Bitcoin: Despite MicroStrategy’s conviction, why are profits elusive?

  • MicroStrategy recently invested $147.3 million into Bitcoin, increasing its holdings to $4.7 billion.
  • However, Bitcoin needed to pass $30k to ensure profits.

Recently, MicroStrategy was in the spotlight for its unwavering commitment to accumulating Bitcoin. Notably, the American firm made headlines for investing an additional $147.3 million to expand its Bitcoin [BTC] holdings.

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This latest purchase added a substantial 5,445 BTC to MicroStrategy’s existing cryptocurrency reserves.

Still a long way to go

MicroStrategy’s total investment in Bitcoin stood at an impressive $4.7 billion at the time of writing, a clear signal of the company’s continued bullish stance on cryptocurrency.

However, despite its conviction, the company faced challenges. Just a month ago, they were enjoying a slight profit, but their valuation sat at $4.15 billion at press time. This represented an unrealized loss of over $550 million.

At the time of publication, MicroStrategy’s Bitcoin holdings amounted to 158,245 BTC, with an average purchase price of $29,582 per coin. For these holdings to turn profitable, Bitcoin’s price must surpass the $30,000 range, a crucial threshold that will determine MicroStrategy’s success in this venture.

Under pressure

While MicroStrategy appeared committed to its long-term Bitcoin accumulation strategy, other cryptocurrency holders may not share the same patience.

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Notably, the MVRV (Market-Value-to-Realized-Value) ratio for Bitcoin was on a decline at the time of writing, indicating that both Michael Saylor, the founder of MicroStrategy, and other BTC holders, were witnessing decreasing profitability.

If Bitcoin’s price were to rise significantly, bringing the MVRV ratios back to previous highs, it could incentivize these holders to sell their holdings, potentially triggering a price correction for the cryptocurrency.

Source: Santiment

The key question is whether other Bitcoin holders will follow MicroStrategy’s lead and maintain a long-term perspective, or if they will choose to sell as prices approach or exceed the critical $30,000 mark.

Retail investors starry-eyed as miner revenue declines

Beyond large institutional investors, retail participants also showed significant interest in Bitcoin. Glassnode’s data revealed that the number of addresses holding 0.1 or more Bitcoins reached an all-time high of 4,499,669.

However, it’s important to note that both large and small investors could be influenced by the selling pressure exerted by Bitcoin miners. Over the past few days, miner revenue has experienced a substantial decline, dropping from $32,000 to $24,000 at press time.

Read Bitcoin’s [BTC] Price Prediction 2023-2024

Miners may thus be compelled to sell a portion of their holdings to maintain profitability, potentially impacting Bitcoin’s price dynamics.

Source: Blockchain.com

At the time of writing, Bitcoin was trading at $26,259.39, reflecting a modest 0.51% price increase in the last 24 hours.

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