MicroStrategy Buys More Bitcoin As Binance Comes Under Fire
Crypto market drops after MicroStrategy’s news. But there may be more at stake than just this single incident.
MicroStrategy co-founder Michael Saylor announced Monday that the company just bought 6,455 bitcoin, equivalent to about $179 million at press time.
The investment totals 138,955 ($4.14 billion) in the company’s bitcoin holdings.
In addition, MicroStrategy is said to have repaid a loan of 205 million dollars to Silvergate Bank. The crypto-friendly bank wound up earlier this month after a huge financial struggle.
Silvergate Bank and MicroStrategy reportedly entered into a loan agreement for the purpose of purchasing bitcoin.
The software company has borrowed money from many institutions to enrich its bitcoin holdings as part of its strategy to keep bitcoin as a reserve asset in the treasury.
However, the executive highlighted that instead of paying back the original amount, the company only needed to pay off the loan at a 22% discount, roughly $160 million.
“MicroStrategy repaid the $205M Silvergate loan at a 22% discount. As of 3/23/23, $MSTR acquired an additional 6,455 bitcoins for $150M at an average of $23,238 per bitcoin and held 138,955 BTC acquired for $4.14B at an average of $29,817 per bitcoin .” Michael Saylor said in the announcement.
A losing bet so far
According to estimates, MicroStrategy suffered a 45% loss by the end of 2022, as a result of a sharp decline in Bitcoin’s price. The recent upturn in the market has closed the gap in MicroStrategy’s portfolio.
MicroStrategy has no plans to stop stacking, regardless of the volatile price movements of its flagship crypto. MicroStrategy views its bitcoin holdings as a long-term investment rather than a short-term speculation.
The company has stated that it plans to hold its bitcoin as a proprietary reserve for the foreseeable future. It encouraged other entities to consider adding bitcoin to their balance sheet.
As of March 27, 2023, Michael Saylor and his company are two of the entities that own the most Bitcoin.
Satoshi Nakamoto, a pseudonymous person believed to be the creator of Bitcoin, and Brian Armstrong, Coinbase’s CEO, are some of the well-known whales.
Crypto market down
Saylor’s move to buy Bitcoin has historically been associated with price movement.
The price of Bitcoin went down pretty much every time similar news broke in the past. Bitcoin is trading at around $26,800 after the decision, down 3.21% in the last 24 hours.
However, the recent decline may be due to other news, especially the recent news regarding the lawsuit against Binance by the US Commodity Futures Trading Commission (CFTC).
On the day of MicroStrategy’s additional bitcoin purchases, the CFTC filed a lawsuit against Binance Holdings and Changpeng Zhao, the firm’s CEO, alleging that the entities violated trading and derivatives rules.
In the filing, the CFTC included several internal communications from Binance in the lawsuit, which acknowledge that the exchange has processed transactions for terrorists.
In addition to the accusations of processing transactions for terrorists, regulators also accused Binance of running its own 300-account trading unit.
The CFTC wants the court to impose administrative sanctions against Binance, a permanent ban on trading and account registration, and other penalties if they are found to be repeat offenders.
The CFTC has reportedly been investigating Binance since late 2021. The agency has cracked down on cryptocurrency exchanges operating in the United States without proper regulatory oversight.
In the lawsuit, the CFTC continues to strengthen its position that Bitcoin, Ethereum, Litecoin and two stablecoins, USDT and BUSD, are commodities.
On the other hand, the US Securities and Exchange Commission (SEC) has repeatedly argued that most cryptocurrencies are securities, except for Bitcoin.
The lawsuit has caused a stir in the industry, with most cryptocurrencies being down. Given the attitude of regulators globally, the recent CFTC action may be a sign of things to come.
