It can do it for clever fundraising moves you are not available.
The drivers who make investment decisions are still relevant to their investment decisions.
strategy (NASDAQ:MSTR) Just bought over $1.4 billion in Bitcoin on April 28th (Cryptography: BTC)and not the first time. With these purchases, the company is sending a clear signal that it believes the value of the coin will continue to increase.
But that doesn’t mean you need to blindly follow the tracks of your strategy. You can assess that approach and its basis to know if it makes sense to invest in Bitcoin as well, or if it’s better to allocate capital elsewhere.
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The strategy currently holds around $52 billion in Bitcoin, which amounts to around 2.6% of the total supply. Over the past six months or so, businesses have purchased around 2,087 bitcoins every day. That’s far more than the roughly 450 Bitcoins newly mined each day. Therefore, this purchasing activity is a relatively new and important supply constraint, which helps to increase the price of the coin.
The strategy publicly says it is not intending to sell Bitcoin unless it is forced. So, assuming you can continue to buy assets, you will get more supply from the market. The main pillar of financing these purchases is the issuance of convertible obligations. This is a valuation asset that relies on the value of Bitcoin to raise stock prices, so you can collect even more money to issue convertible obligations and buy coins.
So far, this plan has worked for strategy. Its stock has grown 190% over the past 12 months, exceeding the 51% increase in Bitcoin and 8% increase in the market. If the price of Bitcoin drops in large numbers, the company’s creditors may require crypto investments to be settled to ensure repayment. It could surge downward spirals at both the stock price of the strategy and the price of Bitcoin.
However, as investors are thinking about whether to buy Bitcoin or not, what is more important to recognize here is that your financial situation and your ability to buy is not similar to your strategy. You should not copy your willingness to commit more large capital to the purchase of coins. And you should not borrow to fund your purchase. Even if it is one of the safest cryptocurrencies, Bitcoin is still a volatile asset, so it is too risky for most people to buy from debt using a lot of leverage.
The story continues
Regardless of how the strategy is implementing it, there are strong investment papers to buy Bitcoin, and the strategy approach actually strengthens the paper to some extent.
The core of the strategy is the fact that Bitcoin supply is severely limited. Only 21 million coins can be created (approximately 19.9 million coins have already been distributed), and only small amounts are produced. As a result of a half-scheduled schedule, it becomes increasingly difficult to produce new Bitcoin over time. And with governments and large companies accumulating more assets than ever before, there is growing competition for existing supply.
Furthermore, a concentration of coin supply in large owners’ wallets introduces the risk that holders can knock prices by dumping their holdings, but such a decline is a short-term blip rather than a long-term problem. A greater consideration for potential buyers is the ability of the coin to maintain purchasing power in Fiat currency terms. This is important because it allows assets to function not simply as valuable reservoirs, but as hedges against inflation.
Yes, you should probably buy at least some Bitcoin to be exposed to it in your portfolio. Here you will slowly and steadily win the race. Set up a dollar cost average (DCA) plan and gradually build positions.
Finally, don’t forget that this is a long-term play. In the long run, it doesn’t really matter whether strategy planning will enrich shareholders or whether Bitcoin will burn money either way, as it will provide a shorter supply.
Consider this before purchasing inventory with Bitcoin.
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Alex Carchidi has a Bitcoin position. Motley Fool has a position and recommends Bitcoin. Motley Fools have a disclosure policy.
The company bought $1.4 billion in Bitcoin. Should you do it? Originally published by The Motley Fool
