MicroStrategy Bitcoin Fourth Anniversary: A Review of Its Acquisition Strategy and Market Impact

Original Title: MicroStrategy's Bitcoin Anniversary: A Look Back at Its Acquisitions and Market Influence

Author: Valdrin Tahiri, CCN

Compiled by: Fairy, ChainCatcher

Key Takeaways

• MicroStrategy (MSTR) began purchasing Bitcoin in August 2020.
• The company has made five purchases totaling over 15,000 Bitcoins.
• Is there a correlation between these purchases and MSTR's stock price?

On August 11, 2020, MicroStrategy boldly entered the Bitcoin (BTC) space, making headlines and ushering in a new era for the entire industry.

Under the leadership of Michael Saylor, MicroStrategy quickly rose to become one of the largest publicly traded holders of Bitcoin in the world, fundamentally changing how companies think about financial management and shifting the industry's attitude toward digital assets.

As we celebrate the fourth anniversary of this decision, let’s delve into some significant Bitcoin purchases made by MicroStrategy and examine how these strategic moves have influenced the market.

The Beginning of Purchases

MicroStrategy's most iconic purchase occurred on August 11, 2020.

At that time, the company's chairman, Michael Saylor, announced that the Nasdaq-listed company had purchased 21,454 Bitcoins for $250 million. This investment marked a significant strategic shift for MicroStrategy, incorporating Bitcoin into the company's financial strategy.

Saylor referred to Bitcoin as a "reliable store of value" and viewed it as a hedge against inflation.

His vision was clear: to set a new standard for corporate financial management and demonstrate the company's confidence in Bitcoin's future. And it turned out he indeed set a new standard—MicroStrategy has become one of the best-performing tech companies globally.

Following this announcement, Bitcoin's price surged, reflecting the market's growing confidence in its legitimacy as an asset. MicroStrategy's stock also rose as investors applauded this bold move. This initial purchase paved the way for MicroStrategy to become a leading publicly traded Bitcoin holder, reshaping industry norms.

The 5 Largest Bitcoin Purchases

Bitcoin purchases have been a significant component of MicroStrategy's stock performance.

Here are the five largest Bitcoin purchases made by MicroStrategy, sorted by the number of Bitcoins purchased rather than the total price at the time of purchase:

1. December 21, 2020 -- 29,646 BTC
2. August 11, 2020 -- 21,454 BTC
3. February 24, 2021 -- 19,452 BTC
4. September 14, 2020 -- 16,796 BTC
5. November 30, 2023 -- 16,130 BTC

From a stock performance perspective, during the five weeks when the company made its largest Bitcoin purchases, MicroStrategy (MSTR) stock rose in four of those weeks (marked by white icons). The only exception was the week of the third-largest purchase (marked by a black icon), when MSTR's stock price fell by over 13%.

While MSTR's stock price has risen 80% of the time following large Bitcoin purchases, this relationship is not as straightforward as it seems. Stock price increases do not always align perfectly with the scale of purchases.

MSTR's stock price fluctuations ranged from 5% to 21%. In fact, the most impressive increase occurred in August 2020, when the stock price soared by 21%. It then rose by 12% in September 2020.

While MicroStrategy's stock has performed well most of the time, how has Bitcoin performed?

Impact on Bitcoin Prices

Bitcoin's price performance has been similar to that of MicroStrategy. BTC prices rose in four of the five major Bitcoin purchases made by the company. The only exception was during the third major purchase in February 2021, when Bitcoin prices fell.

Notably, the largest increase in Bitcoin occurred during the largest purchase in December 2020, when prices rose by 12%. This contrasts with MicroStrategy's stock performance, where the largest price increase does not necessarily correlate with the largest purchase volume.

With this in mind, let's compare whether there is an increasingly close relationship between MicroStrategy's stock price and Bitcoin's value. As MicroStrategy's Bitcoin holdings have increased, one could anticipate that the price movements of the two will become more closely linked.

That seems to be the case. Before MicroStrategy's first Bitcoin purchase in August 2020 (marked in black), there was almost no correlation between MSTR and Bitcoin prices. The correlation coefficient (marked in blue) fluctuated near zero, indicating no actual relationship between the two assets.

However, since August 2020, there has been a significant change. The correlation has turned positive, sometimes even reaching a perfect positive correlation score. This indicates that the price movements of the two now closely reflect each other.

This pattern is very evident when comparing price charts: MSTR (white) and Bitcoin (orange) have highly consistent trends, especially during the current bull market. This synchronization suggests that as MicroStrategy's Bitcoin holdings have increased, its stock price increasingly reflects Bitcoin's performance, demonstrating an enhancing connection between the two.

The correlation occasionally dips to zero or negative values (marked by black circles). Interestingly, all these instances mark local or absolute bottoms for Bitcoin. This is a positive sign for the future prices of both Bitcoin and MSTR, as the current correlation stands at 0.20.

Thus, there is a positive correlation between MicroStrategy's large purchases, Bitcoin prices, and MSTR prices. The correlation between MSTR and Bitcoin also shows a positive trend and strengthens with each purchase.