MicroStrategy Buys More Bitcoin – Is this a Bottom Signal

MicroStrategy Inc, a business intelligence and software company headed by Michael Saylor, recently made a Bitcoin purchase, at times when the crypto market appears to be on the brink of collapse.

The firm bought 480 Bitcoins, worth about $10 million, where each Bitcoin was acquired at a rough value of $20,817. According to the paperwork filed with the US Securities Exchange Commission (SEC), the purchase was made between May 3 and June 28.

With the addition of these new coins, MicroStrategy currently holds 129,699 Bitcoins, acquired for roughly $4 billion. Where the average price of each Bitcoin remains to be $30,664.

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MicroStrategy is the largest holder of Bitcoin among any other public companies, followed by Tesla which owns roughly 43 thousand Bitcoins. Valued at $860 million.

Bitcoin Isn’t Keeping Well

Given the current market conditions, this may not come as a surprise, but Bitcoin underwent its worst quarterly loss recorded in over a decade.

Bitcoin was roughly trading at over $46,000 at the start of April, while three months in, the coin has fallen below its $20,000 resistance level.

The last time Bitcoin took such a steep plunge was back in the third quarter of 2011. When Bitcoin fell from $15 to $5, dropping in price by more than 60%. The current price drop too is pretty close to that number. No bear market in the last decade has witnessed a loss of this magnitude. In 2014, for example, bitcoin dropped by 39%, which although significant, is relatively lesser than the current one.

The month of July saw the sharpest fall, where the coin dropped by almost 40%. This was in alignment with the equity market, where the S&P index too has made a drop of more than 7%. While in the year 2022, the index fell by a little over 21%.

This downtrend was a consequence of a lot of factors. Including the Covid-19 pandemic, inflation of interest rates by the federal reserve, the highly noteworthy and devastatingly impactful luna crash, and the lastest liquidation of Three Arrows Capital.

Amidst all of this, the bitcoin purchase made by MicroStrategy has welcomed some questioning. Including the calling out of the firm’s intent.

Reaction to the Bitcoin Purchase

MicroStrategy has been known to make Bitcoin purchases very frequently, but this purchase, in particular, was considerably insignificant in value.

In April, MicroStrategy purchased 4,167 Bitcoins worth more than $190 million. The purchase before that was made for a massive $640 million. However, the current purchase is hardly close to any of these figures.

The intent of this purchase was questioned by Peter Schiff, Euro Pacific Capital Chief Economist in a reply to Saylor’s tweet, saying “Increasing your stake by less than .004% seems more like an attempt to influence the market by demonstrating your conviction to other investors. But if you’re so sure #Bitcoin is cheap, why not buy $100 million? You must think there’s still a lot of downside left in this move.”

Many believe investment decisions like these may become a matter of concern for investors of the company. MicroStrategy is down 74% from starting this year while falling by more than 17% just this week.

MicroStrategy’s Optimism For Bitcoin

Edward Moya, a senior market analyst for foreign exchange company OANDA, said that “The rapid appreciation before last year’s record high and latest demise shows MicroStrategy has failed to capitalize on the way up and to find protection when things got ugly,”; “Investors looking for crypto exposure should not consider MicroStrategy a good vehicle for that as they have proven to be reckless with their portfolio management.”

Fawad Razaqzada, financial market analyst for StoneX commented on the purchase saying “It feels a bit like a gamble though as prices haven’t stabilized to give you confidence that a low is in just yet. I hope that doesn’t scare investors who are holding the company’s stock.”

The purchase has raised some criticism, however, MicroStrategy remains committed to improving its Bitcoin investments. Saylor has been known to make a tweet that read “Bitcoin is the only investment-grade currency.”

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On Twitter, the CEO frequently does his job of arguing why the coin is probably the best investment. From what it can be seen, MicroStrategy is fairly optimistic about the asset. And the recent purchase may lead us to believe that they may soon be expecting a recovery.

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