Bitcoin and the Consequences: MicroStrategy on the Rise of Cryptocurrency

In recent years, MicroStrategy has caused a stir with its Bitcoin strategy. The once inconspicuous provider of data analysis software, which recorded revenue growth of only 0.6% annually between 2010 and 2020, has transformed its business model through massive crypto investments. Under the leadership of its co-founder and former CEO, Michael Saylor, the company first invested $250 million in Bitcoin in 2020. By November 2023, its holdings have grown to 279,420 Bitcoins. With an investment of approximately $11.9 billion, these Bitcoins are currently worth $28.3 billion, accounting for more than 30% of MicroStrategy's market capitalization. This makes the company the largest corporate holder of Bitcoin worldwide. MicroStrategy's shares experienced an impressive surge of 2,590% over the past five years, equivalent to a theoretical gain of over one million dollars from an initial investment of $40,000. Parallel to its crypto engagement, MicroStrategy is attempting to revive its software business by transitioning to cloud-based services and introducing generative AI. However, revenue stagnated with a decline of 1% in 2023 and a forecasted growth rate of less than 1% per year until 2026. The software division thus primarily generates funds for further Bitcoin purchases. The downside of this strategy is increasing debt and the necessity to issue new shares, combined with high write-downs on Bitcoin investments, which could keep MicroStrategy unprofitable on the GAAP balance sheet until 2026. The debt level rose to $4.2 billion, compared to $2.1 billion at the end of 2021; the number of shares increased by 122% in five years. Bitcoin enthusiasts hope MicroStrategy's comprehensive Bitcoin bet will pay off, as the value of Bitcoin could continue to rise in the coming decades. Saylor forecasts an impressive Bitcoin price of $13 million by 2050, and VanEck, a leading investment firm, raises the potential price to as high as $52 million in its most optimistic forecast.