The price of anything depends of supply and demand, buyers and sellers. There is one buyer we can always rely on to continuously to buy bitcoin regardless of the price, and that is MicroStrategy. The company that makes business analytics software and of which nobody had heard of before getting involved in bitcoin, is now well known for its bitcoin strategy. All this because of unbreakable conviction in bitcoin of company's founder Michael Saylor. When initially this bitcoin treasury strategy was criticized by many, seen interesting by some, eventually in a very short time it has been proven to be absolutely genius one. Not only Michael Saylor's vision has been proven right by now, but it also helped the growth of the company, its recognition, and rewarded its investors.
This week MicroStrategy announced their intention of raising $500 million by offering of senior convertible notes and use the money to buy more bitcoin. This number has been increased to $700 million now. This is not the first time MicroStrategy has raised funds to buy more bitcoin. This will not be the last one either. They will continue to buy as long as they can find ways to do so. It seems like they have built their own money printer with this bitcoin strategy. Of course they are very strategic with how and when to raise funds and buy more bitcoins.
It all started with a simple idea MicroStrategy had during 2020. The simple idea was a solution to the problem Saylor faced as a CEO of a company with a decent money flow and decent amount of savings in the treasury of the company. They problem Saylor was trying to solve had to do with preservation of value of assets MicroStrategy had. The company had half a billion dollars in savings and was adding to the treasury $50 million yearly. They problem was that with the dollar losing its purchasing power, the value of company savings would also lose its purchasing power by at least 10%, which became obvious during the initial months of Covid. In other words, all the efforts company would put in to generate revenue and income within a year would result in net zero. Sure they would add more dollars to savings, but the purchasing power of the total holding would be the same as the previous year. There had to be a better way for the company, a better treasury strategy that would preserve the wealth, help the company continue to grow, and create returns for its investors.
After exploring all possible investment option, different treasury strategy, Saylor came to the conclusion that the bitcoin was the way. After adopting bitcoin strategy for its treasury, MicroStrategy became the first bitcoin company. Today it is evident that company's growth, MSTR stock price increasing 10x all have to do with bitcoin strategy. The strategy itself had to pivot and grow as MicroStrategy got involved in bitcoin more and more. They didn't stop with initial all in with their money in the savings. They continued to borrow more money at very lower interest rates to buy more bitcoin. They issued more stocks to buy more bitcoins, issued more obligations to buy more bitcoin. Its seems they can keep buying bitcoin forever with the money they do not have. As long as bitcoin's price continues to appreciate, they will be just fine. Short term volatility wouldn't make much of difference, since MicroStrategy's bitcoin strategy is a long term one.
Two more awesome things about Saylor strategy is are complete transparency from the beginning, and willingness to hold bitcoin forever. I called this bitcoin strategy simple idea, because any company like MicroStrategy could have implemented the same strategy and received the same results. Any company with decent business and money flow and some cash in savings could have easily adopted bitcoin treasury strategy which would help them to preserve the value of their savings and help the growth of the company. Saylor and MicroStrategy were not secretive about this strategy. Not only they informed the public and investors of their actions, Saylor actively became a bitcoin advocate promoting this technology to all business executives. He kept encouraging others CEOs to take similar steps and was willing to share the blueprint with anybody who was interested. Among notable CEOs who paid attention and took actions was Musk and Tesla. While Tesla and Musk didn't go all in as Saylor did, they still hold a decent amount of bitcoins.
Companies can still implement this strategy. It is not too late now, it won't be too late years ahead. We will probably see more and more coming to this realization. At the very least they would be preserving the value of their funds, purchasing power of the money flow, and not lose value due to inflation. With the approval and successful launch of bitcoin spot ETFs, bitcoin is becoming more and more acceptable investment instrument, store of value for large institutions, big companies and sovereign funds. Demand continues to grow. Supply continues to decrease. We had the halving event already, and that cut the production of bitcoin. What will lower the supply even more is Saylor's strategy. MicroStrategy has no intentions of selling their bitcoins anytime soon. Initially Saylor used to say they will hold their bitcoin for ten years. Then this changed to forever. The logic was, if bitcoin is good to hold for ten years, then it is good to hold forever. All bitcoin MicroStrategy buys removes bitcoins from the market. If more companies adopt the same strategy, more bitcoins will be removed from the market and continue lowering the supply side.
MicroStrategy is no longer an enterprise software maker. I am sure the core business will continue to grow. But that part of the company only represents a smaller part of it. It is indeed a bitcoin company now. Great thing about this is being a bitcoin company only helps the core business. Any company can become a bitcoin company, only if their executives are courageous enough to take such risks to benefit their companies.
