MicroStrategy Announces the "21/21 Plan"
MicroStrategy President and CEO Phong Le released the third-quarter results on Wednesday and announced that the company plans to raise $42 billion over the next three years to continue its Bitcoin investment strategy, referred to as the "21/21 Plan."
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The company will use these additional funds to purchase more Bitcoin as a financial reserve asset, aiming for higher Bitcoin yields, with $21 billion to be raised through equity financing and another $21 billion through fixed-income securities. This strategy aims to position Bitcoin as the company's core reserve asset to achieve higher Bitcoin returns.
MicroStrategy's Bitcoin Strategy
Led by founder Michael Saylor, MicroStrategy has been making large-scale investments in Bitcoin since 2020, viewing it as digital gold and a future anchor for global finance. As of September 30, the company holds over 252,220 Bitcoins, with a total investment of approximately $9.9 billion and an average purchase price of $39,266 per Bitcoin. According to statistics, MicroStrategy is currently the publicly traded company with the largest Bitcoin holdings in the world.
MicroStrategy plans to raise $42 billion in phases from 2025 to 2027. This fundraising plan will be conducted through equity and debt markets, aiming to further increase its Bitcoin holdings. The company plans to raise funds by issuing stocks and bonds to flexibly respond to market conditions and bolster its Bitcoin position. At the same time, the company has released all Bitcoin collateral, enhancing financial flexibility and reducing market volatility risks.
Based on the current Bitcoin market value, MicroStrategy's plan could significantly impact market supply and demand dynamics, considering that only 450 Bitcoins are mined daily. MicroStrategy's purchasing plan could potentially cover all newly mined Bitcoins during that period. The company views its Bitcoin reserves as a capital preservation tool, similar to oil reserves held by oil companies.
By increasing its Bitcoin holdings, MicroStrategy expects to achieve annual Bitcoin returns of 6% to 10%. The company also plans to continuously finance to bolster its Bitcoin reserves, driving growth in its market value.
Market Reaction and Risks
The upcoming Bitcoin halving will have a significant impact on the market in the coming years. The market generally holds an optimistic view of MicroStrategy's plan, believing it could bring the company Bitcoin returns above the market average. The implementation of this plan may further solidify MicroStrategy's position as one of the largest Bitcoin holders globally.
The large-scale investment plan can be seen as a vote of confidence in Bitcoin. Such substantial capital inflow may enhance market confidence in Bitcoin, encouraging more institutional and individual investors to enter the market, thereby driving up Bitcoin prices.
However, MicroStrategy's Bitcoin investments also come with risks. The company's third-quarter report showed that it recorded a $412 million impairment charge on its massive Bitcoin inventory, leading to a net loss of $340 million in the third quarter.
Conclusion
MicroStrategy's "21/21 Plan" represents a bold and forward-looking market strategy aimed at achieving capital appreciation through large-scale Bitcoin investments. This plan not only demonstrates the company's strong confidence in Bitcoin but also has the potential to profoundly impact the cryptocurrency market. Typically, large fundraising plans will be interpreted by the market as a significant positive signal for future Bitcoin demand. A substantial amount of Bitcoin is expected to be acquired by MicroStrategy, which will reduce the number of Bitcoins available in the market, creating expectations of supply tightness.
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