MicroStrategy (NASDAQ:MSTR) has been making headlines over recent weeks. After spending months buying up Bitcoin, the firm’s most recent move was to invest another $10 million in cash, even as its share price was going down. MicroStrategy now holds a total investment of over 90,000 BTC worth nearly $4.5 billion.
Is it a risky gamble or a smart, prescient move? At this point, it’s certainly evident that the company has tethered itself to the price of Bitcoin. In early March, JP Morgan entered a filing with the US Securities and Exchange Commission for a structured note offering tied to a basket of stocks of Bitcoin-invested companies, including MicroStrategy, Square, and Riot Blockchain. The idea is to give investors indirect exposure to Bitcoin.
The same day, Bitcoin’s price rose to $56,000, while MicroStrategy’s stock climbed 14%. Speculation now holds that the market is assigning small-cap value to MicroStrategy’s core business, with the majority of its market cap value inextricably linked to Bitcoin.
Leading the Pack
MicroStrategy is far from the only company to solidify its commitment to a future involving digital assets, particularly not in the last few months. As the digital asset markets have been breaking new ground, reaching over $1.5 trillion in recent weeks, major corporations have been flocking to Bitcoin. Elon Musk caused a stir when he announced that Tesla had bought BTC to the tune of $1.5 billion during early February.
Since then, several big banks have committed to offering cryptocurrency products and services to their clients. Bank of New York Mellon, Citigroup, and Deutsche Bank have all announced plans, while Goldman Sachs is restarting its crypto trading desk in response to demand. PayPal and Mastercard had already cemented their intentions to incorporate digital assets into their payment networks towards the end of 2020.
It seems that others could be set to follow, at least according to a recent report published by eToroX, the digital subsidiary of eToro, which provides an onboarding solution for institutions wanting to invest in cryptocurrencies. The report examines the current state of the crypto markets from an institutional standpoint, and the findings show that market capitalization is directly correlated to institutional market participant’s propensity to engage with crypto markets. An overwhelming majority of 84% of respondents stated that market cap was important for institutional participation in crypto. One respondent went as far as to put a $25,000 price on Bitcoin as the tipping point for institutional buy-in.
A Bullish Outlook for 2021?
A recent poll commissioned by JP Morgan seems to confirm that many institutional participants agree that now is the time to enter the crypto markets. The poll found that the number of organizations set to invest in cryptocurrency in 2021 is likely to treble. Whereas 11% of respondents affirmed that they had already invested in cryptocurrency, another 22% said their firm was “likely” to invest. While this is still far from a majority, if the inflow triples from its current levels, the demand for Bitcoin will skyrocket.
Furthermore, it seems that the US may soon, finally, get a Bitcoin ETF. The Canadian Purpose Investments Bitcoin ETF opened its first day of trading with a bang in mid-February, rising to the top ten of the most actively traded securities on the Toronto Stock Exchange.
While the US SEC has been reluctant to approve a Bitcoin ETF so far, the race is hotting up. The Cboe recently filed for its own listing of such a product, with a spokesperson saying that the exchange is “much more optimistic” about obtaining approval even after other firms have engaged in repeated attempts without success. Meanwhile, New York-based digital asset manager Grayscale is hiring nine jobs for specialists in ETFs.
All this is extremely bullish for the crypto asset markets due to Bitcoin’s deflationary economic model. We could soon be facing a supply squeeze, which would push prices even higher. From this perspective, it seems relatively safe to say that we can expect further price action from the top of the cryptocurrency ranking tables.