In June 1998, when MicroStrategy went public, traders in the market were cautioned not to confuse its ticker symbol with that of MicrosoftFast forward 26 years, and the connection between MicroStrategy and Microsoft has resurfaced—but this time for an entirely different reasonMichael Saylor, the founder and chairman of MicroStrategy, stood before Microsoft’s shareholders, urging them to allocate a portion of the company’s $78.4 billion in cash, equivalents, and short-term investments into BitcoinSaylor made a compelling argument: "Microsoft cannot afford to miss the next technological wave, and Bitcoin is that wave."

However, despite Saylor's enthusiasm, Microsoft's shareholders overwhelmingly rejected his proposalLess than 1% of them voted in favor of investing in BitcoinIn contrast, Saylor himself has staked everything on this strategy, and it has drastically reshaped MicroStrategy’s financial profile.

Since mid-2020, MicroStrategy has amassed an impressive 439,000 Bitcoin, valued at approximately $42 billion, a sum that has fueled the company’s rise from a modest market capitalization of $1.1 billion in mid-2020 to $82 billion today

The company’s decision to purchase Bitcoin has clearly paid off, turning MicroStrategy into the fourth-largest holder of Bitcoin globally, trailing only Bitcoin’s pseudonymous creator, Satoshi Nakamoto, BlackRock’s iShares Bitcoin Trust, and the cryptocurrency exchange BinanceAs a result, the stock price of MicroStrategy often mirrors the volatile price movements of Bitcoin, making it a unique proxy for the digital currencyAnalysts have pointed out that the company's decision to hold Bitcoin as a reserve asset has significantly boosted its stock attractiveness.

The financial performance of MicroStrategy’s core business—its commercial intelligence software division—is modest, with quarterly revenues hovering just above $100 millionThe company’s stock initially soared during the tech boom of the late 1990s, only to crash after the bursting of the dot-com bubble, nearly losing all of its value

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For years, MicroStrategy was mired in a slow recovery, but the company’s bold Bitcoin purchases starting in 2020 set it on an entirely new trajectoryBy embracing Bitcoin, Saylor has not only helped revive MicroStrategy but also redefined the company’s role in the financial markets.

In the past week alone, MicroStrategy announced that it had purchased 5,262 more Bitcoin for approximately $561 million, at an average price of $106,662 per BitcoinThis purchase brought the company’s total holdings to 444,262 Bitcoin, solidifying its place as a major player in the Bitcoin market.

MicroStrategy’s bet on Bitcoin has, in many ways, transformed its stock into a de facto Bitcoin investment vehicleAs of the most recent data, MicroStrategy’s stock has risen by 477% this year, a performance second only to AppLovin among U.Stech companies with a market capitalization of $5 billion or more

In 2023 alone, the stock is up 346%, and since November 5th, it has surged by 60%, surpassing its 2000 peak.

While Michael Saylor’s bullish stance on Bitcoin has earned him the status of a Bitcoin evangelist, his strategy has also attracted a growing chorus of criticsDetractors have labeled Saylor a “cult-like leader” and described his strategy as a “Ponzi scheme,” in which the company issues bonds and equity to buy Bitcoin, supporting MicroStrategy’s stock price, only to repeat the cycle. 

Min Jung, an analyst with Presto Research, has raised concerns about the sustainability of MicroStrategy’s financial dependence on BitcoinHe noted, “The favorable price trajectory of Bitcoin has allowed MicroStrategy to maintain a positive feedback loop—rising stock prices help raise funds for further Bitcoin purchases, which pushes up Bitcoin’s price and, in turn, the company’s stock value

While this strategy works in a bull market, its sustainability heavily relies on the continued appreciation of Bitcoin.”

Famed short-seller Citron Research also expressed skepticism about MicroStrategy’s Bitcoin strategyIn late November, Citron’s Andrew Left posted on social media, accusing MicroStrategy of becoming little more than a Bitcoin investment fundLeft argued that with the launch of Bitcoin ETFs, investors can directly invest in Bitcoin funds without having to use MicroStrategy’s stock as a proxy. 

Citron’s analysis pointed out that Saylor’s use of the capital markets to fund his Bitcoin obsession has led to significant stock price growth this year, but it likened the company’s financial model to a “glitch in a video game”—profitable, addictive, but potentially unsustainableThe short-sellers' concerns were centered on the notion that while Bitcoin’s price continues to rise, any significant downturn could leave MicroStrategy exposed, especially if it continues to fund its Bitcoin purchases through debt and equity issuance.

Responding to the criticism, Saylor compared his strategy to real estate developers in Manhattan, who issue more bonds whenever property prices rise in order to fund new projects

“This has been going on for 350 years,” Saylor explained“I would call it economics.”

Saylor remains adamant in his belief that Bitcoin is a cornerstone of the growing digital economyIn an interview, he confidently predicted that Bitcoin, along with other digital assets, will experience significant growth as the broader market embraces a “digital asset framework.” Saylor argued that taxes would decline, and that regulators’ previous hostility toward banks interacting with Bitcoin would eventually dissipateHe said, "Bitcoin is still the 'safe trade' in the crypto space, but once the framework is in place, all digital assets will see a surge."

MicroStrategy's Bitcoin acquisitions have grown more aggressive this yearBy November 11th alone, the company had purchased more than 255,000 Bitcoin, with about two-thirds of those purchases made after that date

In a bold move, the company announced a “21/21” plan, which aims to raise $42 billion in funding over the next three years—$21 billion through equity and $21 billion through debt—to buy even more Bitcoin. 

Saylor’s vision for Bitcoin has grown increasingly optimisticIn September, he predicted that by 2045, each Bitcoin could be worth $13 million, representing a 29% annual growth rateFor Saylor, owning more Bitcoin is always a good idea"Every day is a good day to buy Bitcoin, even if you’re buying at the top," he said. 

Although Microsoft rejected Saylor’s proposal, Saylor continues to advocate for other companies to adopt his Bitcoin strategyHe argues that many “zombie companies,” which lack innovation or growth in their core business, could better utilize their cash reserves by investing in Bitcoin. 

Despite the criticism, Saylor’s determination to promote Bitcoin as a new economic foundation remains steadfast

As MicroStrategy continues to increase its Bitcoin holdings, the company’s future is increasingly tied to the fortunes of the cryptocurrencyWhether or not the market will continue to support this strategy remains uncertain, but one thing is clear: MicroStrategy's future is now inextricably linked to the success of Bitcoin, for better or for worse. 

While the company’s stock has flourished alongside Bitcoin's meteoric rise, the risks of this strategy are evidentIf Bitcoin’s price were to plummet, it could have devastating consequences for MicroStrategy’s financial health and stock priceYet, for Saylor, the gamble appears to be a calculated bet on the future of the digital economy, with Bitcoin at its centerWhether this strategy will prove to be a masterstroke or a disastrous misstep in the long run remains to be seen, but Saylor’s vision for Bitcoin as the future of finance is undeniable.