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MicroStrategy is set to inject part of its excess $250 million liquidity into Bitcoin, losing faith in the long-term benefits of the U.S. dollar.
Nasdaq-listed firm MicroStrategy Incorporated (NASDAQ: MSTR) is wary of the impending United States dollar losing its long-term value. The COVID-19 pandemic which has impacted the global economy has also caused a switch to BTC as MicroStrategy asset preference.
The billion-dollar software firm has plans to invest in alternative assets for which BTC has been considered a part of. Besides BTC, MicroStrategy believes that Gold and Silver are also a better store of value at a time like this. Based on this, the firm plans to invest a part of its excess cash flow worth $250 million in BTC in the next 12 months.
“We will seek to invest up to another $250 million over the next 12 months in one or more alternative investments or assets which may include stocks, bonds, commodities such as gold, digital assets such as Bitcoin, or other asset types,” MicroStrategy President and CFO disclosed this in a transcript adapted from the Motley Fool
The firm’s stock is showing a positive reaction to the news as it closed 0.51% higher at $123.95 per share.
What MicroStrategy Sells to Have Excess Cash for BTC Big Buy
To appreciate the plans by MicroStrategy to hedge against the dollar’s possible inflation, its good to understand the company’s merchandise. Founded in 1989, the firm develops software to analyze internal and external data in order to make business decisions.
MSTR has developed several unique products over the years including Usher, MicroStrategy Mobile, MicroStrategy 2019, and MicroStrategy 2020. Usher is a digital credential and identity intelligence product that helps organizations to securely control digital and physical access.
The MicroStrategy Mobile is applicable as an analytics tool in apps for use in iPhones, iPads, Android, and Blackberry. Its two latest products, MicroStrategy 2019 and MicroStrategy 2020 are business intelligence analytics softwares with hyperintelligence capabilities.
With these product offerings, MicroStrategy (MSTR) posted a net income of $34 million in the 2019 fiscal year. The company has been able to keep revenue afloat and boasts of a market cap of $1.2 billion. The firm has a ‘merely solid’ revenue for Q2 2020 with an excess to pump in alternative assets
Why Bitcoin Appeared Attractive for MicroStrategy
Bitcoin is the largest cryptocurrency by market capitalization and the most widely accepted digital currency. The crypto coin has seen massive price rally in recent times and is often pitched as a viable investment alternative.
Most institutions are bullish on Bitcoin believing its volatility will spike a price hike as predicted by Wall Street analysts. With excess dollars on its balance sheet, MicroStrategy will rather bet its funds in BTC as it believes the returns will be potentially better than the U.S. Dollar.
“We have a large amount of USD on our balance sheet and we have carried that for a while. Over time, the yield on our dollar values has decreased and at points, we had an expectation that we would get higher real yields, and therefore, there was no real urgency to address this issue. But as of today, we’re expecting negative real returns or a negative real yield on U.S. dollars, and that’s an expectation that has materially changed over the course of the last three months,” Michael Saylor said in the earlier quoted transcript.
Bitcoin is currently trading at $11,709.67, up 2.67% in the past 24 hours.