Bitcoin Arms Race Lifts iShares Bitcoin Trust, MicroStrategy

One of the biggest stories on the markets so far this year has been the introduction of the first spot bitcoin exchange-traded funds (ETFs). These first 11 ETFs that invest directly in bitcoin as opposed to bitcoin futures have opened up the asset to an entirely new segment of the investing public. As such, it’s probably not a coincidence that bitcoin has surged since they were launched on Jan. 11.

Of the new funds, the iShares Bitcoin Trust (NASDAQ:IBIT) has grown the fastest, picking up some $13.2 billion in assets under management already. It topped the $10 billion asset level faster than any other ETF in U.S. history.

The iShares Bitcoin Trust was briefly the largest institutional holder of bitcoin as of March 8 after a recent purchase that brought its total to about 196,000 bitcoin. However, the largest corporate owner of bitcoin, MicroStrategy (NASDAQ:MSTR), has now joined the bitcoin arms race.

MicroStr ategy adds 12,000 more bitcoin

MicroStrategy, a business intelligence firm, has been buying up bitcoin at a rapid pace since 2020, when it made the strategic decision to use bitcoin as its primary treasury reserve asset.

Earlier this month, it offered about $800 million in convertible notes to buy more bitcoin and add to its growing portfolio. At that time, it had 193,000 bitcoin, but on March 11, the company announced another purchase that lifted it above the iShares Bitcoin Trust.

In a press release, MicroStrategy management said the company had completed its $800 million offering and generated $782 million in net proceeds from the sale of the notes. As management had previously stated, those funds will be used to buy additional bitcoin.

In a post on X later on Monday, MicroStrategy founder and Chairman Michael Saylor wrote that the firm had acquired another 12,000 bitcoin for $821.7 million using the proceeds from the convertible notes and some excess cash. The price per bitcoin was $68,477.

This increased MicroStrategy’s total to 205,000, making it again the largest institutional or corporate owner of bitcoin. Overall, MicroStrategy has made a $6.91 billion investment in bitcoin at an average price of $33,706 per bitcoin.

Share price surges on purchase

The purchase also made MicroStrategy one of the top gainers on the stock market on Monday, as its stock price popped about 13% on the day to $1,611 per share. MicroStrategy stock has been on a rocket ship fueled by its bitcoin holdings, as the share price is up a whopping 135% year to date from $685 per share at the start of the year.

During that time, the price of bitcoin has hit an all-time record, currently sitting at $72,520 as of Monday at 12 p.m. Eastern. The price of bitcoin is up by about 65% YTD from roughly $44,172 per bitcoin on Jan. 1. On Monday, it was up more than 5% and surpassed $70,000 for the first time.

As for the iShares Bitcoin Trust, it probably won’t be long before it makes its next bitcoin purchase as it chases MicroStrategy. The iShares Bitcoin Trust ETF was up by about 5% on Monday, and since it launched on Jan. 11 at around $27.94 per share, it has returned about 49% climbing to $41.51 per share.

The 2024 boom in bitcoin has largely been fueled by institutional interest, which has broadened access to the asset via ETFs. With the bitcoin ETFs being added to more platforms and the cryptocurrency’s price surging, interest is not likely to slow down any time soon.  

The interest has also brought on the next bitcoin halving event, which is slated for April. Halving is a mechanism that seeks to control the supply of bitcoin that is mined, and when supply drops, demand usually increases.

As with any investment, particularly with one as volatile as bitcoin, investors should be cautious and consider any type of aggressive growth investment as a relatively small portion of a diversified portfolio.


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