Michael Saylor Buys Another $150 Million in Bitcoin: Is Crypto a Screaming Buy?

The crypto markets had a rough 2022, and Bitcoin (BTC -0.15%) wasn’t spared — the cryptocurrency fell nearly 65% ​​last year. But 2023 has become a comeback story, with Bitcoin up 83% since January.

Bitcoin mega supporter and Micro strategy co-founder Michael Saylor recently revealed that his company bought 6,455 Bitcoin in late March, a transaction worth $150 million.

Should investors follow Saylor’s lead? One should not base one’s investment decisions on others, but there are some good reasons to consider adding Bitcoin to your portfolio today. Here’s what you need to know.

A strong declaration of confidence

While investors should make their own decisions, there’s no denying the influence that famous investors like Warren Buffett can have on a stock’s sentiment. Saylor is arguably the Buffett equivalent of Bitcoin investors, and his latest $150 million investment is a vote of confidence on something.

MicroStrategy now owns a total of 138,955 Bitcoin worth nearly $4.2 billion. The company’s average Bitcoin cost is $29,817, just a bit below where it is trading today. In other words, you could argue that Saylor sees value in Bitcoin at the current price; a $4 billion investment would imply an expectation that the asset’s value would increase over time.

However, one should not automatically mirror Saylor’s stance on Bitcoin, just as one should not blindly buy Coca Cola stock simply because Buffett owns it. Instead, see it as a call to return to your investment thesis.

Revisiting Bitcoin’s Investment Case

The overarching theme of Bitcoin is that it is a store of value, similar to gold or silver. Ideally, Bitcoin can protect investors from two critical problems in the fiat-based financial system. First, Bitcoin has a limited supply of 21 million coins, a hedge against inflation that continually devalues ​​fiat currency as more are created. Second, it is decentralized, independent of central control such as the US financial system, which is dominated by the Federal Reserve.

In addition, the banks use a fractional reserve system, where they use their deposits to lend more money than they have. That’s fine until too many people try to pull their money out of the banks at once. Bitcoin’s scarcity and independence from any person or party controlling it has driven demand and fantastic investment returns. Bitcoin has easily outperformed S&P 500 despite the coin’s dramatic decline in 2022.

Data source: YCharts Bitcoin Price

Some might ask if Bitcoin’s volatility disqualifies it as a store of value, but Bitcoin doesn’t seem more volatile than silver and gold. You can see below that gold and silver have experienced similar declines from their highs, a reminder that asset prices fluctuate.

Data source: YCharts gold price in US dollars

Yes, Bitcoin has been more volatile than gold, but it is a lesser known commodity than a precious metal that has been sought after and valued for thousands of years. Perhaps Bitcoin will become less volatile as it ages – at least that’s a fair question.

Is Bitcoin’s Comeback Just Beginning?

For now, the markets seem to be valuing Bitcoin as a riskier asset, declining as investors flee to safety. Gold is close to an all-time high, while Bitcoin is far from it. Bitcoin’s early comeback in 2023 could signal that the crypto winter, as some are calling it, is coming to an end.

Investors will only know for sure in hindsight, but it appears Bitcoin’s long-term appeal remains intact, especially after the near-miss of another crisis in the modern banking system. Bitcoin is likely to remain a volatile asset, but it could have more up days than down if market sentiment toward riskier assets turns positive.