MicroStrategy’s Profit Could Exceed $10B if Bitcoin Hits $100K

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As a seasoned analyst with over two decades of experience in the financial industry, I have witnessed the rise and fall of numerous market trends, from the dot-com bubble to the global financial crisis. However, nothing quite compares to the rollercoaster ride that is the crypto market, and more specifically, the meteoric rise of Bitcoin.

With each day that passes, the crypto market is growing increasingly lively as Bitcoin inches closer to reaching $100,000 during the intense bull run of 2024. Many investors and analysts are now considering the potential of MicroStrategy, the biggest publicly traded Bitcoin company, which has been actively purchasing Bitcoin.

MicroStrategy’s strategy during this bull market has been to amass Bitcoins, as demonstrated by its recent purchase of 51,780 BTC for $4.6 billion on November 18, at an average price of $88,627 per Bitcoin. There is no question that Michael Saylor, the co-founder and executive chairman of the company, has long advocated for Bitcoin’s usefulness, and it appears his approach is set to yield substantial returns.

MicroStrategy has purchased approximately 51,780 Bitcoins for around $4.6 billion, with each Bitcoin costing roughly $88,627. This acquisition has given them a Quarter-to-Date (QTD) Bitcoin Yield of 20.4% and a Year-to-Date (YTD) yield of 41.8%. As of November 17, 2024, they hold approximately 331,200 Bitcoins that were purchased for around $16.5 billion, with each Bitcoin costing about $49,874. $MSTR refers to MicroStrategy’s stock symbol.

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

At present, MicroStrategy holds approximately 331,200 Bitcoins, purchased collectively for around $16.5 billion. If Bitcoin were to reach $100,000, the value of MicroStrategy’s holdings would soar to approximately $33 billion. Presently, this accumulation represents an unrealized profit of over $10 billion, solidifying MicroStrategy’s position as a dominant player in corporate Bitcoin investments.

The main approach of this company involves buying Bitcoins, a move they’ve been pursuing since August 2020. Initially, they used excess cash and later convertible debt to finance these acquisitions. Traditional assets like cash and stocks are considered “fiat,” meaning their growth potential is restricted. On the other hand, Bitcoin can be viewed as “digital gold” according to Saylor’s perspective.

To date in this year, Mastercard’s treasury activities have generated a Bitcoin Return on Investment (ROI) of approximately 41.8%. This has translated to an estimated accumulation of around 79,130 Bitcoins for our shareholders, which is equivalent to roughly 246 Bitcoins per day. Remarkably, these Bitcoins were obtained without the usual expenses, energy consumption, or capital investments associated with Bitcoin mining.

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

Stock Market Implication

MicroStrategy’s stock moves in sync with the value of Bitcoin and frequently surpasses its gains. For example, in 2024, for each dollar increase in Bitcoin’s value, MSTR shares rose by 1.23%. This relationship suggests that the company is generally perceived as a stand-in for Bitcoin.

Should bitcoin surpass the $100K threshold, certain analysts foresee MicroStrategy’s stock soaring between 50% and 75%, potentially reaching around $1800. This growth would bring the stock closer to its previous peak of over $3000, a level last seen during two significant crypto market bull runs in the past.

It’s not unexpected that the increase in stock value is accompanied by an increase in institutional backing and clearer regulations, which suggests a promising outlook for the revitalized cryptocurrency market. For investors, MicroStrategy (MSTR) offers the advantage of Bitcoin exposure without actually having to possess the cryptocurrency directly.

Challenges to Profitability

Although some predict that MicroStrategy will make a profit in the near future, there are still a few obstacles to overcome. The company has experienced losses in recent quarters largely because of the volatile pricing of Bitcoin and accounting rules mandating it to report its assets at their current market value.

This implies that when the price drops, the impact on “shareholder’s equity” and net earnings is greater than expected.

To illustrate, just last quarter, one of such companies suffered a loss of US$1.72 per share. Also, there is no assurance that Bitcoin will reach $100,000. 

Despite the primary reason for the increasing cost of digital currencies being the decrease in supply post the latest halving, it’s important to remember that numerous other factors also play a significant role. These include regulatory decisions, broader economic trends, and overall market sentiment.

Conclusion 

If Bitcoin manages to hit the $100,000 milestone, it could mark a pivotal moment for the cryptocurrency market and MicroStrategy alike. For MicroStrategy, this isn’t just about earning profits but also serves as validation of its pioneering approach towards handling digital assets, showcasing their belief in innovation.

Displaying the transformative impact of cryptocurrencies on corporate finance, MicroStrategy has amassed potential gains exceeding $10 billion. However, this journey is not without hurdles. Potential risks like market volatility, legislative changes, and global economic factors could shape the future of Bitcoin and MicroStrategy.

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2024-11-22 12:23