The dust raised by business intelligence firm MicroStrategy when it transferred 1,652 Bitcoin worth about $114 million appears unsettled. In the broader cryptocurrency space, speculation persists about the firm’s possible Bitcoin sale.
Some have even attributed the current market volatility witnessed by Bitcoin to a likely effect of fear over a possible sale by MicroStrategy. However, CoinShares analysts have found credible reasons why MicroStrategy might not sell its Bitcoin accumulated over four years.
The MicroStrategy Commitment to Long-Term Bitcoin Accumulation
According to CoinShares analysts, MicroStrategy’s announcement in its October report indicates its long-term commitment to the Bitcoin strategy. The business intelligence firm announced a $42 billion capital to acquire more Bitcoin over the next three years. The accumulation strategy would combine debt and equity financing to leverage its Bitcoin holding.
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The analysts maintain that for this to happen, MicroStrategy requires favorable financing conditions to trigger demand for its convertible notes. Besides, MicroStrategy sells convertible notes to purchase Bitcoin at a lower cost without weakening shareholders. Selling its current Bitcoin holdings will put those conditions at risk.
Another credible reason cited by the analysts is the exposure that such a move will have on MicroStrategy. According to them, MicroStrategy and Bitcoin have become “integrated” significantly. They predict that should the firm choose to sell some of its Bitcoin, its market valuation might decline.
This will negatively impact a key component of its investment. Additionally, a sell move could have tax implications for MicroStrategy. Notably, given the $7.7 billion capital gain since the inception of its Bitcoin purchases, the regulatory authority might tax the company. This will cover the unrealized gains on its Bitcoin holdings.
Furthermore, MicroStrategy’s cash flow from Bitcoin surpasses that of its business intelligence software services. Therefore, MicroStrategy is unlikely to sell its Bitcoin holdings as it requires enough capital to service its coupons.
Influence of MicroStrategy’s Model on Global Firms
MicroStrategy’s approach to Bitcoin accumulation has become a template for some in the broader financial space.
Notably, Metaplanet is now celebrated as “Asia’s MicroStrategy.” The Japanese investment firm has followed in MicroStrategy’s footsteps and appears determined to raise its Bitcoin holdings regardless of market volatility.
As reported by The Coin Republic, Metaplanet recently expanded its Bitcoin holdings to 1,000 BTC. This followed the additional purchase of 156.78 BTC, worth $10.4 million at the time of purchase. Simon Gerovich, Metaplanet’s CEO, maintains that the investment firm has decided to invest in Bitcoin as a reserve asset on a long-term basis.
Will Bitcoin Soar After the U.S. Election?
In the cryptocurrency market, Bitcoin has continued on its volatility path. According to market data, BTC price has declined by 0.731% to trade at $67,787 as of this writing. However, price fluctuations have not diminished investors’ interest in the world’s leading digital asset. The market volume supports this analysis, showing a 29.66% increase to $38.39 billion.
Meanwhile, some analysts believe Bitcoin’s price will soar astronomically after the U.S. presidential election if history repeats itself. Based on precedence, in 2016, before the U.S. election, BTC was $700, but it rose sharply to $19,900 within a year. Similarly, in 2021, Bitcoin jumped from the $13,600 pre-election price to $69,000 a year later.
This trend also confirmed the same uptrend might trail BTC if history repeats.
