from electric car maker Tesla caused the value of the currency to spike, although prices crashed again when CEO and space cadet Elon Musk tweeted that the price might be too high, wiping $15bn or so off his personal fortune.

Maybe Musk can afford repeated visits to the crypto-casino. Whether a more prosaic player like MicroStrategy can is far less certain. ®

Broader topics


Other stories you might like

  • Don't hate on cryptomining, hate the power stations, say Bitcoin super-fans
    We're not the ones telling them to burn fossil fuels, top names write in response to probe request

    Big names in Bitcoin have defended cryptocurrency mining, issuing a jointly signed letter hitting back at US lawmakers who last month urged a government watchdog to probe the practice.

    Twitter founder and Bitcoin champion Jack Dorsey, the CEO of Bitcoin-collecting MicroStrategy Michael Saylor, and others on Monday signed the letter [PDF] that is a point-by-point rebuttal to a memo [PDF] sent last month to America's Environmental Protection Agency (EPA) by Representative Jared Huffman (D-CA) and a couple dozen other Democrats.

    In that first letter, Huffman and pals asked the EPA to probe proof-of-work cryptocurrency mining facilities to ensure they're following US laws such as the Clean Air Act and Clean Water Act, and not having an outsized effect on climate change. Proof-of-work cryptocurrencies include Bitcoin, Ethereum, and Monero. Ethereum, for one, is planning to move to fully proof-of-stake approach, which is more energy efficient.

    Continue reading
  • Wiki community votes to stop accepting cryptocurrency donations
    Cryptocurrencies make up less than 1% of wiki donations, but as member points out, that $130k could pay a salary

    The wiki community held a vote as to whether the Wikimedia Foundation should continue to accept cryptocurrency donations, the result of which was a resounding "no".

    The proposal was made by Wikipedia administrator, checkuser and oversighter GorillaWarfare based on three points: it could be seen as an endorsement of cryptocurrency by the organization; the tech is not environmentally sustainable; and, last of all, accepting crypto could damage the reputation of the foundation.

    The Wikimedia Foundation currently accepts donations in Bitcoin, Bitcoin Cash and Ethereum, as well as traditional payment types. According to the community, crypto is one of the foundation's smallest revenue channels, making up a mere .08 percent of 2021 revenue, equating to $130,100. Total revenue for 2021 was around $162 million.

    Continue reading
  • Crypto inferno: Intel's Bitcoin-mining Blockscale ASIC to arrive in Q3
    Gelsinger's firm drops details on crypto chip – including hash rate of up to 580GHps

    Intel has disclosed more details of its Blockscale ASIC, the firm's entry into the realm of cryptocurrency mining with a dedicated chip built to provide users with energy-efficient hashing for proof-of-work consensus networks.

    As previously revealed, the chip now identified as the Intel Blockscale ASIC is designed to provide hardware acceleration for SHA-256 (Secure Hash Algorithm-256) processing for blockchain proof-of-work applications. It will start shipping in the third quarter of 2022.

    Intel has now claimed that its Blockscale ASIC has a hash rate of up to 580GHps, or giga hashes per second, and can support up to 256 integrated circuits per chain. The latter means that a customer could theoretically build and operate a mining system comprising 256 of the Blockscale chips, which would be capable of over 148THps, or tera hashes per second.

    Continue reading
  • Europe advances crypto-coin regulation – without potential ban on Bitcoin
    Vote held after red-tape targeting proof-of-work assets removed

    Europe's lawmakers this week moved ahead with their proposed cryptocurrency regulations, having ditched a rule that might have banned financial services from dealing in Bitcoin and Ethereum.

    The European Union is considering ways to regulate digital coins, particularly to stamp out money laundering, and as such in 2020 drew up a draft framework dubbed the Markets in Crypto Assets (MiCA) to achieve this. During the development of this red tape, an amendment was proposed that, depending on its interpretation, could have made it illegal for app and web services to handle transactions involving proof-of-work coins, such as Bitcoin and Ethereum.

    Proof-of-work algorithms underpin these cryptocurrencies, how they are mined, and how transactions are confirmed by the network. These algorithms have been criticized for being computationally intensive and consuming large amounts of energy, prompting some lawmakers to propose restrictions. Under the European Green Deal, member states are trying to slash greenhouse gas emissions, and are heavily scrutinizing activities like running proof-of-work algorithms.

    Continue reading

Biting the hand that feeds IT © 1998–2022