MicroStrategy’s Bitcoin Endgame and Holdings Explained

What is MicroStrategy?

MicroStrategy is a reputable enterprise software company that has redefined its identity by making Bitcoin a cornerstone of its financial strategy. Established in 1989 by Michael J. Saylor and Sanju Bansal, the company specializes in data analytics, mobile software, and cloud-based services.

Headquartered in Tysons Corner, Virginia, MicroStrategy is also the biggest publicly traded corporate holder of Bitcoin, with holdings exceeding $40 billion (402,100 BTC). The Saylor-led company believes in Bitcoin as a superior store of value and a key asset for long-term growth.

MicroStrategy’s Bitcoin Endgame focuses on aggressively accumulating Bitcoin. In 2024, the company purchased over 200,000 BTC, including a record-breaking 55,500 BTC purchase at an average cost of $97,862 per coin, underscoring its willingness to pay any price.

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Why is MicroStrategy Buying Bitcoin?

In 2020, MicroStrategy started buying Bitcoin as part of a bold shift in its financial strategy to address growing economic uncertainties. Michael Saylor identified Bitcoin’s fixed supply of 21 million coins as a critical safeguard against inflation and fiat currency devaluation.

He argued that its decentralized nature and scarcity made Bitcoin a superior store of value compared to traditional assets like cash. Saylor referred to this approach as a "Bitcoin treasury strategy," aiming to reposition the company’s reserves for long-term stability and growth.

To fund its Bitcoin acquisitions, MicroStrategy raises funds through equity and convertible bond issuances, which are financial instruments that allow investors to convert their bonds into company shares under certain conditions.

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MicroStrategy Plans to Become a Bitcoin Bank

Beyond being a treasury company, MicroStrategy also plans to become a “Bitcoin bank” as part of its long-term vision. This concept came to life in 2024, with Michael Saylor stating that Bitcoin can function as a "Google or Facebook for money."

The company aims to achieve a trillion-dollar valuation by developing Bitcoin-based capital market instruments. Saylor described MicroStrategy’s plans to offer equity, convertible bonds, fixed-income products by "recycling capital," far exceeding traditional financial strategies.

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MSTR Stock Price Growth

MicroStrategy’s stock price soared by 500% in 2024, reaching $395, driven by intense activity from retail investors and growing institutional interest. This surge coincided with the company’s bold accumulation of Bitcoin, which now totals over $40 billion in value, alongside strategic financial maneuvers.

MicroStrategy’s fundraising efforts included $10.5 billion from equity sales and $3 billion through convertible bonds. The stock has also gained traction through two leveraged ETFs: the Defiance Daily Target 2X Long MSTR (MSTX) and the T-Rex 2X Long MSTR Daily Target (MSTU).

Analysts, including those from Benchmark, have projected a $650 price target for the stock, attributing its valuation to the company’s innovative treasury operations and dominance in Bitcoin-backed instruments, despite concerns about its steep premium and the fact that it's unlikely to be included in the S&P 500.

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How Does MicroStrategy Use Bitcoin To Make Money?

MicroStrategy’s strategy for generating returns from Bitcoin goes beyond simple buy-and-hold tactics. Here are the key ways it leverages its Bitcoin holdings:

• Raising Capital Through Shares and Bonds: In 2024, MicroStrategy raised $750 million through shares and $2.6 billion in 0% convertible bonds due to 2029.
• Bitcoin-Backed Loans: By using Bitcoin as collateral, the company secures loans for operations or further acquisitions without selling its holdings.
• Bitcoin Yield: This concept reflects the increasing Bitcoin holdings per share, creating value for shareholders over time.
• Selling Bitcoin Volatility: Borrowing at low or zero interest rates, MicroStrategy profits by betting that Bitcoin’s long-term appreciation will outpace its costs.

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Is MSTR Overvalued?

The question of whether MicroStrategy (MSTR) is overvalued sparks diverse opinions among analysts and investors. Some argue that MSTR’s premium valuation (2.20x) relative to its Bitcoin holdings reflects its innovative treasury strategy and Bitcoin yield potential, with advocates like Adam Back suggesting a fair value of $485 to $585 per share.

Others point to the company’s heavy leverage, noting its $9 billion in debt tied to 386,700 BTC, which amplifies risk during Bitcoin’s price declines. Skeptics highlight that MSTR’s 2.5x volatility to Bitcoin makes it a high-risk proxy for cryptocurrency exposure, recommending alternatives like Bitcoin ETFs.

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How Many BTC Will MicroStrategy Buy?

As of December 2024, MicroStrategy holds 402,100 BTC, or 1.91% of the total Bitcoin supply. Michael Saylor has made it clear that his goal is to buy as much Bitcoin as possible before prices potentially skyrocket from $100,000 to $13 million per coin by 2045.

While the company has not disclosed an explicit end target, Saylor’s statements and strategy suggest a vision of doubling or even tripling the current holdings. By issuing interest-free bonds and leveraging equity premiums, MicroStrategy has built a system designed to continuously acquire Bitcoin.

Analysts believe this relentless accumulation could push the company’s Bitcoin holdings to nearly 1 million BTC in the coming years, depending on market conditions and available capital. For comparison, Bitcoin ETFs now hold over 1.1 million BTC, while the US government has around 207,000.

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Risks of MicroStrategy

Investors today worry about MicroStrategy’s aggressive Bitcoin strategy and the potential risks it faces in volatile markets. They usually draw parallels to the 2022 collapse of Terra Luna and FTX caused a devastating crypto bear market that lasted nearly two years.

Here are the leading risks, associated with MicroStrategy:

• Bitcoin Price Volatility: A sharp decline in Bitcoin’s price could jeopardize MicroStrategy’s ability to service its debt and maintain liquidity.
• Debt Overhang: The company’s $9 billion in debt, much of it tied to Bitcoin, creates considerable repayment risks during downturns.
• Liquidity Risks: Collateralized Bitcoin loans may trigger margin calls during steep price drops, forcing MicroStrategy to liquidate assets.
• Shareholder Dilution: Frequent stock issuances could frustrate investors if Bitcoin’s price growth slows or stagnates.
• Regulatory Uncertainty: Increased scrutiny of cryptocurrency holdings and transactions may pose operational or legal challenges (less likely risk under Trump's administration).

During the Terra Luna and FTX crises, many speculated that Michael Saylor and MicroStrategy might face liquidation. Back then, Saylor revealed that a margin call would occur only if Bitcoin fell below $21,000, with liquidation requiring a drop below $3,562.

While today's liquidation levels are clearly higher, the company has previously demonstrated expertise in managing such stress tests.

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Michael Saylor’s MicroStrategy Holdings

Michael Saylor holds 19,998,580 shares of MicroStrategy Class B common stock, representing 9.9% of the total outstanding shares and approximately 45% of the voting power. This ownership structure was significantly impacted by a 10:1 stock split on August 8th, 2024, for both Class A and B shares.

Separately, Saylor owns 17,732 Bitcoins personally, valued at approximately $1.6 billion, comprising nearly 20% of his $8.3 billion net worth. Overall, this has positioned Michael Saylor as the face of Bitcoin, despite being an early critic in 2013.

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Does MicroStrategy Still Do Business Beyond Bitcoin?

A very common question online is whether MicroStrategy still operates its original business outside of Bitcoin. The answer is yes, as MicroStrategy continues to manage its software business, generating $116.1 million in revenue during Q3 2024, though this marked a 10.3% decline year-over-year.

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Bottom Line

After 30+ years in business, MicroStrategy has transformed its trajectory with an unprecedented focus on Bitcoin, frequently making headlines for its relentless BTC acquisitions.

Since pivoting to Bitcoin in 2020, Michael Saylor has not only amplified his personal wealth but also placed the company at the forefront of corporate cryptocurrency adoption.

Will MicroStrategy’s audacious bet on accumulating 1 million BTC pay off, or could the company become the first major domino to fall in the next bear market? Only time will tell.