The crypto market is declining following MicroStrategy’s news. But there may be more at play than just this single event.
MicroStrategy’s co-founder Michael Saylor announced on Monday that the company just purchased 6,455 bitcoin, equivalent to around $179 million at the press time.
The investment totals 138,955 ($4.14 billion) in the company’s bitcoin holding.
In addition, MicroStrategy reportedly repaid a $205 million loan to Silvergate Bank. The crypto-friendly bank discontinued earlier this month after a titanic financial struggle.
Silvergate Bank and MicroStrategy reportedly entered a loan agreement for the purpose of bitcoin acquisition.
The software company has borrowed money from many institutions to enrich its bitcoin holding as part of its strategy to hold bitcoin as a treasury reserve asset.
However, the executive highlighted that instead of repaying the original amount, the company only needed to pay off the loan at a 22% discount, approximately $160 million.
“MicroStrategy repaid its $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.
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A Losing Bet So Far
According to estimates, MicroStrategy suffered a 45% loss by the end of 2022, resulting from a sharp decline in Bitcoin’s price. The recent rally in the market has closed the gap in MicroStrategy’s portfolio.
MicroStrategy has no plan to stop stacking, regardless of the volatile price movements of the flagship crypto. MicroStrategy sees 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 treasury reserve asset for the foreseeable future. It encouraged other entities to consider adding bitcoin to their balance sheets.
As of March 27, 2023, Michael Saylor and his company are two of the entities that own the most Bitcoin.
Satoshi Nakamoto, a pseudonymous individual 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 purchase Bitcoin has been historically associated with the price movement.
The price of Bitcoin mostly went down whenever similar news broke out in the past. Bitcoin is trading at around $26,800 following the decision, a 3.21% decline in the last 24 hours.
However, the recent decline could result from other news, specifically the latest news regarding the lawsuit against Binance by the U.S. Commodity Futures Trading Commission (CFTC).
On the day of MicroStrategy’s additional bitcoin purchase, the CFTC brought a lawsuit against Binance Holdings and Changpeng Zhao, the firm’s CEO, claiming that the entities violated trading and derivatives rules.
In the filing, the CFTC included multiple internal messages 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, the regulators also accused Binance of operating its own trading unit of 300 accounts.
The CFTC wants the court to impose administrative sanctions on Binance, a permanent ban on trading and account registration, and other penalties if found to be repeat offenders.
The CFTC has reportedly been investigating Binance since late 2021. The agency has been cracking down on cryptocurrency exchanges that operate in the United States without proper regulatory oversight.
In the lawsuit, the CFTC continues strengthening its position that Bitcoin, Ethereum, Litecoin, and two stablecoins, USDT and BUSD, are commodities.
On the other hand, the U.S. Securities and Exchange Commission (SEC) has repeatedly asserted that most cryptocurrencies are securities, except for Bitcoin.
The lawsuit has caused a stir in the industry, with most cryptocurrencies have been down. Given the stance by regulators globally, the recent CFTC action could be a sign of things to come.
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