Microstrategy’s Shocking Bitcoin Strategy: How Are They Buying Billions Without Breaking the Bank?

MicroStrategy ingeniously leverages convertible notes to bolster its Bitcoin holdings, creating a win-win by funding acquisitions and offering investors interest or stock options.
Microstrategy, Voice of Crypto 

Key Insights

  • MicroStrategy holds the most Bitcoin of any company globally, at roughly $14 billion.

  • The company uses convertible notes as a way to get more bitcoin

  • Investors buy these convertible notes for a fixed interest rate and can convert them to MicroStrategy stock at maturity.

  • This produces a win-win scenario for the company because MicroStrategy gets funds for Bitcoin, and investors earn passive interest from their investments.

  • MicroStrategy issues more of these notes when Bitcoin's price rises and issues new shares if Bitcoin's price falls.

At some point, it becomes important to ask:

Where does MicroStrategy get the funds to buy so much Bitcoin?

According to Bitcoin Treasuries, MicroStrategy is the largest corporate holder of Bitcoin by far, with as much as $12 billion worth of Bitcoin, more than Marathon Digital, the next largest.

<div class="paragraphs"><p>MicroStrategy versus others</p></div>

MicroStrategy versus others

Broker Bernstein has realized this and has looked into things.

Where does a software company get $15 billion in liquidity to buy Bitcoin?

The answer lies in convertible notes. Let's discuss convertible notes and MicroStrategy's almost foolproof method of raising funds to buy more Bitcoin.

MicroStrategy As a Bitcoin Whale

According to Saylor Tracker, MicroStrategy currently holds around 214 400 $BTC, which is around 1% of the cryptocurrency’s total supply.

This company has been making waves in the crypto industry since 2020 when it first bought a staggering 21,454 bitcoins (then worth over $250 million).

Between then and now, the company has purchased nearly 200,000 more $BTC, all of which is now worth around $14 billion.

According to a recent analysis from Bernstein, MicroStrategy has now emerged as the company with the largest Bitcoin holdings worldwide.

But how does it get the funds to buy Bitcoin consistently for four years?

It turns out that the company, under the leadership of its chairperson, Michael Saylor, has been converting its corporate treasury into crypto via convertible bonds.

Raising Capital through Convertibles

But what are Convertible Bonds?

Investopedia defines convertible bonds as "corporate bonds that the holder can convert into the common stock of the issuing company."

In essence, when MicroStrategy offers these convertible bonds to the public, investors can buy them like regular bonds and earn a steady interest rate over the years.

Once these bonds mature, they can be returned to the issuing company to get back the original investment/capital.

Moreover, these bonds can also be converted into shares of the company's stock if said stock price goes up.

In essence, it is easier to think of this as crowdfunding:

Investors give MicroStrategy money in exchange for a fixed interest rate, and MicroStrategy uses this money to buy more Bitcoin. Bitcoin’s price goes up significantly in a few years, and everyone walks away with a profit.

So far, Bernstein notes that MicroStrategy has managed to rake in a staggering $4 billion through the sales of these convertible bonds solely for buying more Bitcoin.

Strategic Debt Management

 MicroStrategy’s approach to getting funds to buy more Bitcoin is different in that it is clever and highly calculated.

This strategy helps MicroStrategy capitalize on Bitcoin's volatility. When Bitcoin's price rises, the company's stock price rises, too, and more bonds can be issued.

On the other hand, if Bitcoin’s price goes down, the company issues new shares to combat this.

<div class="paragraphs"><p>MicroStrategy stock since 2020</p></div>

MicroStrategy stock since 2020

This genius approach has allowed MicroStrategy to experience a nearly 67% growth in Bitcoin per equity share since 2020.

Moreover, in over four years, MicroStrategy has not sold any of its holdings, indicating an impressive and almost inspiring commitment to buying and holding the flagship cryptocurrency.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.

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