- Noted bitcoin bull Michael Saylor saw shares of his company MicroStrategy fall as much as 23% on Wednesday.
- The volatile move is a result of MicroStrategy’s significant bitcoin exposure.
- JPMorgan analysts warned clients in a note of the increased volatility that results from holding bitcoin.
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Although MicroStrategy doesn’t mine bitcoin itself, the business intelligence firms is one of only a few companies to buy into bitcoin in a big way. MicroStrategy owns 71,079 bitcoins, worth an estimated $3.21 billion at current prices.
For reference, the company’s market cap is $9.25 billion as of Wednesday, meaning MicroStrategy owns a third of its net value in Bitcoin.
MicroStrategy acquired the majority of its bitcoin in 2020 at prices well below current levels. In fact, according to a press release from the company, it owned 70,470 bitcoins as of Dec 21, which were acquired at an aggregate purchase price of approximately $1.125 billion or $15,964 per bitcoin.
Saylor’s business intelligence firm has seen a monumental 732% rise in share prices during the past six months as bitcoin climbed.
And when Tesla announced a $1.5 billion investment in the cryptocurrency on Monday, sparking newfound hope for institutional investment, a move to record highs of over $48,000 helped MicroStrategy break the $1000 per share mark.
Michael Saylor has been at the forefront of a move by institutions into Bitcoin for some time and that position was solidified after he held a “Bitcoin for Corporations” conference on February 3 and 4.
In an interview with Ran Neuner, former host of CNBC’s “Crypto Trader,” Saylor said 7,000 companies and around 8,500 people attended the event, exceeding his expectation of 2,000 attendees.
Saylor also noted he held the event “by popular demand” after he was asked for “thousands” of meetings from prospective institutional bitcoin buyers to discuss legal, logistical, and security details.
Tesla and Microstrategy may entice other corporate treasuries to hold bitcoin, but the move is risk. JPMorgan strategists led by Nikolaos Panigirtzoglou warned clients of the potential for increased volatility if companies start holding significant amounts of bitcoin.
“The main issue with the idea that mainstream corporate treasurers will follow the example of Tesla is the volatility of Bitcoin. The addition of BTC would cause a big increase in the volatility of the overall portfolio of large companies. BTC allocation could mean the portfolio’s volatility rises to 8% due to Bitcoin’s 80% annualized volatility,” the research note states.
MicroStrategy traded down 22%, at $990.66, as of 3:53PM E.T. on Wednesday.