MicroStrategy’s 2023 Stock Surge on Bitcoin, ETF Prospects

The stock price of MicroStrategy (MSTR) has increased by more than 350% in 2023, primarily as a result of the anticipation surrounding the approval of a spot Bitcoin exchange-traded fund (ETF) in the United States. At the time of this writing, MSTR traded at $654, representing an intraday increase of 8.3%.

The enormous exposure that the company has to Bitcoin is helping to support the performance of its shares. MicroStrategy and its subsidiaries currently possess 189,150 bitcoins, which represents a collective purchase price of about $5.9 billion and an average purchase price of $31,168 per bitcoin.

Because MicroStrategy has exposure to the cryptocurrency, some analysts have referred to the company’s shares as “essentially a leveraged Bitcoin ETF.” Seeking Alpha’s analysis of the company’s quarterly results indicates that MicroStrategy has financed its bitcoin transactions by utilizing a combination of long-term debt with low interest rates and the issue of shares.

As of the 30th of September, MicroStrategy’s overall liabilities amounted to $2.534 billion, representing a decrease of 7.7% compared to the previous year. The company’s long-term liabilities amounted to $2.180 billion. The company plans to issue the senior convertible notes in December 2025.

The analysis states that “from Saylor’s point of view, it is not prudent to save in a fiat currency that is perpetually debased when he can instead put the company’s treasury in a liquid asset that does not suffer from dramatic supply inflation.”

Senior convertible notes are a financial instrument utilized by businesses to raise funds. Software for mobile devices, business intelligence, and cloud-based services are all services that MicroStrategy offers. Companies utilize MicroStrategy’s platform for data analytics to visualize data.

The company’s increasing exposure to Bitcoin has now closely linked its balance sheet to the volatility and risks associated with the cryptocurrency markets. The possibility of spot Bitcoin exchange-traded funds (ETFs) trading on Wall Street is another factor that is driving up the price of the cryptocurrency.

Bitcoin’s price has increased by more than 160% in 2023, exceeding the performance of major traditional assets. This is despite the fact that the macroeconomic environment is tight and the cryptocurrency industry is facing headwinds.

Investors can quickly buy or sell Bitcoin at the current market price through a practice called spot trading. The United States Securities and Exchange Commission is expected to decide in early January whether to allow spot trading of Bitcoin through exchange-traded funds (ETFs).

Major financial institutions such as Fidelity and BlackRock are among the companies that are in the race for this decision. The approval could potentially increase the value of Bitcoin as well as the liquidity of the market by making the cryptocurrency accessible to a wider range of investors.