At the end of 2020, Michael Saylor transferred 50,000 shares of MicroStrategy to Alcantara LLC, which he controls. This move also aroused public suspicion. According to regulations, the reduction of company shares by company executives must be disclosed to the public in a timely manner, so many executives often use their non-listed companies to control stocks. The transfer of shares by Michael Saylor is also suspected of evading supervision. Recently, the executives of the MicroStrategy have also continued to cash out, causing stock prices to fall.
Since Winklevoss brothers applied to the SEC for a Bitcoin ETF in 2013, countless companies have made similar attempts, all of which ended in failure. The reason is that the SEC believes that Bitcoin has huge opacity and its price is easily manipulated.
However, there are more institutions accepting Bitcoin, while some regulatory agencies begin to embrace it. In February, Canada listed the country’s first Bitcoin ETF, which ran ahead of the United States. Will the U.S. regulatory changes its attitude?
Regardless of the SEC’s attitude, the arrival of Bitcoin ETF seems inevitable. Even if the SEC has not approved any company’s Bitcoin ETF, companies like MicroStrategy can also turn their stocks into Bitcoin ETFs indirectly.
At present, the market value of MicroStrategy is nearly US$6 billion, and the 91,064 bitcoins held by the company are worth US$4.6 billion. This shows that 76% of the MicroStrategy’s stock comes from Bitcoin. If the growth of Bitcoin exceeds the growth rate of the company’s commercial software business in the long run, this ratio will gradually increase. When it approaches 100%, the MicroStrategy’s stock is a Bitcoin ETF in the de facto sense. From a regulatory perspective, we can only accept such a fait accompli at that time. In the newly launched JP Morgan Chase cryptocurrency risk exposure basket, MicroStrategy accounts for up to 20%.
From the perspective of MicroStrategy’s Bitcoin investment, this part of the investment is quite successful, because its holding cost is US$24,119, and the current price of Bitcoin is above US$50,000. In other words, only if Bitcoin falls by half its value on the current basis, it can cause a loss of investment to MicroStrategy.
However, Bitcoin assets only occupy a very small part of Tesla, and for companies like MicroStrategy, if the price of the currency falls in the future, its stock price will also fall, and the decline in the stock price will increase the difficulty of financing for the company. It can no longer buy currency through the issuance of convertible bonds or new shares to maintain the currency prices, which creates a vicious circle and may eventually lead to bankruptcy. Judging from the history of Bitcoin over the past ten years, it is not impossible for the price to fall for a certain period. If this happens, the stock price of the company holding Bitcoin will be highly correlated with the trend of the currency price. This further strengthen the volatility of Bitcoin. Bitcoin has proven its resilience, but it is unknown whether the public companies that hold a large amount of Bitcoin can survive this catastrophe.
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