Why are Norwegian and Swiss banks buying MicroStrategy shares?

As a seasoned researcher with over two decades of experience in the financial industry, I find the recent investments by European central banks into MicroStrategy intriguing. My personal analysis leans towards the idea that these institutions might indeed be making an indirect bet on Bitcoin through MSTR.


European central banks are purchasing stocks from MicroStrategy, a company that supports Bitcoin, which could be seen as a roundabout investment in the popular digital currency.

As an analyst, I’ve observed that both the Norwegian and Swiss central banks have recently acquired significant holdings in MicroStrategy. Specifically, they purchased 1.1 million and 466,000 shares respectively, as per the shareholder data disclosed on the official Nasdaq website.

The reason behind central banks from two major European economies (by GDP) investing in MicroStrategy remains unclear, however, two plausible explanations emerge:

Are banks betting on Bitcoin through MSTR?

A widely held view posits that significant financial entities, particularly those with a sovereign status, exhibit optimism towards Bitcoin (BTC). For instance, MicroStrategy, a major American corporation, holds the largest amount of Bitcoin, valued at over $13 billion in assets.

Starting in 2020, the company headquartered at Tysons Corner made the decision to invest in Bitcoin, following the guidance of its executive chairman and previous CEO, Michael Saylor. Initially doubtful about digital currency, Saylor advocated for Bitcoin as a means for long-term value storage, a shield against inflation, and a more advanced form of digital asset.

Since MicroStrategy has been a significant purchaser of Bitcoin, there’s a possibility that the Central Banks of Norway and Switzerland may have acquired Bitcoin exposure indirectly through MicroStrategy (MSTR).

It’s not unprecedented for financial institutions to engage in such strategies. In July 2023, entities such as Goldman Sachs, BlackRock, and Fidelity, which are banks and wealth managers respectively, collectively invested millions of dollars in MSTR shares. At that time, Saylor was intensifying his pro-Bitcoin stance and serving as a corporate Bitcoin advocate.

Nothingburger

A divergent view suggests that the two apex banks merely view MicroStrategy as a good investment. On X, Patrick Saner, head of macro strategy at Swiss Re, said that nothing indicated a Bitcoin bullish outlook from Norges Bank and the Swiss National Bank.

As someone who has spent years working in the financial industry, I can confidently say that having a physical index replication strategy is a common practice among large institutional investors. This strategy doesn’t necessarily mean that Norges or SNB are suddenly bullish on Bitcoin or MicroStrategy (MSTR), as some may interpret it. Rather, it reflects a strategic approach to managing portfolios and mitigating risk, which is crucial for these institutions given the size of their assets under management. While I can’t speak for these specific entities, my experience has taught me that they are likely following this strategy due to its proven track record in helping institutional investors achieve their investment goals, rather than any bullish sentiment towards Bitcoin or MSTR.

— Patrick Saner (@patrick_saner) August 14, 2024

Regardless, investors might view this move as beneficial for MicroStrategy and the broader acceptance of Bitcoin. In fact, global Bitcoin adoption has significantly increased over the past four years. For instance, El Salvador recently legalized Bitcoin, and exchange-traded funds specializing in Bitcoin on Wall Street have amassed more than $50 billion in assets under management within just a year.

Discussions about creating a strategic Bitcoin reserve have emerged during U.S. presidential campaigns. The most notable White House candidate advocating for Bitcoin-friendly policies is former president Donald Trump. Under the current government, critics within the crypto industry contend that it has been hampered by unclear regulations and faced numerous unfair lawsuits as a consequence.

There’s optimism that the Democratic ticket led by Vice President Kamala Harris (alongside Minnesota Governor Tim Walz) might foster better ties with the tech sector, particularly digital industries. However, as the election draws nearer (less than three months away), Harris has yet to clarify her views on cryptocurrencies.

Regarding Harris’ cryptocurrency policy proposal and the crypto community’s lean towards Trump, seasoned industry figures such as Coinbase Chief Legal Officer Paul Grewal underline the importance of keeping cryptocurrencies as a neutral, bipartisan issue.

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2024-08-14 21:00