An analyst has analyzed the strategy behind MicroStrategy’s aggressive Bitcoin acquisition, which is gaining attention due to the cryptocurrency’s soaring price.
Anthony Pompliano, founder and CEO of Professional Capital Management, understood the mathematical reasoning behind the company’s investment move but also warned that any investment is exposed to potential risks.
MicroStrategy’s acquisition of Bitcoin
MicroStrategy is making a bold move to buy more, Pompliano said Bitcoin And build its cryptocurrency reserve using convertible debt to finance the cryptocurrency acquisition.
The investment company offers its shares at a higher price than the current price per share to generate the funds needed to acquire Bitcoin.
Pompliano explained that MicroStrategy is selling future shares at a 55% premium to help the company buy more bitcoin, saying this is a financially attractive move. “This strategy makes sense from a financial perspective,” Pompliano explained.
Image: Crypto Economy
The analyst said it is a useful strategy for Accurate strategy Because it allows the investment firm to have significant capital that the company now uses to buy a lot of leading cryptocurrencies, saying that this approach makes mathematical sense.
Bitcoin investment plan
In October of this year, MicroStrategy announced that it would conduct a trial Bitcoin shopping spree By raising $42 billion in new capital in the next three years to fund its goal of buying more Bitcoin.
Some analysts consider this Bitcoin investment strategy to be a bold move that the investment company is looking forward to.
Bitcoin market cap currently at $1.92 trillion. Chart: TradingView.com
According to the company’s CEO, the goal of MicroStrategy’s approach to raising capital is to raise $21 billion of new capital from equity offerings and generate another $21 billion from fixed-income securities between 2025 and 2027.
As of September 2024, MicroStrategy is already the largest holder of Bitcoin among publicly traded companies worldwide. Purchasing more cryptocurrencies would strengthen its position at the top among public companies.
Image: Theya Blog
Associated risks
Pompliano understood the appeal of Bitcoin’s proposal, saying the move could be profitable for the investment firm.
However, the analyst noted that investors should not ignore the risks associated with such investments, saying that anyone who wants to adopt a MicroStrategy approach should understand the risks before diving in.
“Now, the counterweight to that is that there are a lot of people I see who say nothing can go wrong. I’m not in that camp,” he said.
Pompliano explained that the company’s investment strategy is not foolproof, saying that some people assumed that nothing could derail the investment plan.
“I can’t sit here and tell you what could go wrong,” he expressed, “but what I can tell you is that alarm bells go off in my head when I start seeing everyone saying nothing can go wrong.”
He noted that there are volatility risks when people invest in Bitcoin, adding that an uncertain regulatory environment could amplify the risks associated with heavy buying of Bitcoin.
Featured image from Canva, chart from TradingView
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