MicroStrategy Records Profit from Bitcoin Holdings Amid Uncertain Market Outlook
Summary:
MicroStrategy, a tech firm that started investing in Bitcoin in 2020, gains from its BTC holdings, recording around $132 million in paper profit as BTC price surpasses $30,000. The firm's purchases intensified in 2023 amid a BTC price recovery. However, Bitcoin's struggle to maintain bullish momentum after the $30,000 mark raises concerns about future profit. Potential approval of a Bitcoin ETF in the U.S. could boost the Bitcoin market and turn the tide for investors like MicroStrategy.
For the first time since July, MicroStrategy has started seeing profitability from its Bitcoin (BTC) holdings since the price of BTC has surpassed the $30,000 mark. On October 23, the company held a BTC inventory of 158,245, valuing at $4.847 billion, showing a profit of approximately $132 million from their initial investment. This profit was based on an average BTC rate of 29,870 which means that the company's gain per coin is no less than $130.
MicroStrategy initiated its Bitcoin purchases in 2020, and intensified the process in 2023 when the price of BTC started recovering from major downturns driven by the Federal Reserve's interest rate policies and several high-profile crypto bankruptcies. In September 2023, the firm mirrored its earlier strategy and added 5,444 BTC to its holdings, financed by equal capital raising, similar to its previous acquisition of around 12,333 Bitcoin earlier this year.
MicroStrategy's co-founder and chairman, Michael Saylor, shared insights on Bitcoin's superior performance compared to traditional assets since the company started implementing its cryptocurrency acquisition strategy in August 2020.
However, since May 2022, Bitcoin has struggled to sustain any significant bullish runs after breaking the $30,000 barrier. This might occur also in the forthcoming weeks, posing a threat to drag MicroStrategy's BTC investment below its mean purchase price.
Adding to potential downside scenarios, the current position of Bitcoin's daily relative strength index (RSI) suggests it may already be overbought, a condition seen previously in January 2023. As per technical analysis norms, an overbought RSI (above 70) could trigger a decline or consolidation sideways in BTC prices. In such a corrective state, Bitcoin's price could revert to its 50-day exponential moving average (50-day EMA) around $27,720 in November, marking a drop of around 10% from the present levels. On the flip side, by securing and validating $30,000 as a new support level, BTC might pave the way to its next major resistance zone at $32,000, a spot it hasn't reached since May 2022.
Beyond technical factors, prospects of a Bitcoin ETF approval in the U.S. serves as a significant potential bullish catalyst, as outlined by CryptoQuant. It indicates that an accredited Bitcoin ETF can amplify the Bitcoin market's total capitalization by $155 billion. Consequently, this could catapult the per Bitcoin price to between $50,000 and $73,000 in 2024, a favorable outcome for MicroStrategy, though the company remains committed to its Bitcoin investment strategy irrespective of the ETF approval.
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Published At
10/23/2023 2:32:37 PM
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