MicroStrategy (NASDAQ: MSTR) describes itself as “the largest independent publicly-traded business intelligence company, with the leading enterprise analytics platform.”
In other words, the company is a tech firm focusing on the cloud computing industry, as highlighted by the following statement on its investor relations website: “MicroStrategy provides modern analytics on an open, comprehensive enterprise platform used by many of the world’s most admired brands in the Fortune Global 500. Optimized for cloud and on-premises deployments, the platform features HyperIntelligence®, a breakthrough technology that overlays actionable enterprise data on popular business applications to help users make smarter, faster decisions.”
However, due to the company’s substantial holdings of bitcoin, MicroStrategy is one of the most crypto-correlated stocks in the world. CEO Michael Saylor is a vocal bitcoin bull, and the company’s hope.com website is home to a raft of bitcoin articles, insights, and videos.
Bottom line: MicroStrategy can and does move with bitcoin, and that’s meaningful for investors considering exchange traded funds with exposure to the stock, including the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC) and the Invesco Alerian Galaxy Crypto Economy ETF (SATO). MicroStrategy is a top-10 holding in both funds.
These days, that’s a good thing because the largest digital currency is rebounding in a major way from the 2022 “crypto winter.” Saylor started betting on bitcoin in significant fashion nearly three years ago, telling investors it was a better use of MicroStrategy’s cash than allocating that capital to low-yielding short-term Treasuries.
“Since then, Bitcoin has seen wide price fluctuations that have resulted in quarterly paper gains of as much as $3.1 billion and cumulative impairment charges of more than $2.1 billion for MicroStrategy. The company’s holdings have been underwater at the close of the last three quarters,” reported Bloomberg.
In news relevant to BLKC and SATO investors, those ETFs may be positioned for an added MicroStrategy boost because the company’s wager on the cryptocurrency is close to turning profitable. Additionally, the Virginia-based firm averaged down on this year’s rally, adding bitcoin holdings at prices lower than original purchases.
“MicroStrategy announced Monday that it bought $150 million more of the cryptocurrency and paid off the remainder of its $205 million loan partly backed by its Bitcoin through the selling of shares. The latest purchase of 6,455 tokens from Feb. 16 through March 23 was the largest acquisition by the company since April 2022,” according to Bloomberg.
SATO allocates 4.39% of its weight to MicroStrategy, while BLKC has an allocation of 1.79% to the stock.
For more news, information, and analysis, visit the Crypto Channel.
VettaFi LLC (“VettaFi”) is the index provider for BLKC and SATO, for which it receives an index licensing fee. However, BLKC and SATO are not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing or trading of BLKC and SATO.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
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