Bitcoin rebounded on Friday, sending certain stocks higher. Technology company MicroStrategy (NASDAQ: MSTR) holds thousands of Bitcoin tokens on its balance sheet (and keeps buying more), which is why its stock has risen. And like bitcoin mining stocks Marathon Patent Group (NASDAQ: MARA) and Riot blockchain (NASDAQ: RIOT) are also up today and reversed some declines over the past week.
As of 3 p.m. EST on Friday, MicroStrategy stock rose 10%, the marathon 6%, and the Riot blockchain 8%. Cryptocurrencies have no market hours (they are traded all day and every day), so it is best to measure their returns over a 24-hour period. According to cryptocurrency news site CoinDesk, the price of Bitcoin had increased 3% in the past 24 hours. However, the price is up around 15% from Thursday’s lows.
According to today’s filing with the Securities and Exchange Commission, MicroStrategy has bought more Bitcoin. The company bought another 314 tokens for around $ 10 million to comply with the new accounting policy. According to the policy, any cash that is not needed to run the business is to be held in Bitcoin.
This brings MicroStrategy’s total inventory to 70,784 Bitcoin tokens. At its current price (around $ 33,700 at the time of this writing), it is worth nearly $ 2.4 billion. With the company’s market cap of less than $ 5.4 billion, it’s no wonder this stock is as volatile as Bitcoin these days: Bitcoin accounts for roughly 44% of its value.
For his part, Marathon had no news today, even though its stock continues to trade in high volume. Riot Blockchain filed with the SEC today. In the filing, the company set out its payment schedule and delivery schedule for new mining equipment in accordance with its December 18 agreement with Bitmain Technologies. In short, this deal alone is expected to receive thousands of new Antminers over the next several months.
Yesterday I noticed Riot Blockchain increasing its mining power to keep up with the increasing hashrate of the Bitcoin blockchain network. The amount of Bitcoin received for mining is proportional to the amount each player contributes to the total hash rate. As more miners step in and others increase their power, companies like Riot Blockchain and Marathon need to keep spending to improve their mining operations.
With MicroStrategy, Marathon, and Riot Blockchain, long-term shareholder returns are likely to be heavily influenced by Bitcoin price. Michael Saylor, CEO of MicroStrategy, is clearly optimistic about Bitcoin’s long-term prospects. Otherwise, why would his company have thousands of Bitcoin tokens? Saylor showed up at CNBC’s Power Lunch today to discuss this.
Regarding the new Biden government, Saylor expects that it will ultimately clear up legal ambiguities in cryptocurrencies. Once resolved, it could spark a wave of institutional buyers of assets like Bitcoin. This is Saylor’s long-term vision: he hopes many companies will do what MicroStrategy did and hold Bitcoin instead of cash. To this end, he is holding a conference called Bitcoin for Corporations in February, at which he openly shares everything that MicroStrategy, as a listed company, had to consider with Bitcoin.
If more companies do what MicroStrategy does, the demand for Bitcoin will likely exceed the current estimated supply of 900 new tokens per day. This could cause the price of Bitcoin to continue to rise (good for MicroStrategy shareholders, by the way).
At the moment, however, it’s still pretty speculative. In fact, we don’t know which companies will attend the conference or what they will decide afterwards. But investors may find out more when MicroStrategy releases its quarterly earnings update on January 28th.