MicroStrategy Inc (NASDAQ: MSTR) may not be included in the index, but it has outperformed every stock in the S&P 500 — and by a significant margin.
As of the latest update, MSTR stock was valued at $388.88, having surged by 78.25% over the past 30 days, bringing its year-to-date (YTD) returns to an impressive 469.90%.
The firm, recognized as the largest corporate holder of Bitcoin (BTC), seeks to become the first Bitcoin bank. Through this strategy, it has managed to deliver exceptional returns and provide exposure to the leading cryptocurrency globally.
Michael Saylor, executive chairman of MicroStrategy, has long been a vocal advocate for the decentralized currency. Although critics once deemed his strategy to concentrate investments exclusively in BTC during a bear market as unwise, recent developments suggest that those assessments were premature.
From November 11 to November 18, MSTR purchased a total of 78,980 BTC, as disclosed in press statements and Form 8-K filings with the Securities and Exchange Commission (SEC).
Let’s delve deeper into how MicroStrategy has established itself as a top Bitcoin miner — without engaging in traditional mining activities.
Understanding MicroStrategy’s Bitcoin Strategy
Unlike conventional miners, who must invest heavily in infrastructure and wait through the mining process while bearing high energy costs and fluctuating prices, Saylor’s methodology is considerably more straightforward.
The company employs a metric known as Bitcoin yield to evaluate whether its acquisitions are advantageous for shareholders. This calculation compares MicroStrategy’s BTC holdings against projected diluted shares outstanding, which includes all currently traded MSTR shares plus those expected from convertible notes and stock option awards.
MicroStrategy finances its BTC purchases by issuing additional shares at the market price (ATM) and taking on debt. By monitoring the percentage change in Bitcoin yield over time, the company can determine whether its acquisitions are beneficial to shareholders.
In 2024, the firm reported a BTC yield of 41.8%, according to its most recent Form 8-K filing. This translates to a net benefit of 79,130 BTC for shareholders, equating to approximately 246 BTC daily — without incurring the high expenses typically associated with mining.
For context, achieving that amount would require all the miners in the world around 176 days.
Is MicroStrategy’s BTC Strategy Viable Long-term?
While Saylor’s strategy for accumulating BTC has proven effective thus far, it is not without its risks. In a bull market, rising BTC prices can mitigate the effects of share dilution on MSTR; however, a stagnant or downturning crypto market could jeopardize the initiative.
Nevertheless, the increasing institutional acceptance of cryptocurrencies, particularly following President-elect Donald Trump’s endorsement of the sector, may reduce the likelihood of adverse scenarios.
MicroStrategy’s ambition to transform into the first Bitcoin bank presents a viable avenue for sustainable growth. By capitalizing on its substantial BTC assets, the company could offer financial services including Bitcoin-backed loans, custodial services, or facilitate digital asset transactions.
Image Source: Michael Saylor @ Instagram
