$1.2B MicroStrategy Will Hold Bitcoin as Part of its Cash Reserves

MicroStrategy, an enterprise business intelligence (BI) application software vendor valued at over $1.2 billion, said it will add Bitcoin as part of its cash holdings, and will likely increase its exposure to the digital asset if market conditions are favorable.

The new capital allocation to Bitcoin was revealed by MicroStrategy’s President and Chief Financial Officer, Phong Le during the company’s second-quarter 2020 earnings call on July 28, with the object being to boost the company’s share buyback capabilities over the next twelve months.

As part of MicroStrategy’s cash allocation plan over the said period, Phong Le mentioned that the company “will seek to invest up to another $250 million over the next 12 months in one or more alternative investments or assets which may include stocks, bonds, commodities such as gold, digital assets such as Bitcoin, or other asset types.”

Michael Saylor, Micro Strategy Chairman and CEO further backed the company’s decision to increase its exposure to bitcoin and similar assets. According to Saylor, the recent influx of monetary stimulus by the U.S Federal Reserve, and the fact that the central bank isn’t planning to raise interest rates anytime soon means that investors must look elsewhere to increase yield.

He added:

If you have large dollar values and you’re hoping for any kind of return on them, that’s faded. Gold, silver, and bitcoin are showing strength.

Saylor also acknowledged that the U.S dollar (DXY index) is weakening while faith and fiat currency across the market are fading at the same time. Therefore, the CEO described it as not so prudent if the company continues to hold a large portion of USD in its treasury when there are investments that “can’t be inflated away or are less likely to be inflated away.”

MicroStrategy’s disclosure that it now holds bitcoin comes off the back of what has been a stellar year for the cryptocurrency. Despite growing economic uncertainty since the turn of the year, Bitcoin recorded an impressive year-to-date (YTD) returns (%55), further strengthening the save haven narrative.

A $215 billion market cap at press time also means that Bitcoin’s market valuation has now surpassed that of a beverage company, Coca-Cola, and tech giant Intel.