MicroStrategy Plans to Raise $500 Million to Buy BTC: Are New Highs Around the Corner?

28 Jun 2024

While crypto markets continue to consolidate below historic highs, Michael Saylor’s MicroStrategy is ready to buy more Bitcoin. The company has recently announced that it will issue a $500 million aggregate principal amount of convertible senior notes due 2032. The company may redeem for cash all or any portion of the notes on or after June 20, 2029.

MicroStrategy plans to use the proceeds from the notes’s sale to buy additional Bitcoin and for general corporate purposes. The wording regarding “general corporate purposes” is always used during notes offering, and it is clear that the company is raising money to buy BTC.

Currently, MicroStrategy holds 214,400 BTC. If we assume that the company buys additional Bitcoin at prices equal to or better than $70,000 (assuming for simplicity purposes that it uses all the $500 million raised and that it covers the notes issuance expenses using the money on its balance sheet), its Bitcoin holdings would grow by 7,143 BTC and total 221,543 BTC.

At $70,000 per Bitcoin, MicroStrategy will hold $15.5 billion worth of BTC, which is a major investment position. In comparison, the popular spot ETF, iShares Bitcoin Trust (IBIT), holds roughly $20 billion worth of BTC in its holdings. While IBIT holdings have already exceeded MicroStrategy’s holdings, the company remains a notable holder of Bitcoin whose actions are closely watched by the market.

From a big-picture point of view, MicroStrategy continues to leverage its unique position as a public company to fund additional Bitcoin purchases.

For the Bitcoin market, Microstrategy has already become a key regular buyer. At the same time, the company also serves as a major holder that does not plan to sell Bitcoin. In fact, MicroStrategy cannot sell a single Bitcoin without hurting its own investment position.

Any sales from MicroStrategy may put strong short-term pressure on the price of BTC as traders will surely react to such news. Saylor is aware of MicroStrategy’s impact on the BTC market, so his company is almost forced to buy BTC to expand its holdings in the foreseeable future, at least as long as the equity and bond markets are ready to finance such purchases.

It’s worth noting that MicroStrategy is issuing convertible bonds instead of classic ones. The prolonged period of high interest rates made traditional financing more expensive. The use of convertible bonds reduces the interest rate for the company.

Will the market view MicroStrategy’s new BTC purchases as a bullish signal? At this point, it looks like BTC needs stronger catalysts to test new highs. Additional purchases from a market player that has been investing in BTC for years are not sufficient to serve as a key positive catalyst that could trigger another wave of buying in Bitcoin markets.

However, crypto investors should note that MicroStrategy is among those players that continue to withdraw BTC from active circulation, making it an increasingly scarce asset. Ultimately, Bitcoin’s scarcity in combination with stable demand for the world’s main cryptocurrency will trigger another rally in BTC.