Strategy (MSTR) has made a bold move amid a market selloff, investing an impressive $835.6 million into Bitcoin, marking its most significant buying spree in four months. The announcement, made on Monday, reveals that the company has increased its total Bitcoin holdings to 649,870 tokens, valued at approximately $61.7 billion. This strategic purchase occurred during one of Bitcoin’s most substantial price drops this year, with the cryptocurrency falling nearly 30% from its peak earlier in October.
The funding for this acquisition appears to have primarily come from a recently closed euro-denominated preferred offering. This financial maneuver was executed just as Bitcoin liquidity began to tighten and retail investors pulled back, creating a landscape where new acquisitions seem increasingly precarious.
The recent dip in Bitcoin’s value below the crucial six-figure mark has unsettled many traders who had anticipated that the expected adoption of exchange-traded funds (ETFs) and a more favorable regulatory environment would stabilize the market. Instead, retail investor activity has diminished, leading to lighter order books on major exchanges. As digital-asset treasury companies, like Strategy, tend to suffer more when liquidity is low, the company’s stock has been affected significantly, causing its market-to-net-asset value (mNAV) to drop from over 2.5 to around 1.2.
Nevertheless, the preferred share sale completed by Strategy, raising approximately €620 million (about $703.9 million after fees), provided the capital needed for last week’s Bitcoin purchase. Initially targeting €350 million, the sale far surpassed expectations, issuing 7.75 million shares of ten percent Series A Perpetual Stream Preferred stock. This influx of funds comes at a critical time when Bitcoin’s value has declined sharply and the pace of acquisitions had slowed down.
Mike Saylor, the pioneer of the digital-asset treasury model since 2020, aimed to transform Strategy into a Bitcoin-focused investment initiative. However, this strategy depended heavily on strong confidence and expanding mNAV premiums, both of which have shown signs of impairment this year. Other companies within the cryptocurrency space, such as BitMine Immersion Technologies (BMNR) and Nakamoto Holdings, are experiencing similar challenges.
As Strategy embarks on this latest purchasing endeavor, it is being regarded as a test of market conviction. The future performance of large players in the market will depend on the return of liquidity and whether investors are willing to take risks by following Saylor’s example.
Despite the stock’s volatility and the broader uncertainties surrounding Bitcoin, Wall Street analysts remain optimistic about Strategy’s prospects. Over the past three months, 14 analysts have provided insights, resulting in a consensus rating of Strong Buy, with 12 recommending a Buy, two suggesting to Hold, and none advising a Sell. The average 12-month price target for MSTR stands at $524.08, indicating a potential upside of roughly 164% from its recent closing price.
This positive outlook reflects a belief in the resilience of Bitcoin as a leading asset class and highlights the potential for recovery as market conditions stabilize.