Harsh Crypto Winter experiencing Cozy Warmth: Microstrategy

Crypto winter seems to be warming up, with Bitcoin rallying up.
Microstrategy reported Q4 Earnings; Positive.

The industry faced a long, harsh crypto winter in 2022, affecting almost everyone, but with the advent of 2023, it seems to be warming up. Everyone who slowed down seems to be recovering; Microstrategy is also up from a near-term low, with Bitcoin recovering from a bad phase.

Bitcoin vs. Microstrategy

At the time of writing, BTC was trading at $21,817.51 with a jump of 0.87%, while Microstrategy’s MSTR was trading at $193.36 with a raise of 11.62%. Right now, the investors, speculators and maximalists can be seen looking towards the broader macroeconomics figure to direct them. It should be known that higher inflation, increasing Fed fund rates and a probability of upcoming recession-plagued the last 12 months.

To answer how Microstrategy benefited directly from the BTC rally, it is because they are substitutes for direct Bitcoin investment as they provide spot bitcoin ETF. The factors that slowed the economy can also be a driving factor for adoption and deviation towards the darling cryptocurrency.

Bitcoin and the whole crypto market experienced a rally during the pandemic, as people deviated from traditional finances in fear that the world economy might crash. This continued for some time and fuelled BTC to touch its highest point. But Russia vs. Ukraine war started, and the energy crisis fueled the fire of inflation, forcing the Feds to tighten their grip on crypto and traditional finances.

Microstrategy Q4 Earnings

They employ two corporate strategies. One is an operating strategy centered around Business Intelligence software business, while the other deploys a balance sheet strategy surrounding Bitcoin adoption as a primary treasury reserve asset. They aim at buying and holding BTC for as long as possible using the cash generated from their operating strategy, with additional income from capital-raising transactions.

They recently reported earnings for Q4 2022, with revenue at $132.6 million, with a 1.4% decline from last year. It still managed to beat consensus estimates by $1.6 million. They hold 132,500 BTCs at the end of the quarter, gaining an additional 2,500 from Q3. The total holding is worth $1.840 billion.

The current market value of Microstrategy’s BTC holdings stands at around $2.9 billion, with a jump of 32.4% from the end of Q4 which was $2.19 billion. The purchase of 2,500 BTCs in Q4 was for nearly $45 million at $17,850 per bitcoin. Bulls in the market would hope that leading digital assets go above their average cost per Bitcoin of $30,137.

The core software business of Microstrategy generated gross profits of $105.8 million in the fourth quarter, which is a correction from $110.5 million just a year ago.

The report says that they are somewhat suffering in financial terms, but they always have the option to sell BTC, but they might never do that, as it’s against their strategy.

Bulls at Microstrategy are curiously looking forward to the upcoming Bitcoin halving and feel that more recovery is possible from the current stage. The feat would divide BTC mining rewards by 2, fueling its inflation. The next BTC halving is expected to happen around March 18, 2024.