The El-Salvador and Microstrategy Bitcoin Strategy

Nayib Bukele, in 2021 was (and is still) a big Bitcoin believer. But being in the boat alone was not enough for the young and vibrant El-Savador president. So, what did he do? He rallied around to find favour with the country’s influential figures to legalise the cryptocurrency. Not only did he push for that, but he also got approval to invest some of the country’s reserves in Bitcoin. How has that turned out? You will find out in the latter parts of this article. 

Like Bukelt, Michael Saylor, former CEO of Microstrategy, also created the Bitcoin strategy standard for the company. The latest was the $45 million accumulation between October and December 2022. While there was intense enthusiasm in making these decisions, the return on investments has not been so great. This has called for concern among the Microstrategy board and residents of El Salvador. 

Nonetheless, the leaders in making the decisions are sticking to their guts despite some drawbacks. So, this leads to the question— when will the results of their stand become a “yes, I told you so” situation?

El-Savador: Looking to Bitcoin for a Way Out

For some experts, Bukele’s decision to invest the country’s assets in Bitcoin is too risky. But the president seems to care less as he believes the cryptocurrency would be influential in taking El Salvador out of economic ruins. However, the price of Bitcoin over the last 365 days has shown that it could take a long time before the country achieves its objectives. But let’s take it back in time to see when the government began its Bitcoin investing journey.

During the 2021 bull run, El Salvador officially began buying Bitcoin. While outsiders criticised the move, the country’s legislative assembly aligned with the president’s viewpoint. Public comments from president Bukele have repeatedly shown that he is someone who wants people to easily access the crypto market. Of course, the security of his people is a number one priority. This is the reason why even the president of El Salvador instructs future traders to stay away from online scams and choose safety first by registering at a proven website with a 24/7 support team. With 62 out of 84 members in agreement, the Bitcoin buying spree was set in motion. 

For a start, the country set aside $150 million for her first buy. However, the Bitcoin price was heading toward its all-time high when El Salvador began its purchase. So, we can say Bukele was the propeller for buying the top. 

Between September 2021 and January 2022, El-Savador had purchased about $85 million worth of BTC. But since the drop from $69,000 in November 2022, the assets owned by El Salvador have depleted. This means the country’s portfolio is at a massive loss. However, Bukele and his cohorts are unconcerned about the harsh criticism it has received. They even made it clear that they were sticking to their decision. In January 2022, the president approved the purchase of an extra $15 million BTC. When the coin price dropped to $19,000, El Salvador saw it as an opportunity to accumulate further. This time, it added 80 BTC even though the country’s finance minister said it was less than 0.5% of its annual budget. 

So, the clarification implied that  El-Savador was not gambling away its future, and the accumulation had little to no effect on the inconsistencies in its economy. In November 2022, President Bukele admitted that he was unperturbed by the Bitcoin capitulation. He also pledged that the country would buy at least one BTC every day onwards.

Despite everything, the Bitcoin invested by the country has yet to produce the gains that Bukele would have expected. However, with Bitcoin down 67% from its all-time high, El-Savador may have all the time to gain incredibly from her holdings, provided that Bitcoin surges above the highest point reached in 2021. Now, let’s leave El Salvador behind and lean towards the similar activities of Microstrategy.

The Microstrategy Bitcoin Strategy:: Holdings In Greens 

The Business Intelligence (BI) software provider has been one of the institutional investors who hold a high number of BTC apart from Elon Musk-led Twitter. And the reason for this can be traced to one man—Michael Saylor. Because of Saylor, Microstrategy became the largest corporate holder. In November 2022, the Nasdaq-listed enterprise added 2,500 BTC to its holdings.

Before stepping down in August 2022, Michael Saylor was Microstrategy’s CEO from 1989. But now that he has transitioned to executive chairman, one would think that the company would halt its Bitcoin activities. However, that has not been the case. Still, it is noteworthy that the company does not possess all the Bitcoin it has accumulated. In December 2022, it sold some part of it, with rumours flying around that it sold at a loss. Details from the transaction showed that the company sold 704 BTC for approximately $11.8 million.

Despite the trade-off, Microstrategy took the crypto community and sceptics by surprise as it purchased another $43 million at an average price of $16,845 per Bitcoin. The new purchase meant that the company’s Bitcoin holdings were now about 132,500 BTC. 

Meanwhile, the last purchase of the company means that it has made significant profits if we were to compare the acquisition cost with the price of Bitcoin as of this writing. Since Bitcoin had risen above $20,000, that particular purchase would be in profit worth millions of dollars. 

However, the same company bought BTC in February 2022 when the price had yet to capitulate. In May of the same year, it did the same even though the crypto market faced notable challenges during that period. Well, you might not say it’s over for Microstrategy yet, especially as its strategy seems to revolve around Dollar Cost Averaging (DCA).

Final Thoughts

While Saylor and Bukele may have faced much criticism due to their grit, you may also admire their resolve to ignore the naysayers. More importantly, will these investments solve El Salvador’s ravaging economy? 

Well, the honest opinion is that there is a chance, but the problem is not knowing when. Bitcoin has been in a bear condition for a long while, and citizens of the country may get impatient if the bull market does not return sooner than projected. But Bukele has the support of another Bitcoin Maximalist, Max Keiser, who relocated from the United States to El Salvador.

For Microstrategy, it had recorded profits with some buys. While Others have plunged in losses, the company’s actions show that it is highly dedicated to sticking to the strategy irrespective of its executive arm change. Whether both institutions will succeed or falter, time will tell.

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