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MicroStrategy Adopts Bitcoin as Primary Treasury Reserve Asset

Updated: Sep 28, 2020

Even with the last 2-3 months filled with countless of developing stories about increasing institutional adoption and interest in Bitcoin, the latest developments involving MicroStrategy® is undoubtedly the biggest victory for Bitcoin adoption in it's history.

Being a publicly listed company, MicroStrategy® Incorporated (Nasdaq: MSTR) has become the first publicly listed company to officially have some of it's holdings in Bitcoin. What has come as even more surprisingly was the size of their acquisition and conviction behind it, making a first purchase of $250 million, followed closely by a second purchase of $175 million just a month later, putting their total holdings at $425 million dollars.

On a podcast with Pomp (link below), MicroStrategy's CEO Michael Saylor underlined the rationales behind the company's decision to move forward with Bitcoin, highlighting that it was a collective decision made between all the directors of the company that there was a need to begin protecting the company's holdings from a "significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.”

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. - MicroStrategy's CEO Michael Saylor

In the company's search for an alternative asset class (to cash) that more effectively preserves it's value over time, MicroStrategy considered a number of other asset classes, such as equities, gold and real estate. However, they felt that at this point in time, the valuations of alternative classes were infavourable as compared to Bitcoin, which had a asymmetrical risk/reward ratio - meaning that a 1 dollar investment in Bitcoin had the potential to return 5x to even 10x. However the same cannot be said of the stock market today.

Initially a skeptic of Bitcoin, Michael Saylor felt that the pressing need to preserve the company's holdings from "melting away" let him to reconsider other asset classes, and after falling down the rabbit hole with bitcoin, shared his idea with the company's other executives who similarly researched bitcoin to arrive at the same conclusion. After achieving consensus, proceeding with the Bitcoin purchase had numerous challenges as well, due to the size of the purchase and the compliance steps taken prior to the purchase. It is tremendously bullish for Bitcoin that major institutions are opening to the idea (an acting upon it) that can bitcoin serve as an attractive store of value with an asymmetrical return in today's economic climate. With MicroStrategy taking the first step and leading the way, there is now an increased prominence and likelihood that other listed companies may soon follow suit, massively increasing and normalizing institutional adoption. Read more about Bitcoin's use case as a store of value here, in Everything About Bitcoin's FAQ "The Future of Bitcoin and Why?"

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