MicroStrategy spent $821 million this year just buying bitcoin on credit. But JPMorgan analysts warn: These impulsive purchases could turn into disaster, especially if the market slows down. Michael Saylor should perhaps curb his enthusiasm, or even stop buying bitcoins, to avoid a financial crisis.
MicroStrategy should probably give up buying more bitcoins
In just two months, BlackRock, with its Bitcoin Spot ETF, has overtaken MicroStrategy as the world’s largest BTC holder. Would Michael Saylor seek to avoid this humiliation? According to a report from Cryptopolitanhe has become more and more aggressive in terms of bitcoin strategy.
As bitcoin skyrockets, JPMorgan is sounding the alarm about the risks faced by overly exposed companies. MicroStrategy, in particular, invested $821 million in bitcoin between February 26 and March 10, funded by the sale of $1.2 billion worth of senior convertible bonds.
According to JPMorgan analysts, these credit purchases amplify market fluctuations and increase the risk of a financial crisis in the event of a downturn. These bonds, which can be converted into shares, represent senior debt for the company, ensuring interest is paid before any other repayments in the event of bankruptcy.
These warnings come as bitcoin hits all-time highs, surpassing $73,500. Currently, its value is $67,926.79, with a volatility of 6.6% for the day. The global cryptocurrency market capitalization stands at $2.69 trillion, with BTC dominating at 49.42%. Caution therefore seems necessary in this market with rapid and unpredictable movements.
The art of leverage
MicroStrategy, under the ticker MSTR on Nasdaq, is not its first attempt. Using bitcoin as collateral, the company launched a new $500 million bond via senior convertible bonds, maturing in 2031, with the aim of acquiring even more BTC. But leverage fever has not yet reached its peak in the market.
Leverage, a double-edged effect, promises amplified gains, but also exposes you to significant losses. In the United States, where regulations are stricter, platforms like Coinbase or Kraken offer leverage limited to 10 and 5 times respectively, a wise precaution.
Despite renewed optimism marked by record notional open interest in bitcoin futures, reaching $34 billion, leverage remains moderate (0.20 according to CryptoQuant). This figure reflects relative caution in the market, unlike the peak of leverage in October 2022, when it reached 0.40.
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