If Bitcoin hits $100K, What will be MicroStrategy’s Profit?

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As a seasoned researcher with a keen interest in both traditional finance and the burgeoning crypto industry, I find myself captivated by the meteoric rise of MicroStrategy under the leadership of Michael Saylor. The company’s strategic approach to Bitcoin acquisition, combined with its unwavering belief in Bitcoin as “digital gold,” is a testament to forward-thinking and calculated risk-taking that I find truly inspiring.

Every day sees increased excitement in the world of cryptocurrency as Bitcoin moves closer to reaching $100,000 during this intense bull market of 2024. Now, many investors and experts are taking a close look at MicroStrategy, the biggest publicly traded Bitcoin company, which has been actively buying Bitcoin.

MicroStrategy’s strategy during this bull market involves buying Bitcoins, as demonstrated by its recent purchase of 51,780 BTC for $4.6 billion, or approximately $88,627 per Bitcoin on November 18. It’s clear that Michael Saylor, the company’s co-founder and executive chairman, has long advocated for the usefulness of Bitcoin, and his method suggests they are well-positioned to reap substantial profits.

MicroStrategy recently purchased approximately 51,780 Bitcoins for around $4.6 billion, equating to roughly $88,627 per Bitcoin. This transaction has resulted in a quarter-to-date (QTD) yield of 20.4% and a year-to-date (YTD) yield of 41.8%. As of November 17, 2024, the company holds 331,200 Bitcoins that were acquired for approximately $16.5 billion at an average price of $49,874 per Bitcoin. In other words, MicroStrategy now owns over 331,000 Bitcoins, with the majority having been purchased for about $16.5 billion.

— Michael Saylor⚡️ (@saylor) November 18, 2024

From my perspective as an analyst, I can share that MicroStrategy currently holds approximately 331,200 Bitcoins, purchased at an average cost of around $16.5 billion. If Bitcoin were to reach the projected price of $100,000, MicroStrategy’s holdings would be worth a staggering $33 billion. This represents an impressive unrealized gain of over $10 billion, positioning the company as a dominant player in corporate Bitcoin investments, given its substantial investment compared to other corporate entities.

The main approach of this company involves buying Bitcoins, a move they’ve been pursuing since August 2020 when excess funds and later convertible debt were utilized for these purchases. They view traditional currencies like cash and stocks as having limited growth potential, but Bitcoin can be likened to “digital gold” in the perspective of Saylor.

To date in this year, Mastercard’s treasury operations have generated a Bitcoin Yield of approximately 41.8%. This translates to an estimated 79,130 Bitcoins benefiting our shareholders, which equates to around 246 Bitcoins each day. Notably, these Bitcoins were acquired without the usual expenses, energy consumption, or capital investments associated with Bitcoin mining.

— Michael Saylor⚡️ (@saylor) November 19, 2024

Stock Market Implication

The stock of MicroStrategy regularly follows the trend of Bitcoin’s price and often surpasses its growth. To illustrate, in 2024, an increase of 1.23% in MSTR shares corresponded to every dollar rise in the value of Bitcoin. This data suggests that the company is generally perceived as a stand-in for Bitcoin.

If bitcoin surpasses the $100K threshold, certain analysts predict that MicroStrategy’s stock could surge between 50% and 75%, potentially reaching around $1800. This growth would bring it nearer to its previous peak of over $3000, a level last seen during two past crypto market bull runs.

It’s not unexpected that the rise in stock value is accompanied by increased institutional backing and clearer regulations, which suggest a promising outlook for the revitalized cryptocurrency market. For investors, MicroStrategy (MSTR) offers an opportunity to capitalize on Bitcoin’s potential without actually owning the digital currency directly.

Challenges to Profitability

Although some assert that MicroStrategy is about to make a profit, there are several obstacles yet to be overcome. The company has primarily experienced losses in recent quarters, largely attributed to volatile Bitcoin prices and accounting rules demanding the valuation of its assets at fair market value.

In other words, when the price drops, it heavily impacts the “stockholders’ equity” measure and the profit earned on record.

For instance, during the last quarter, one particular company experienced a loss equivalent to $1.72 per shared stock. Furthermore, it cannot be guaranteed that Bitcoin will hit $100,000.

Despite the recent increase in digital currency prices being primarily due to reduced supply following the last halving, numerous other factors such as regulations, economic conditions, and investor sentiment also play significant roles in shaping its price trends.

Conclusion 

If Bitcoin were to hit the $100,000 milestone, it would signify a significant shift in the cryptocurrency market and have profound implications for MicroStrategy. For the company, this isn’t just about earning profits but serves as validation of its forward-thinking approach towards handling digital assets – demonstrating their innovative philosophy at work.

Demonstrating over $10 billion in potential profits, MicroStrategy has highlighted the transformative impact of cryptocurrencies on corporate finance. However, the path forward is not without its obstacles. Risks including market volatility, legislative changes, and global economic conditions could potentially impact Bitcoin and MicroStrategy’s future trajectory.

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2024-11-22 09:08