MICROSTRATEGY INVESTS MORE INTO BITCOIN INFRASTRUCTURE

In the spring, the e-car maker Tesla first announced its billion-dollar entry into Bitcoin, but then a few months later voiced its concerns about the high power consumption that occurs during the mining of the cryptocurrency. Entrepreneur Michael Saylor has also been investing in BTC for a long time with his software company MicroStrategy – and is not thinking of selling his holdings.

Despite a brief slump in the price of Bitcoin and other cryptocurrencies, the crypto trend is currently on everyone’s lips, as evidenced by the fact that major tech companies such as Apple and Amazon are rumoured to be entering blockchain and digital assets soon. And in spring, star investor Cathie Wood also predicted the important role institutional investors would play in the widespread acceptance and adoption of Bitcoin and other coins and tokens. 

At the same time, however, criticism of Bitcoin’s negative environmental balance is growing louder. For example, in February, the US e-car maker Tesla announced that it had made a billion-dollar investment in the crypto-legend Bitcoin and would soon also let customers pay for vehicles with the internet coin. The new payment method was activated in March, but the group removed it from its online shop less than two months later. “We are very concerned about the increasing use of fossil fuels for Bitcoin mining and transactions, particularly coal, which has the worst emissions of any fuel,” read a statement posted by CEO Elon Musk on his Twitter profile. Shortly before, the company also sold off some of the Bitcoins it had bought in the spring.

MicroStrategy boss expands Bitcoin engagement

In addition to the high power consumption, the volatility of digital coins is also a frequent point of criticism. MicroStrategy CEO Michael Saylor had to experience first-hand that a rapid fall in the price of cryptocurrencies can be problematic for companies. As Financial Express reports, with 105,085 Bitcoins, the software group holds the most cryptocurrency units among all listed companies. Yet the provider of business intelligence solutions has only been invested in the crypto business since last year: MicroStrategy first bought 21,454 Bitcoins in August 2020 at a total price of $250 million, including fees and expenses, and then kept adding to it. And despite impairments that totalled US$424.8 million in the second quarter of 2021 and cumulatively amounted to US$689.6 million, due to declining prices of the coin, the company is now looking to expand its BTC exposure further. “We continue to be very pleased with the results of the execution of our digital asset strategy,” the portal quotes CEO Saylor as saying. “Our recent capital raise allowed us to expand our digital holdings, which now exceed 105,000 Bitcoins. We intend to continue to invest additional capital in our digital asset strategy in the future.”

Bitcoin "next big tech digital network"

Speaking to “CNBC”, the IT company’s CEO now justified the debt-financed purchases. “We have $2.2 billion of debt, and we’re paying about 1.5 per cent interest, and we have a long time horizon,” Saylor said on the “Squawk on the Street” television programme. “We think it’s good for our shareholders to be a leveraged company that invests in Bitcoin for a long time.” For example, he said, borrowing a billion-dollar amount at a low interest rate as a company is a no-brainer when it comes to investing in the “next big-tech digital network”. “I mean, if I could borrow a billion US dollars a decade ago and buy Facebook [shares] for 1 per cent interest, I think I would have done pretty well.” Papers of the social network, for example, were first listed on NASDAQ in 2012 and started trading at US$42.05. Facebook shares last traded at US$361.61 (closing price on 9 August 2021). He said Bitcoin was another entry on the list of successful tech innovations, including Google, Apple and Amazon, and Facebook. “We think it’s only a matter of time before billions and billions of people have mobile phones that are connected to Bitcoin, and we just want to be there first,” the MicroStrategy CEO said.

MicroStrategy and Bitcoin

Power consumption increases network security

Although Saylor did not address the high energy consumption that occurs when mining Bitcoins in the CNBC interview, the Bitcoin Mining Council (BMC), which was founded in June under the leadership of the entrepreneur, does not see the high power consumption as a problem. As Markets Insider writes, the association believes that the high energy balance ensures the network’s security, which is why they are not talking about a bug but a function. In the run-up to the founding of the BMC, Saylor stated at the online conference “Consensus” organised by CoinDesk that he wanted to use the association to counter criticism of the high power consumption of Bitcoin & Co. and to dispel corresponding concerns. This is to be done, for example, by publishing data on the mining process of cryptocurrencies.

Bitcoin purchase helps MicroStrategy core business

And despite the impairments that Bitcoin has caused to the company’s balance sheet, the coin did help MicroStrategy’s core business grow significantly, Saylor told CNBC. For example, the software group reported a 13.4 per cent increase in revenue to $125.4 million in the second quarter of this year, up 6 per cent from the second quarter of 2019, when the coronavirus had not yet gripped the world. Thus, he said, the multi-million dollar Bitcoin purchase did not hurt the company’s reputation in any way – quite the opposite. “It’s a door opener,” Saylor said, expressing enthusiasm for the company’s Bitcoin involvement. “It’s imperative that people know who you are. It starts the conversation. It’s been great for our enterprise software business and also for employee morale.”

Similar to Elon Musk, Saylor mainly shares memes and quotes about bitcoin on his Twitter profile. As early as December 2020, i.e. before Tesla announced its Bitcoin entry, Saylor called on Musk to convert his company’s balance sheet from US dollars to Bitcoin.

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