MicroStrategy announced today that it has spent nearly 1 billion USD to acquire an additional 10,624 BTC. This way, the largest institutional holder of Bitcoin has increased its total holdings to 660,624 BTC.
The purchase occurred during a time of heightened scrutiny over MicroStrategy's CEO, Michael Saylor. The company faced significant pressure during a broader market collapse caused by poor BTC price action.
Accumulation continues, pressure is mounting: MicroStrategy buys
Saylor continues to increase Bitcoin holdings in MicroStrategy despite ongoing public scrutiny of the company's approach.
The price action of Bitcoin weakened over the last two months, failing to recover the $100,000 level. The largest cryptocurrency lost this psychological support in November and is currently trading around $90,000.
MicroStrategy, effectively focused on Bitcoin as a reserve asset rather than traditional programming activities, has been heavily impacted by Bitcoin's volatility. This has undoubtedly hindered its growth.
Nonetheless, the company continues its purchases. It did not buy during the recent dip to $86,000. However, it announced its latest purchase when Bitcoin rose to $90,615.
Some saw this move as a way to revive supporters and maintain high morale among loyal investors. On the other hand, other analysts believe that MicroStrategy's ability to finance future Bitcoin purchases is weakening.
Analyst Novacula Occami noted that during this recent buying cycle, MicroStrategy was only able to sell preferred shares worth $44 million last week. This is a very small amount compared to previous capital raises.
This suggests that the market may be less willing to lend or buy their preferred shares.
As leverage becomes increasingly larger, MicroStrategy is returning to issuing common shares. In this case, it sold 5.1 million shares of MSTR at $181 each, which dilutes existing shareholders.
Under the current conditions, MicroStrategy, this method may soon become unsustainable.
MicroStrategy experienced a severe breakdown in early December when the company's market capitalization fell below the net value of its Bitcoin assets. This event raised new concerns about leverage, liquidity, and overall investor confidence.
The stock price fell to $156, reducing the company's valuation to $45 billion. At the same time, the value of Bitcoin assets held by MicroStrategy was around $55.2 billion. This marked a very unusual period when the market valued the company below its core assets.
Since then, MicroStrategy has regained stability. However, if its shares were to be listed below the value of its assets again, issuing new shares will become more difficult and less effective.
The effect of the continuous diminishing of leverage and the difficulties in capital dilution may result in a situation where MicroStrategy will not be able to raise sufficient capital to continue its accumulation model.
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