Bitcoin’s pullback is causing volatility in MicroStrategy.
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- Well-known Bitcoin bull Michael Saylor saw shares in his MicroStrategy company fall by up to 23% on Wednesday.
- The volatile move is the result of MicroStrategy’s significant exposure to Bitcoin.
- JPMorgan analysts warned clients of the increased volatility resulting from holding Bitcoin.
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Bitcoin’s pullback on Wednesday even slashed 23% of the shares of Crypto Bull Michael Saylor’s MicroStrategy.
While MicroStrategy doesn’t mine Bitcoin itself, the business intelligence firm is one of the few companies that is opting for Bitcoin on a large scale. MicroStrategy owns 71,079 bitcoins valued at an estimated $ 3.21 billion at current prices.
For reference, the company’s market capitalization as of Wednesday is $ 9.25 billion, which means MicroStrategy has a third of its net worth in Bitcoin.
MicroStrategy acquired most of its Bitcoin in 2020 at prices well below current levels. According to a press release from the company, it owned 70,470 bitcoins as of December 21, which were purchased for a total purchase price of approximately $ 1.125 billion, or $ 15,964 per bitcoin.
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Saylor’s business intelligence firm saw its share prices surge 732% over the past six months as Bitcoin rose.
And when Tesla announced a $ 1.5 billion investment in cryptocurrency on Monday that sparked new hopes for institutional investments, a move to record highs of over $ 48,000 helped MicroStrategy, the $ 1,000 mark per share.
Michael Saylor spearheaded an institutional move in Bitcoin for some time, and that position was cemented after holding a Bitcoin for Corporations conference on February 3rd and 4th.
In an interview with Ran Neuner, the former host of CNBC’s “Crypto Trader,” Saylor said that 7,000 companies and around 8,500 people attended the event, which exceeded his expectations of 2,000 attendees.
Saylor also noted that he was holding the event “by popular vote” after asking for “thousands” of meetings of potential institutional Bitcoin buyers to discuss legal, logistical and security details.
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Tesla and Microstrategy can trick other corporate coffers into holding Bitcoin, but the move is a 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 problem with the idea of mainstream treasurers following Tesla’s lead is the volatility of Bitcoin. The addition of BTC would greatly increase the volatility of the overall portfolio of large companies. The BTC allocation could mean the volatility of the portfolio increases due to the increase annualized volatility of Bitcoin from 80% to 8%, “says the research note.
MicroStrategy was trading 22% to $ 990.66 at 3:53 p.m. ET on Wednesday.