The opinion ECHO: Is Microstrategy becoming a bitcoin fund?

Microstrategy may be running out of cash, but that’s not stopping the company from buying more bitcoin.

The Nasdaq company is now looking to buy another $400 million worth of BTC with special notes. But slowly the first critics of the strategy are speaking out. The opinion ECHO.

Gold and Bitcoin serve similar investment narratives. After all, the precious metal is traditionally considered a good store of value. In times of crisis or in periods of high inflation, investors increasingly buy gold to hedge against the uncertainties of the future. Readers of BTC-ECHO will not have missed the fact that the metal has gained a serious competitor from the digital world: Bitcoin.

Meanwhile, this realization is also penetrating the traditional financial sector. Recently, for example, JP Morgan analyst Nikolaos Panigirtzoglou traced the argument for Bitcoin.

The adoption of Bitcoin by institutional investors has just begun. Meanwhile, the proliferation of gold by institutional investors is already very advanced,

the analyst told Bloomberg. According to the report, the gold story has already been told, while Bitcoin is gaining momentum. Should investors diversify even small portions of their gold portfolios into BTC, the precious metal could be in real trouble.

If this medium- to longer-term thesis proves true, the gold price would suffer from a structural capital outflow in the coming years,?

writes the analyst.

Microstrategy strikes again

Michael Saylor can’t get a grip. The charismatic CEO of the business intelligence company Microstrategy already confidently took several hits on the bitcoin market. Currently, according to bitcointreasuries.org, there are over 40,000 BTC on the company’s balance sheet. However, digital gold in the equivalent of 720 million USD does not seem to be long yet.

That’s because, as Microstrategy had announced on Dec. 7, the company plans to issue so-called senior convertible notes, interest-bearing debt securities that are exchangeable for shares. With the proceeds worth $400 million, Microstrategy then plans to buy – three guesses – more Bitcoin.

Besides the Bitcoin community, this will especially please the shareholders. Since the announcement of the first big Bitcoin shopping spree, Microstrategy shares have risen by an incredible 116 percent.

But not everyone agrees with the Nasdaq company’s risky behavior. Citi Group is already warning investors against the stock.

Issuing new debt to fund bitcoin purchases is aggressive and could be a deal-breaker for software investors who fear they now own a riskier asset manager, the bank writes in a memo obtained by The Block. In other words, Citi Bank warns against restructuring Microstrategy into something like a Bitcoin fund. That’s not objectionable per se, it says. Investors just need to know exactly what they are investing in.

The much-touted Bitcoin liquidity crisis

I repeat myself but there is a Bitcoin liquidity crisis playing out before our eyes right now. More and more BTC is being withdrawn from Exchanges. Another $700 million (USD) was withdrawn from exchanges last week, more and more people are hoarding.

You hear it all the time: bitcoin is running out. Not only are large investors like Microstrategy or Grayscale buying massive amounts of BTC. The retail sector is also apparently driving the shortage of BTC supply. For example, the amount of coins that investors currently hold in accounts on bitcoin exchanges like Binance has been steadily decreasing since the beginning of this year.

In plain language, this means that more and more Bitcoiners are managing their coins themselves and storing them on hardware wallets such as Ledger or Coldcard. At the same time, the supply of available BTC is decreasing along with the transfers, which is leading to a renewed shortage on the sell side. According to market observers such as Danny Scott, CEO of the bitcoin exchange CoinCorner, this could lead to „rapid price movements“ in the medium term.

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