Why MicroStrategy Invests Billions of Dollars in Bitcoin

The Nasdaq company MicroStrategy has been investing in Bitcoin (BTC) since 2020 and has written a success story. Now MicroStrategy wants to invest another 42 billion US dollars in Bitcoin – a deal with risks?

Around 1.2 percent of all Bitcoin (BTC) is owned by MicroStrategy – the Nasdaq company has become the largest Bitcoin owner in the world since 2020

But that’s not all: Last week, MicroStrategy announced plans to raise $42 billion in funding over the next three years to buy more Bitcoin. Market observers have expressed doubts as to whether the plan is soundly financeable and whether Bitcoin can withstand MicroStrategy’s concentrated influence.

An analysis by Coinshares is particularly critical. So far, MicroStrategy has managed to take out loans for Bitcoin purchases at interest rates close to zero and to service liabilities at least partially with income from a software business. But according to Coinshares, MicroStrategy’s liabilities currently amount to “only” a good $4.2 billion.

The Bitcoin on the credit side is worth $18 billion at current market prices and was purchased for just under $10 billion. MicroStrategy will venture into new spheres with $42 billion, half of which will be financed with debt. Coinshares warns that this will also change the company’s financial balance and that investors should keep an eye on risks such as MicroStrategy’s tax payments and the cash flow for loan financing.

Because one thing is clear: MicroStrategy’s three-year plan will make it even more dependent on Bitcoin than before. If the company were forced to sell parts of its Bitcoin reserves, this would likely shock the crypto market. The mere idea that MicroStrategy will be able to accumulate several percent of all BTC in the future is worrying parts of the crypto scene – MicroStrategy certainly does not live by decentralization.

And the history of the crypto industry has already shown, for example with Grayscale’s Bitcoin fund, which is now an ETF, how oversized market participants can become a systemic risk.

Conclusion: Bitcoin and MicroStrategy – a healthy partnership of convenience?

The share price of MSTR (MicroStrategy) provides an indication of how the markets rate the 42 billion bet on Bitcoin. MSTR lost significantly following the publication of the BTC strategy for 2025 to 2027, and this in a market environment in which Bitcoin itself recorded gains.

Another factor here is that calculations had already been circulating which showed that anyone who invests indirectly in Bitcoin via MSTR has to accept a premium of 200 percent or more – whether this is worthwhile depends crucially on whether MicroStrategy finds ways to transform its enormous BTC liquidity into a passive and low-risk source of income. MicroStrategy will have to be observed in detail in order to seriously assess its impact on Bitcoin.

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(Featured image by Kanchanara via Unsplash)

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First published in BLOCK-BUILDERS.DE. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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