Joe Radle
MicroStrategy (NASDAQ:MSTR) stocks have been on an absolute precipice so far in 2023 since I previously wrote about MSTR stock on Jan 06, 2023 when MSTR traded at $160.
MSTR stock is up 75% year-to-date and that entire narrative surrounding bitcoin (BTC USD) has changed drastically since my previous MSTR article.
Data from YCharts
The banking crisis of 2023 explains the case for Bitcoin
The 2023 banking crisis explains why so many people worldwide turn to Bitcoin as a safe haven when banks collapse and play risky games with their customers’ deposits.
Silvergate, Silicon Valley Bank, Signature Bank and Credit Suisse are the biggest banks set to fail in 2023, but I think there will be quite a few more bank failures over the next few months.
US banks have over $600 billion in unrealized losses and this number should continue rise as long as the Fed refuses to cut rates.
MicroStrategy Q4 2022 Results and Recent Bitcoin Purchases
Let’s face it, most of us hold MicroStrategy stock for our bitcoin holdings and aren’t overly concerned about how the underlying company is performing near-term.
MSTR shares were literally left to die for almost 2 decades until Michael Saylor became a Bitcoin maximalist and held BTC on MicroStrategy’s balance sheet in 2020.
MicroStrategy did fairly well in the fourth quarter of 2022 as Phong Le began transitioning into his new role as the company’s CEO.
Total revenue for the fourth quarter of 2022 reached $132.6 million, while net income for the quarter reached $193.7 million. The impairment of the company’s bitcoin holdings accounted for $197.6 million of the quarter’s losses, leaving MicroStrategy’s core business with a small net profit of $3.9 million.
Since my last MSTR article, MicroStrategy has been buying the dip, acquiring more bitcoin at very attractive long-term prices.
- In the fourth quarter of 2022, MicroStrategy bought 3,204 Bitcoin at an average price of $17,616 per coin.
- So far in the first quarter of 2023, MicroStrategy has purchased 6,455 Bitcoin at an average purchase price of $23,238.
Both purchases are well below the company’s total Bitcoin purchase price of $29,817, which helped lower MicroStrategy’s overall Bitcoin cost base.
Each MSTR share holds about 0.12 BTC each, making MicroStrategy a solid alternative to buying Bitcoin or Grayscale Bitcoin Trust (OTC:GBTC) outright.
Why MicroStrategy paid off its Silvergate loan
For those of you wondering about Silvergate’s $205 million loan, MicroStrategy repaid the entire loan at a 20% discount to get away from the bankrupt crypto bank.
Silvergate is in bankruptcy proceedings and could currently use any form of cash to help settle its depositors. MicroStrategy saved $44 million by prepaying the loan due in 2025.
The only downside is that MicroStrategy offered 1.3 million new shares to repay the Silvergate loan and acquire more bitcoin. From what I understand, MicroStrategy’s stock sale was diluted 10% to $10.5 million in the first quarter of 2023.
It’s not an ideal situation, but the company made a smart move by repaying its Silvergate loan and buying the recent bitcoin dip.
Bitcoin is a deflationary asset that continues to appreciate as the US dollar loses purchasing power.
Many people are aware of Bitcoin’s potential due to the recent banking crisis, and I think Bitcoiners are quite excited as we approach the 2024 halving in about 13 months.
risk factors
Bitcoin has performed well year to date, but nothing is guaranteed in such a troubled economic climate. The biggest risk would be bitcoiners losing confidence in bitcoin and switching to another cryptocurrency or asset class.
MicroStrategy doesn’t have any major debt obligations until 2025, so the company looks fairly secure financially right now.
What’s next for MicroStrategy?
I wouldn’t worry about the recent dilution now because MicroStrategy has killed two birds with one stone by eliminating its Silvergate loan and acquiring more bitcoin at a lower-than-average strike price.
The global banking sector is facing major turmoil and that bodes well for Bitcoin in the long term.
I still believe that the crypto bull market will start in April 2023 as more bank failures and bailouts will scare the entire global economy.
Right now I’m holding my MicroStrategy shares and patiently awaiting the next bitcoin halving to consider taking some profits off the table.
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