MSTR's Speculative Attack
Summary
-> Bitcoin has shown exceptional growth potential this year, rising 163 percent year to date
-> Some bitcoin-related stocks like COIN (325%) and MSTR (307%) are showcasing even better performance
-> MicroStrategy’s purchase program can be seen as a “speculative attack” against the US dollar
-> MicroStrategy’s exotic loan arrangements rely on borrowing unlimited fiat against the scarce bitcoin with limited supply
-> The current selection of macro factors can easily uplift bitcoin above and beyond $100 000 in 2024
Saylor in Full Accumulation Mode
The leading digital asset by market capitalization, bitcoin, has shown exceptional growth potential this year, rising 163 percent year to date. However, some bitcoin-related companies have scored even more exponential growth numbers: Coinbase (COIN) is up 325 percent and MicroStrategy (MSTR) up 307 % in 2023.
MSTR's exponential growth aligns with the insights of expert Jeff Booth, who argues that certain Bitcoin-related stocks offer better returns than the underlying asset itself. MSTR has indeed strengthened almost twofold compared to bitcoin.
Looking back at the history, Michael Saylor unveiled his company’s Bitcoin strategy on August 10th 2020, and since then, the MSTR stock has climbed by 321 percent. MSTR reached its all-time high in February 2021, when the stock rose to 1034 US dollars. Compared to February 2021, the current price of $590 still leaves room for further growth.
In 2022, MSTR’s purchases amounted to a modest 8109 units as the market experienced capitulation during the fourth quarter. The company’s purchases for this year have already climbed to 42 030 units year to date, representing a 418 percent growth in the purchase program compared to the previous year.
Source: 21metrics
MicroStrategy employs Michael Saylor’s dollar-cost averaging (DCA) strategy in its purchases while simultaneously seeking to capitalize on the natural cycles of the market. The accompanying chart illustrates the modest bitcoin purchases by the company in 2022, contrasting sharply with the accelerated accumulation seen this year.
A Speculative Attack?
MicroStrategy’s massive purchase program naturally sparks interest, and some experts assess it as a speculative attack against the US dollar. Specifically, the theory advocated by Preston Pysh interprets the company’s exotic loan arrangements as relying on unlimited fiat money borrowed for purchasing the limited supply bitcoin. Scaled, this model implies the perpetual weakening of the dollar as bitcoin continues to strengthen constantly.
Pysh draws parallels between the current buying program and George Soros’s famous attack on the Bank of England (BoE), where he shorted the pound sterling with nearly a million GBP. Some analysts estimate that the BoE was on the brink of collapse back then.
Source: Investopedia
During the “Black Wednesday” on September 16th 1992, Soros and his Quantum Fund saw an opportunity to profit from the perceived vulnerability of the pound. Soros began shorting the pound, effectively betting that its value would decrease. Shorting, or short selling, involves borrowing a currency, selling it at the current market price, and then buying it back later at a lower price to repay the borrowed amount.
As Soros and other investors engaged in massive short selling, the Bank of England tried to defend the pound by buying large quantities of it. However, the pressure on the pound continued to escalate, and eventually the UK government was forced to withdraw from the European Exchange Rate Mechanism (ERM). This decision led to a sharp devaluation of the pound and resulted in significant losses for those who had bet against Soros.
Soros reportedly made a profit of around $1 billion from his successful speculation against the pound. His actions on Black Wednesday earned him a reputation as one of the most successful currency traders in the world. The event also had broader multiplicative effects for the UK's economic and political landscape, contributing to a re-evaluation of its approach to European monetary integration.
The April 2024 Halving in Horizon
After the heavy bear market of 2022, the leading cryptocurrency bitcoin is once again experiencing a significant ascent. In addition to price development and technical analysis, investors are interested in the fundamentals of Bitcoin, which include the halving event.
The halving, which occurs cyclically every four years, serves an important function in maintaining the scarcity of Bitcoin, as it simultaneously limits the maximum supply to 21 million native units. As of the beginning of December 2023, the circulating supply of Bitcoin was 19,56 million units.
Simply put, the halving refers to the halving of Bitcoin’s block reward. The block reward is the amount that Bitcoin miners receive for adding a new block to the blockchain. Bitcoin’s halving occurs approximately every four years, after a certain amount of new bitcoins units have been mined.
Source: 21metrics
According to the pseudonymous creator of Bitcoin, Satoshi Nakamoto, the mining of Bitcoin will cease completely by 2140 when all 21 million native bitcoin units have been mined. The purpose of halving is to curb inflation by limiting the supply of new bitcoins.
The previous halving events in bitcoin's history have resulted in spot-related parabolic trends. Between the halvings of 2012 and 2016, the price increased by a total of 5187 percent. Between the halving in 2016 and the subsequent year's all-time high, bitcoin's spot price climbed by 2922 percent. It can be said that halving events act as a catalyst for price increases both before and after the halving.
If bitcoin follows the structure of previous halving cycles, it can be predicted that the spot price will easily rise to 100 000 euros and dollars in the aftermath of the 2024 event.
