MicroStrategy Buys $250 Million Worth of Bitcoin as Hedge

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  • MicroStrategy, a NASDAQ-listed company worth $1.2 billion, has ploughed almost a quarter of its capital worth into Bitcoin
  • The company swapped shares for Bitcoin as a hedge against collapsing fiat values
  • The incredible deal illustrates Bitcoin’s growing prowess as an investment vehicle

MicroStrategy, a software firm worth $1.2 billion, has transferred almost a quarter of its capital into Bitcoin. The company, which is the largest independent publicly traded business intelligence company in the U.S., announced Tuesday that it had purchased $250 million worth of Bitcoin as a hedge against the falling values of fiat currency. The astonishing move from MicroStrategy reinforces the idea that institutional interest in Bitcoin is picking up and that Bitcoin’s use case as a hedge against collapsing fiat prices is gaining legitimacy.

MicroStrategy: Bitcoin “Can Be Superior to Cash”

MicroStrategy broke the news via a press release which outlined the rationale behind their Bitcoin purchase, as well as offering a few details on how it was conducted. The company said that the move was part of a long-standing plan to diversify their capital holdings, which included investing up to $250 million in one or more alternative investments or assets.

After looking at the different options, MicroStrategy decided to plough the entire amount into Bitcoin, pointing to its use case in the current financial climate as a key reason:

Since its inception over a decade ago, Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions. MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.

Among all the options available, Bitcoin was eventually chosen by MicroStrategy because of a number of key factors:

We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility, and community ethos of Bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value. Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it. We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fueled the rise of so many category killers in the modern era.

MicroStrategy described that they were able to swap $250 million worth of class A common stock via a “modified Dutch Auction offer”, through which they acquired 21,454.

Bitcoin’s Appeal to Institutions Growing

The news that a huge NASDAQ-listed firm such as MicroStrategy has put a quarter of its capital into Bitcoin rather than traditional hedges like gold and silver is a huge feather in the cap for the relatively new asset, and reinforces what was already known – that institutions are more and more looking at Bitcoin as a legitimate hedge alongside precious metals.

The reaction to this news was predictably bullish, with Bitcoiners celebrating another example that the cryptocurrency is coming of age:

The news won’t be a surprise to people like Goldman Sachs’ new head of digital assets Mathew McDermott, who said last week that, “We’ve definitely seen an uptick in interest across some of our institutional clients who are exploring how they can participate in this space.”

If the MicroStrategy deal is along the lines of what he was talking about then the future looks bright for Bitcoin indeed.