MicroStrategy is the world’s largest holder of Bitcoin. This week, it announced plans to suspend new purchases. We discuss its policy shift in the article below.
Around 500,000 Bitcoins are held by MicroStrategy, making it the biggest holder of the foremost cryptocurrency on earth. Yet despite being the most prominent crypto treasury company, on Monday it announced it would no longer be acquiring Bitcoin. It also did not sell any of its Class A common stock. So what does this mean for Bitcoin in the current climate?
The supply of Bitcoin and MicroStrategy
For some, this will not come as a surprise. MicroStrategy has been voraciously gobbling up stocks of Bitcoin over the past few weeks, and a slowdown is expected. Around 2.25% of the world’s total is now owned by them, expected to have been at a cost of $30.4 billion. Around $20 billion alone was spent in the last 12 weeks as it rode the wave of optimism surrounding the price of crypto.
The executive chairman, Michael Saylor, has remained bullish about its prospects. He has hinted that they will use this as a store of value and hedge against inflation. This is one of the main worries impacting the current Bitcoin price today. It has always been notoriously volatile. Yet in the past week, it has increasingly so, leading to shifts and gains for some. Global events have been playing a huge part in this. These have mainly been down to the US economy, with inflation and tariffs at the heart of what seems like a long road to economic stability.
These tariffs from the US have been imposed on Mexico, Canada, and China. There is also sentiment that they will soon come to the European Union. When Canada and Mexico came to the table to broker deals, it offered a small reprieve and saw Bitcoin rise in price. However, there are still other countries that are defying this trend, with everything from clothing to truck parts possibility impacted. Inevitably, many are worried this will fuel inflation. The Federal Reserve had pinned their goal for this at 2%, though even they have stated that these tariffs could impact that, and the goal may no longer be feasible. MicroStrategy may view Bitcoin as a hedge against the inflation caused as a result, as many others may be thinking.
Long-term yields of any asset tend to follow long-term expectations of what the Federal Reserve will do. This shows possible lower spending, with slowed economic growth possibly coming. Even these are starting to outgrow concerns about inflation. The proof of these worries has been evident in the price of Bitcoin. It went from $92,900 to $102,000 on Monday. This then dropped on Tuesday, before a further rise of 0.7% over the day.
Will Bitcoin remain bullish?
As well as inflation, one factor that could hold back the rise of Bitcoin prices and the general crypto market is the indecision regarding a strategic Bitcoin reserve. MicroStrategy may be waiting to see a decision on this before making more acquisitions. The new government has signed a host of orders and made quick moves on a wide range of its promises. However, it has yet to address the proposed Strategic Bitcoin Reserve.
This was a key factor in the coin’s surge in value towards the end of last year. However, where sentiment was aggressively pro-crypto, this seems to have cooled off. Despite a strategic reserve being set up, it has been done so without the mention of Bitcoin’s involvement. The statement is now that the move will be evaluated.
A strategic reserve is a fund set up to invest in the country’s future. Its sources often come from surplus revenue from raw materials sales, meaning they are popular with countries that have natural resources in abundance. However, money can come from other sources, such as privatization. This money is then kept as a nest egg or invested in companies that are related to the future of the country in some way, such as research organizations.
Bitcoin miners switching to AI
Another issue facing Bitcoin is that the conditions for mining the currency are getting harder. This is generally due to increased energy costs, which Bitcoin mining uses huge amounts of. While it did dip slightly last month, it is only a short-term reprieve. This means the hash rate has only seen marginal growth.
April last year saw the Bitcoin halving event. This is where the amount given to those mining Bitcoin is halved. Typically, this results in a jump in price both three and six months down the line. This happened once again, albeit with a slight delay. However, its long-term impact has yet to be felt. With Bitcoin rewarding less and energy prices up, it remains to be seen how profitable mining will be for many of these companies who solely rely on it.
Many companies are now turning to AI to help reduce the cost of their operations. Riot is one operator who has used AI at their Corsicana facility to complete an evaluation. This has already managed to improve operational efficiency, according to their website. It could be that MicroStrategy has stopped buying because the commodity is getting harder to acquire.
The real question is if Bitcoin actually does act as a hedge against inflation. Over the past year, trends have suggested otherwise. However, with MicroStrategy, one of Bitcoin’s largest holders firmly on its side, it seems to say that despite them no longer buying, their faith is still firmly in the currency.