MicroStrategy has become the first NASDAQ-listed company to buy Bitcoin as part of its planned capital allocation strategy.
Bitcoin is Better than Cash
According to an official press release on Tuesday (August 11, 2020), MicroStrategy bought 21,454 BTC at $250 million. The company stated that Bitcoin, which is seen as an investment asset, is the firm’s main reserve in its treasury.
MicroStrategy’s BTC buy follows an earlier statement made in late July. The company revealed that it was going to adopt a two-way capital allocation strategy, which would see the purchase of stock worth $250 million, and another $250 million used for investing in other assets.
Michael Saylor, the company’s CEO commented on the decision to go for Bitcoin, According to him, the reason for investing in BTC was because the flagship cryptocurrency had unique qualities that served as a hedge against inflation. Also, Bitcoin provided a higher return on investment (ROI) than other assets.
Saylor gave further reasons for choosing BTC over other investment assets, stating:
“Our investment in Bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our shareholders. This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.”
Meanwhile, several members of the crypto community reacted to the news of Microstrategy’s Bitcoin purchase. Shapeshift CEO Erik Voorhees via Twitter stated that “MicroStrategy is this year’s Bitcoin Sign Guy”.
The company is listed on Nasdaq and under the MSTR ticker and boasts a market capitalization of around $1.3 billion.
Big-Money Players Betting on BTC
Institutional adoption remains one of the often-cited prerequisites for greater depth of crypto penetration. A business like MicroStrategy keeping BTC as an investment asset on its corporate balance sheet is likely a preliminary step in other deep pockets entering into Bitcoin positions especially as central banks continue to set negative rates.
There has been a growing interest in cryptocurrency by institutional investors. As reported by CryptoPotato in June, a study carried out by Fidelity Investments revealed that 36% of institutional investors held cryptocurrency, with Bitcoin being popular among the majority of the respondents.
Another study conducted by PricewaterhouseCoopers (PwC) and digital asset firm Elwood Asset showed that the surge in asset under management (AUM) of crypto funds in 2019 indicated an increase in institutional interest in cryptocurrency. Also, hedge fund manager Paul Tudor Jones II revealed he was buying Bitcoin to fight rising inflation rates.