Is retail back or is MicroStrategy only pumping the price of bitcoin?
With the price of bitcoin pumping, many investors were hopeful that it would prove the return of retail investment. However, the influence of a single corporation on the relatively thin number of spot bitcoins listed for sale is casting doubt on this idea.
When US voters re-elected Donald Trump as president, the price of bitcoin immediately soared. Retail traders surged back to crypto markets to bid up prices of anything associated with his incoming administration: Trump NFTs, Tesla, Trump Media & Technology Group, DOGE, Fannie Mae, Freddie Mac, Coinbase, and of course, bitcoin.
Bitcoin acquisition company MicroStrategy soon capitalized on this retail frenzy and placed massive bids for spot bitcoin. This morning, CEO Michael Saylor announced another 51,780-bitcoin purchase using $4.6 billion of his previously announced $42 billion capital raise.
The company now owns 331,200 bitcoins or one-third the number of coins held by Bitcoin creator Satoshi Nakamoto. Moreover, the company has tens of billions left in its existing fundraise — with proceeds set to flow into more bitcoin purchases — and Saylor has forecasted he will try to raise even more debt to buy more bitcoin after he expends this $42 billion round.
Through a combination of debt and associated warrants, options, and convertible rights, the company has been able to raise enough capital to buy $16.5 billion worth of bitcoin at an average price of $49,874 per BTC.
Read more: MicroStrategy investors cheer bitcoin ‘yield’ — but few read fine print
Irresponsibly long MicroStrategy as average jumps above $49K
On social media, Bitcoiners have been celebrating the rising price of bitcoin and MicroStrategy’s leveraged purchases. The return of bullish retail traders are congregating in communities like the self-aware Irresponsibly Long MSTR where they discuss how high the share price can go — and what multiple on MicroStrategy’s net asset value is feasible.
At its current market capitalization of $75 billion, MSTR is currently trading at a multiple of 2.5 times its $30 billion in bitcoin. Some investors believe that this multiple can expand further.
Others are concerned with the downside. While MicroStrategy’s average bitcoin purchase price of $49,874 isn’t a liquidation price, it is concerningly high. Throughout 2023, that average was below $31,000. Through 2024 prior to November, it was below $40,000.
That average has jumped to nearly $50,000 in the last few weeks due to Saylor’s massively leveraged purchases. With such a large and easily identifiable buyer, the effect of retail investors’ return is being overshadowed by a single company and its debt-enabled bids.
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