MicroStrategy’s Bitcoin gamble beats Warren Buffett’s warning | Bitcoin News by CoinCorner

Transcript

Institutional demand takes off as major US banks disclose huge Bitcoin positions. Is the Bitcoin supply running out as exchange reserves reach a five-year low? And MicroStrategy defies all odds by outperforming the world's most respected investor, Warren Buffett.

Looking first at Bitcoin's price: we're currently trading at around $60,000 per coin, and the price is staying somewhat suppressed following the macro data that we looked at last week, with the US economic data and the unwinding of the yen carry trade. But despite this fairly weak price action, it appears the big players in the game are relatively unfazed, as two major US banks revealed owning huge positions in Bitcoin through Bitcoin ETFs.

First, we have Goldman Sachs, who, in a 13F filing for the quarter ending on 30th June, disclosed for the first time positions in several Bitcoin ETFs totalling $418 million. Then we have Morgan Stanley, who also revealed holding $188 million worth of BlackRock's Bitcoin ETF. These enormous allocations reflect the broader trend within the financial industry, where initial scepticism has gradually given way to cautious acceptance and integration of these digital assets into mainstream financial products.

But it's not just the banks who are buying. Earlier this week, the world's largest Bitcoin miner, Marathon, announced plans to raise $250 million to purchase Bitcoin. Marathon's plan is to issue debt in the form of convertible senior notes that are set to mature in the year 2031, following in the footsteps of MicroStrategy, who were the first to implement a strategy like this of taking on low-interest debt in order to maximise the Bitcoin on their balance sheet. Marathon already holds around 20,000 Bitcoin, making them the second-largest Bitcoin holder among publicly traded companies, with MicroStrategy topping the list.

But in a post on X on 14th August, Marathon revealed that they have secured $300 million through the oversubscribed offering, and with the proceeds, they have already purchased 4,114 Bitcoin, making their total holding over 25,000 Bitcoin. Now, with all this buying taking place, the supply of Bitcoin available to purchase on exchanges has hit a five-year low after $55.96 billion was withdrawn in 30 days, according to data from CryptoQuant.com. Centralised exchanges combined currently hold approximately 2.7 million Bitcoin, worth around $161 billion, after a massive 99,000 Bitcoin was withdrawn between July and August.

Now, for context, the last time Bitcoin reserves were this low was during the Bitcoin bear market on 19th November 2018, when the price was trading at around $4,000 per coin. Ever since the collapse of crypto exchange FTX in November 2022, reserves across all exchanges have steadily declined as investors have developed a growing preference for non-custodial solutions to reduce counterparty risk with holding Bitcoin on an exchange. As a result, this is reducing the market's liquidity and increasing the scarcity of Bitcoin, which will potentially strengthen its value over time, especially if large traditional institutions keep buying at the rates they are.

Also in the news, this month marks MicroStrategy's four-year anniversary of their first-ever Bitcoin purchase back in August 2020. Since making the bold move, they have outperformed legendary investor Warren Buffett and his company, Berkshire Hathaway. As of 10th August 2024, MicroStrategy had a holding of 226,500 Bitcoin, worth approximately $13.7 billion. These reserves were acquired at an average cost of around $37,000, and with Bitcoin currently trading at approximately $66,000 per coin, MicroStrategy is now sitting on unrealised profits of around $5.39 billion. As a result, their stock is up around 1,000% since implementing this Bitcoin strategy four years ago, and they have achieved returns 1.5 times higher than Bitcoin, whereas Berkshire Hathaway, Warren Buffett's company, has only gained 14.75% during the same period.

Now, over the years, Buffett has not been afraid to share his negative stance towards Bitcoin, calling it "rat poison squared" in 2018, while his late right-hand man, Charlie Munger, predicted that Bitcoin's price would crash to zero and called it a "disgusting product" in a statement back in 2021. But despite all of this negativity, Bitcoin and MicroStrategy have continued to perform better than Buffett's top stocks, namely Apple, American Express, and Bank of America.

Now, shifting gears, our next story is coming from Nigeria, a country whose government has made it very difficult for citizens to gain exposure to Bitcoin and the crypto market. But this week, Nigerian crypto activist and politician James Uda has taken bold legal action against several government entities on the matter. Uda outlined that the Federal Republic of Nigeria and its agencies, acting to prevent and restrict innocent Nigerian citizens from acquiring, holding, and accessing these assets, is a violation of their fundamental human rights. He highlighted the growing importance of Bitcoin and other digital assets as an essential tool for protecting individuals' savings from inflation and facilitating international transactions, particularly in the face of the Nigerian naira devaluation and foreign exchange shortages. For context, year-to-date, the naira is trading at around 52% down against the US dollar, meaning that holders of the naira are having their purchasing power destroyed.

Now, our final story is following the combined holdings of the US Bitcoin ETFs, which are currently on track to hold more Bitcoin than the creator, Satoshi Nakamoto. Bloomberg ETF analyst Eric Balchunas posted a chart on X showing that the ETFs now hold 990,000 Bitcoin and are closing in on Satoshi's estimated 1.1 million Bitcoin stash. But with the takeoff of the Bitcoin ETFs, Balchunas believes that, at this rate, the ETFs could overtake Satoshi's holdings as early as October this year. Satoshi was the biggest miner during Bitcoin's infancy when the process was much less resource-intensive than it is today, and no one has been able to put an exact number on Satoshi's holdings as they used fresh wallets to receive the 50 Bitcoin reward for every block that was mined.