MicroStrategy taking on debt to buy Bitcoin adds risk to the crypto rally


has extended last year’s momentum into 2024, with BTC price breaking $72,000 earlier this week, setting a new all-time high for the first time since November 2021.

The impressive rise in cryptocurrency value has not stopped MicroStrategy Incorporated (NASDAQ:), the largest corporate investor in Bitcoin, from increasing its holdings. Under the leadership of Michael Saylor, the business software maker recently accelerated its purchases and now has more than 200,000 BTC.

What does MicroStrategy do?

MicroStrategy is a provider of enterprise software solutions and services.

The company specializes in business intelligence, mobile software and cloud-based solutions. Its flagship product, the MicroStrategy analytics platform, provides advanced data analytics capabilities that enable companies to analyze large amounts of data and make informed decisions.

However, in recent years, the company has become widely known for its significant investments in Bitcoin as part of its corporate treasury strategy.

The company positions itself as the “world’s first Bitcoin development company” and is committed to contributing to the growth and development of the Bitcoin network. The Company invests its cash flows and proceeds from equity and debt financings in the acquisition of Bitcoin, which it holds as a primary asset in treasury reserves.

How much Bitcoin does MicroStrategy own?

Earlier this month, filings with the U.S. Securities and Exchange Commission (SEC) revealed that MicroStrategy acquired 12,000 BTC for $821.7 million, its second-largest purchase since it began investing in cryptocurrency nearly four years ago.

This acquisition, completed between February 26 and March 10, was funded primarily with the $800 million the company recently raised from convertible note sales.

This new purchase increased the company’s BTC holdings to around 205,000 tokens with a current value of almost $15 billion. JMP analysts said yesterday that Bitcoin price could reach $280,000 in the next three years.

Most recently, the business intelligence service provider announced on Wednesday its plans to issue another $500 million in convertible notes that it plans to use for further Bitcoin purchases.

If BTC continues to trade at the current level of $73,000, MicroStrategy could use the proceeds from this new offering to purchase approximately 6,800 additional tokens.

JPMorgan warns against further debt-financed Bitcoin purchases

After purchasing more than $1 billion worth of Bitcoin in the fourth quarter of 2023, MicroStrategy continued its aggressive strategy into 2024, purchasing approximately the same amount since the beginning of 2024.

Therefore, it is safe to say that the company itself has also played a notable role in amplifying the momentum of the cryptocurrency.

However, according to JPMorgan strategists, the company’s strategy of buying more BTC via convertible bonds increases the risk to the cryptocurrency market recovery.

“We believe debt-fueled Bitcoin purchases by MicroStrategy will further add to the current crypto rally and increase the risk of greater deleveraging in a potential downturn in the future,” said strategists led by Nikolaos Panigirtzoglou.

At the time of writing, Bitcoin was trading near $72,500, up 72% year-to-date.


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