The analyst broke down MicroStrategy’s aggressive Bitcoin takeover strategy, which is gaining attention due to the rising price of the alpha cryptocurrency.
Anthony Pompliano, founder and CEO of Professional Capital Management, understood the mathematical reasoning behind the company’s investment move, but also cautioned that every investment was exposed to potential risks.
Acquisition of Bitcoins by MicroStrategy
Pompliano said MicroStrategy is making a bold move to buy more Bitcoin and build your crypto reserves by using convertible debt to finance cryptocurrency acquisitions.
An investment company offers its shares at a price higher than the current price per share to generate funds for the acquisition of Bitcoin.
Pompliano explained that MicroStrategy is selling future shares at a 55% premium to assist the company buy more Bitcoin, claiming it is a financially attractive move, saying, “This strategy makes sense from a financial perspective.”
Image: Crypto Economy
The analyst said this is a favorable strategy for Micro-strategy because it allows the investment firm to raise significant capital, which it is currently using to purchase a immense portion of leading cryptocurrencies, arguing that this approach makes mathematical sense.
Bitcoin investment plan
In October this year, MicroStrategy announced that it would conduct the study Bitcoin shopping frenzy raising $42 billion in fresh capital over the next three years to fund its goal of purchasing more BTC.
Some analysts consider this Bitcoin investment strategy to be a bold move that the investment firm is paying attention to.
Bitcoin market cap currently at $1.92 trillion. Chart: TradingView.com
MicroStrategy’s capital-raising approach aims to raise $21 billion in fresh capital from equity offerings and generate another $21 billion from fixed-income securities between 2025 and 2027, according to a company executive.
As of September 2024, MicroStrategy is already the largest holder of Bitcoin among publicly traded companies around the world. Buying more of the cryptocurrency would further strengthen its position as the No. 1 public company.
Image: Theya Blog
Related risks
Pompliano understood the appeal of Bitcoin’s proposal, saying the move could be lucrative for the investment firm.
However, the analyst noted that investors cannot overlook the risks associated with such investments, saying that anyone looking to adopt the MicroStrategy approach should understand the risks before diving into it.
“The counterweight is that I see a lot of people who say nothing can go wrong. I’m not in that camp,” he said.
Pompliano explained that the investment company’s strategy is not foolproof, saying some people assumed that nothing could thwart the investment plan.
“I couldn’t sit here and tell you what could go wrong, but I can tell you that alarm bells go off in my head when I see everyone saying nothing can go wrong,” he said.
He pointed out that investing in Bitcoin comes with volatility risks, adding that an uncertain regulatory environment could raise the risks associated with aggressively purchasing BTC.
Featured image from Canva, chart from TradingView
