MicroStrategy Buys 1,914 Bitcoins For $94.2 Million

MicroStrategy Continues To Execute Its Bitcoin Strategy

In a recent 8-K filing, MicroStrategy, a company which provides enterprise analytics software and is also famous for buying Bitcoin, stated that it “purchased approximately 1,914 Bitcoins for approximately $94.2 million in cash, at an average price of approximately $49,229 per Bitcoin, inclusive of fees and expenses”.

The company also noted that it held approximately 124,391 Bitcoins at an average purchase price of roughly $30,159 per Bitcoin as of December 29, 2021.

MicroStrategy’s tactics is to raise cash via debt offerings and use the proceeds to buy Bitcoin. As a result of this activity, few investors care about MicroStrategy’s main business and most are focused on the company’s Bitcoin holdings.

In fact, with the company’s current market capitalization of about $5.5 billion and the value of its Bitcoin holdings of about $5.9 billion, MicroStrategy’s Bitcoin holdings exceed its market cap. This does not make the stock an immediate buy as MicroStrategy finished the third quarter with $2.15 billion of debt on the balance sheet.

Recent Purchases Failed To Provide Enough Support To Bitcoin

Bitcoin managed to settle below the key $50,000 level despite support from MicroStrategy’s purchases.

The key support level for Bitcoin is located at the recent lows near $45,500. In case Bitcoin manages to settle below this level, it will gain additional downside momentum and may quickly get to the test of the next support levels at $44,100 and $42,600.

On the upside, Bitcoin needs to get back above the 20 EMA at $49,000 to have a chance to test the psychologically important support level at $50,000.

Crypto traders should also monitor the dynamics of MicroStrategy stock, as the company is a major holder of Bitcoin. If the market has doubts about MicroStrategy’s ambitions to buy more Bitcoin, its stock will be punished, and the firm may have trouble raising more debt to buy more cryptocurrency.

In the worst-case scenario, MicroStrategy may have trouble servicing its debt and find itself in a position when it is forced to liquidate Bitcoin. The company’s financials were reasonably healthy at the end of the third quarter of 2021, but it’s a key risk for Bitcoin traders that should be periodically monitored.