MicroStrategy's Bold Bitcoin Bet: A High-Reward Investment Opportunity

Microstrategy has been the talk of the town within the crypto space over the last few years. Within the last 5 years it has outperformed the S&P500 by a ridiculous margin, impressively surpassing bitcoin performance too.

Since mid 2020 the company made a decision to go nearly all in on bitcoin leaving not much in the way of cash reserves left in the Microstrategy vault. This bold move has paid off nicely. The significance of the outpacing of Bitcoin has drawn in big institutional investors like Vanguard and Morgan Stanley.

Roughly 5 years ago investing a little over £20000 would have turned into roughly £900000 today. Now, could investing the same amount produce the same returns in 5 years from now? It’s not possible to actually know but judging by how the trend has gone, it does look likely that if given more time, a £20000 investment could potentially increase significantly.

The numbers

Microstrategy’s market cap sits at 87.23 billion. For history to repeat itself the company would end up with a new market cap of roughly just shy of 500 billion. Because of the company’s close correlation and investment in bitcoin, bitcoin would have to have a major market value increase. If the strategy continues and Microstrategy keeps upping a significant number of bitcoin purchases and the price of bitcoin increases, investing in the company looks promising for any investor. Dollar cost averaging could lead to successful wealth building for any individual.

Funding to accumulate

To help beef up bitcoin reserves, the company has issued debt through convertible bonds. In the month of December 2020 the company raised several hundred million through way of convertible bonds to acquire more bitcoin. Microstrategy currently has 2% of all the bitcoin that exists in crypto land. They have also expressed their interest in dilutive stock sales to purchase more bitcoin. This doesn’t necessarily mean anything negative for investors, if done correctly long term value will increase, raising more cash to accumulate more bitcoin thus increasing the price of both the stock and the cryptocurrency due to their close correlation.

Time accompanied by patience

Microstrategy has shown to be a very durable during rough crypto market conditions, bouncing back along with bitcoin. Although seen as a a highly speculative investment, owning the stock is like owning a bitcoin exchange traded fund. The strong correlation between the two is undeniable. Alternatively one could just buy bitcoin itself but for those who feel more comfortable using traditional markets and methods Microstratergy with its historical, outstanding performance would probably make more sense. If a non emotional approach is applied to investing in the stock, time and patience will most likely reward investors.