Leading business intelligence firm MicroStrategy is doubling-down on Bitcoin, announcing a securities offering to raise $400 million to invest in BTC.
Published on December 7, 2020
The world’s largest publicly traded business intelligence firm, MicroStrategy has announced plans to invest the proceeds from a $400 million securities offering into Bitcoin.
On Dec. 7, the firm revealed plans to issue $400 million in convertible senior notes — a debt security that can be converted into the issuing company’s shares. The announcement stated:
“Microstrategy intends to invest the net proceeds from the sale of the notes in Bitcoin.”
At current prices, the $400 million would increase the company’s holdings by 20,833, which would bring the firm’s total crypto stash to almost 62,000 BTC.
Microstrategy will pay semi-annual interest to the note-holders until December 2025. The firm also reserves the right to redeem the notes for cash from Dec. 20, 2023.
The announcement states that MicroStrategy may also offer up to an additional $60 million worth of notes to its initial purchasers within 13 days of commencing the offering.
The securities will be issued under Rule 144 of the Securities Act, and will be available to qualified institutional investors only.
In response to MicroStrategy’s announcement, Gabor Gurbacs, the CEO of New York-based investment firm VanEck, suggested the offering is more indicative of a digital asset fund than a publicly listed company:
At what point does a securities offering that raises dollars with the purpose of investing in Bitcoin make a publicly listed company to be a listed fund/investment company?
— Gabor Gurbacs (@gaborgurbacs) December 7, 2020
MicroStrategy made waves in the crypto world during August, when the firm revealed it had adopted Bitcoin as its primary reserve asset after purchasing 21,454 BTC for $250 million. It then purchased a further 16,796 BTC for $175 million the following month. The purchases were made through Coinbase’s OTC and brokerage platform.
Just a few days ago on Dec. 5, MicroStrategy’s CEO, Michael Saylor, announced the firm had purchased a further 2,574 BTC priced at approximately $19,427 each for $50 million, bringing its total crypto holdings up to roughly 40,824 BTC.
At current market value, MicroStrategy’s BTC stash is worth nearly $784 million, meaning the firm is currently up 65% on its $475 million investment.
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Frank Holmes: $2,600 gold is ‘very doable’; Bitcoin, Ethereum’s future explained
Another 40% move in gold in 2021 is “very doable” says Frank Holmes, who is looking for a range of $2,200 to $2,600 an ounce.
“A two-standard deviation move, which happens so often now in the past 21 years, we can get between a $400 move and an $800 move in the price of gold over the next 12 months. That would take us from to $2,200 to $2,600,” Holmes said.
Cryptocurrencies will continue to do well; Bitcoin will be driven by increased adoption, while Ethereum benefits from the latest developments in DeFi.
“The number of wallets, people that are embracing bitcoin, that’s been growing for the past three years,” he said, adding that the halving event this year contributed to the supply-demand tailwinds. “If tomorrow, if all the gold mines in the world said we’re going to cut supply by 50%, I can assure you gold will be at $10,000.”
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How Nvidia, Square & PayPal Stocks Are Benefiting From Soaring Bitcoin Prices
POLAND – 2020/11/04: In this photo illustration a Nvidia logo seen displayed on a smartphone. (Photo … [+] Illustration by Mateusz Slodkowski/SOPA Images/LightRocket via Getty Images)
Bitcoin prices have surged by over 160% year-to-date, driven by multiple factors including higher institutional interest, fintech companies Paypal and Square’s moves into the crypto space, and also by a view that scarce digital currency could be a hedge against inflation and a weakening U.S. dollar. Our indicative theme on Cryptocurrency Stocks – which includes semiconductor, payments, and brokerage companies that have some exposure to the cryptocurrency space – is up a solid 110% year-to-date, compared to the S&P 500 which is up by just about 14% over the same period. Key stocks in our theme include Square, PayPal Holdings, Nvidia, and CME Group.
Although crypto likely represents a small portion of these company’s revenues at the moment, it does have the potential to be big. For example, Payment apps Square and PayPal, who make money by buying bitcoin from brokers and selling them to their customers by adding a “spread” stand to benefit as prices and volumes rise. Square’s Cash App generated about $1.63 billion in Bitcoin-related sales in Q3 2020, an 11x jump year-over-year. Similarly, Nvidia also benefits from demand for its top-of-the-line GPUs such as the Ampere lineup from cryptocurrency miners.
[Updated 10/29/2020] Cryptocurrency Stocks To Watch
Interest in cryptocurrency is surging once again with Bitcoin prices up by almost 30% over the last month, driven by growing institutional interest and Paypal’s recent move to allow its customers to buy and sell certain cryptocurrencies. Our indicative theme on Cryptocurrency Stocks – which includes semiconductor, payments, and brokerage companies that have some exposure to the cryptocurrency space – is up 88% year-to-date, compared to the S&P 500 which is up by just about 5% over the same period. This theme could be of interest to investors who are looking for upside from cryptocurrency adoption and prices, but want to avoid buying into the currencies themselves considering the volatility, risk of fraud, or cyber theft, or potential portfolio mandates. Below is a bit more about the stocks in our theme and how they have fared this year.
Square cash mobile wallet app has emerged as a very popular way for people to buy and sell Bitcoin. The stock has gained a whopping 183% year-to-date, as investors bet that Square’s digital payment solutions will continue to gain traction through and post Covid-19. The stock has dropped by about -9% over the last 5 trading days, however.
Nvidia a semiconductor company that is best known for its graphic processing units which are increasingly used in machine learning and AI, is also finding application in bitcoin mining. The stock has gained over 131% year to date although it declined by about -3% over the last week.
PayPal a large online payments processor, has indicated that it would allow customers to buy, hold, and sell cryptocurrencies such as Bitcoin and Ethereum directly within its PayPal and Venmo app. The stock is up by 88% this year and was down by about -1% over the last 5 trading days.
Advanced Micro Devices is a semiconductor major that makes CPUs and GPUs, which are increasingly used in bitcoin mining. The stock has gained about 79% year-to-date and remained largely flat over the last 5 trading days.
CME Group the world’s largest financial derivatives exchange, also offers bitcoin futures contracts. The stock is down by about -18% year-to-date and declined by about -2% over the last week.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio to beat the market, with over 120% return since 2016, versus about 60% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.
See all Trefis Price Estimates and Download Trefis Data here
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Bitcoin And Ethereum Will Explode In 2021 – Gold Bug Frank Holmes
2021 is shaping up to become a tremendous year for gold and cryptos, according to Frank Holmes, CEO of U.S. Global Advisors. He thinks that the rising adoption in the crypto markets will drive bitcoin significantly higher in the coming year. Also, decentralized finance (DeFi) will have a similar effect on the Ethereum market.
In a December 7 interview, Holmes said that he believes digital assets, including ETH and BTC, will perform considerably well alongside gold. The gold bug said that the digital assets are enjoying increasing adoption due to their underlying value drivers.
About the bitcoin market, Holmes thinks that more people are embracing the digital asset in a continuation of a multi-year trend:
“The number of wallets, people that are embracing bitcoin, that’s been growing for the past three years. Nice steady growth.”
Even though many in the cryptocurrency industry liken gold to bitcoin, Holmes stated that bitcoin is not getting fueled by the same macro drivers as bullion. Instead, bitcoin’s rocket fuel is arising from this past May’s deflationary halving event. He commented:
“If tomorrow, if all the gold mines in the world said we’re going to cut supply by 50%, I can assure you gold will be at $10,000.”
Holmes said that it is a demand and supply function, and after the May halving, the number of new bitcoins entering the market from the miners has fallen to almost 900 per day. Interestingly, all this supply has been rapidly getting absorbed by mega-corporations and institutions.
In the meantime, Ethereum continues to benefit from the latest developments in decentralized finance (DeFi). In terms of the cumulative value locked, the DeFi space is worth at least $14.6 billion. Ethereum blockchain is the building block for much of the activity that happens in the DeFi space. Currently, the market capitalization of DeFi coins is about $18.2 billion, according to CoinMarketCap.
Holmes expects a “two-standard deviation” move for gold. This move could send prices between $400 and $800 higher in the coming 12 months. He said:
“That would take us from $2,200 to $2,600.”
Gold futures broke out on December 7, gaining $26.40 to reach $1,866.40 on the Comex segment of the New York Mercantile Exchange.