Bitcoin made its way back to financial media headlines as it outperformed in the last part of 2020. It made a new all-time high when it broke above $20,000 and now consolidates below $24,000.
It wasn’t a smooth sail though for Bitcoin investors this year. For example, the FDA, the UK-based regulator, announced that it forbids crypto CFDs from brokers’ offerings starting with 2021. Also, Ripple, one of the major cryptocurrencies, faces a lawsuit from the SEC (Security and Exchange Commission) on allegations of fraud, and the price of Ripple has collapsed instantly.
Investors willing to gain exposure to Bitcoin and other cryptocurrencies have different options at hand. The most obvious one is to deal with an exchange, with the hustles of having to know the key to a wallet, where to store your Bitcoins, and so on.
However, a different, and quite a smart way, is to own shares in public companies heavily invested in Bitcoin – e.g., MicroStrategy.
Trading Publicly Listed Shares
MicroStrategy rose to fame this year as its management decided to take a big stake in Bitcoin. It revealed a huge position around the $10,000 level and even bigger ones to follow. Recently, it invested another $650 million by purchasing 29,646 Bitcoins at an average price of $21,925 each. In total, MicroStrategy’s investment in Bitcoin is well over a billion dollars, owning 70,470 BTC at an average price of $15,964.
Therefore, it is fair to assume that by owning shares in such a company, one gains exposure to Bitcoin, albeit through an indirect approach.
What is interesting is who is behind MicroStrategy? Listed on Nasdaq, MicroStrategy attracted investments from various parties with interest in the crypto space. One is Russell Investments that owns about 2% of the company and has been vocal on Bitcoin blogs for quite some time. Another one is Renaissance Tech, the 10th largest investor, and one that increased its position four times since June this year. Finally, Citron Fund and BlackRock are other interesting names, both with big stakes in MicroStrategy and obviously backing the Bitcoin investment strategy.
The point here is that owning Bitcoin is one thing and owning shares of a company that owns Bitcoin is a different thing. The advantage is that one can gain exposure to Bitcoin at a relatively cheap price – one share of MicroStrategy (MSTR) trades at $337.18, up 136.4% year to date.
Guess when the bulk of the increase in price came? Naturally, in the last two months, when Bitcoin rose from $10,000 to $24,000.