Goodbye Bitcoin effect – MicroStrategy slumps by 50 per cent in a short period of time
After Bitcoin drove the software maker’s stock to unimaginable heights, it is now heading back down.
Bitcoin’s (BTC) price decline is not only hitting investors, but the big boys are also suffering.
For example, the price of bitcoin major investor MicroStrategy, which now holds over 91,000 BTC, has plummeted by more than half in the last three weeks.
MicroStrategy remains undeterred
Accordingly, the software producer’s share price slipped to an interim low of only 628 US dollars on 5 March, after MSTR had still set a new record high of 1,300 US dollars in February. On the same day, the company announced that it had acquired an additional 210 BTC for 10 million US dollars.
The heavy loss is probably the result of the volatility of the market-leading cryptocurrency, because although it has made massive Bitcoin Pro gains in its record run, it continues to swing wildly in both directions, which the stock market has acknowledged with a crash for the MicroStrategy security.
Nonetheless, the effect on MicroStrategy’s stock (MSTR) has been outstanding so far, as it was trading at just shy of US$100 before the Bitcoin purchase.
„It now holds 91,064 BTC,“ as Anthony Pompliano, co-founder of crypto asset management firm Morgan Creek Digital, notes after the latest investment. To this he adds:
„Few investors in the financial markets have so clearly demonstrated their conviction in a financial product.“
Hayes warns of the extreme
That „conviction“ could pay off for the company in the long run, even if the current headwinds drag Bitcoin down in the short term.
Arthur Hayes, the former chief executive of major crypto trading platform BitMEX, meanwhile, warns that central bank monetary policy could pull capital out of the crypto market in an extreme case, however.
As the former Wall Street trader explains in his latest blog post, central banks could, for example, ensure that government bonds yield more again, which would result in more capital flowing back into this safe financial product.
„I don’t have a precise calculation model for this, but if capital in the form of fiat currencies can earn a worthwhile return again through government bonds, then it will be pulled out of Bitcoin and the crypto market,“ Hayes says. He adds:
„The whole point behind monetary policy measures is to boost purchasing power relative to the cost of energy. If this can be done by buying government bonds, then capital will prefer to take that easy route.“
Should this case really occur in the future, the price value of Bitcoin would again depend more on the technical added value of the cryptocurrency. Without the money of institutional investors, however, the market leader would be significantly weakened either way.