MicroStrategy’s stock has soared by an astounding 1,000% since the company made its first Bitcoin purchase in 2020. Meanwhile, Warren Buffett and his firm, Berkshire Hathaway, have missed out on the cryptocurrency boom, having steered clear of Bitcoin and other digital assets.
MicroStrategy, a technology company known for its aggressive investments in cryptocurrency, made its initial Bitcoin purchase on August 10, 2020. This move marked MicroStrategy as the first publicly traded company to adopt cryptocurrency as its primary treasury reserve asset. Four years later, this bold strategy has become a defining feature of the company, delivering returns that have outpaced even the legendary Berkshire Hathaway, led by Warren Buffett.
According to Cointelegraph, MicroStrategy has netted a profit of $5.38 billion from its Bitcoin holdings. As of August 10, 2024, the company owns 226,500 BTC, valued at approximately $13.77 billion in its reserves.
MicroStrategy acquired its Bitcoin at an average cost of around $37,000 per BTC. With Bitcoin currently trading at approximately $60,500, the company now holds unrealized gains of about $5.38 billion.
Despite the substantial profits, MicroStrategy, under the leadership of Michael Saylor, has chosen to retain its Bitcoin holdings. The company has consistently declined to liquidate its accumulated assets, instead opting to continue acquiring Bitcoin, as evidenced by its latest purchase on August 1.
Michael Saylor Outpaces Warren Buffett
Since August 2020, MicroStrategy’s stock has surged by approximately 1,000%, following a bullish market response to its Bitcoin acquisitions. In comparison, the company’s stock price increase is 1.5 times higher than the return on Bitcoin and 16.25 times greater than the return on the S&P 500 index (SPX) over the same period.
On the other hand, Warren Buffett’s Berkshire Hathaway Class A shares have significantly underperformed compared to MicroStrategy since the Bitcoin purchase. Over this period, Berkshire Hathaway’s stock price has risen by only 104.75%. Buffett’s persistent negative stance on Bitcoin has kept Berkshire from exploring cryptocurrency investments.
In 2018, Buffett famously described Bitcoin as “rat poison squared.” His close associate, the late Charlie Munger, went even further, predicting that Bitcoin’s price would eventually fall to zero. Munger labeled Bitcoin as a “disgusting” product in a statement made in 2021.
However, both Bitcoin and MicroStrategy have outperformed Buffett’s top stock holdings, including Apple, American Express, and Bank of America, in recent years.
Doubts Among Analysts
Despite MicroStrategy’s impressive stock performance, some analysts have expressed concerns. Investment firm Kerrisdale Capital has indicated its intention to sell MicroStrategy shares. The firm argues that the stock is trading at an “unjustifiable premium” compared to Bitcoin.
“The software business is worth a billion, maybe a billion and a half, somewhere between those two. It’s not that valuable,” said Sahm Adrangi, Chief Investment Officer at Kerrisdale Capital, in an interview with Cointelegraph on Monday, August 12.
Adrangi suggested that for MicroStrategy’s value to increase, Bitcoin’s price would need to rise. Conversely, if Bitcoin’s price declines, the company’s value would decrease as well. “MicroStrategy’s stock should be trading at Bitcoin’s value. Our argument is to sell MicroStrategy and buy Bitcoin,” Adrangi concluded.
As the debate over the merits of Bitcoin investment continues, MicroStrategy’s bold strategy has undoubtedly paid off, setting a precedent for other companies contemplating similar moves. Warren Buffett’s cautious approach, on the other hand, reflects a more traditional investment philosophy, one that has yet to embrace the digital currency revolution.