Microstrategy Could Have Pocketed $1.3B if Saylor Had Bought ETH
Defiant Data Crunch Shows Ether Would Have Paid Off Nicely for Software Maker
By: Samuel HaigData Dive
What if Michael Saylor had bought Ethereum instead of Bitcoin?
During the bull market of 2020-21, Saylor, the Bitcoin-loving CEO of Microstrategy, made one of the most famous crypto bets ever — he directed the business intelligence software maker to invest $4B in the No. 1 cryptocurrency, according to data from Bitcoin Treasuries.
Now, with crypto tumbling in a punishing bear market, Saylor’s decision has left Microstrategy with a paper loss of $1.3B.
If only he’d bought Ether.
Microstrategy would have earned almost $1.3B from a stash of Ether worth $5.3B today, according to The Defiant’s analysis of data from CoinMarketCap and BuyBitcoinWorldwide tracking the firm’s Bitcoin buys. Thanks largely to The Merge, Ethereum’s native token has soared 51% since June 30 compared to Bitcoin’s 7% increase, according to Defiant Terminal data.
The Virginia-based company would have also been earning passive yield by staking ETH. Staking Rewards estimates that Ethereum stakers are earning 4.67% annually, which would equate to $246M at the current ETH price.
Moreover, analysis from Flashbots indicates that stakers running its MEV-Boost software earn 135% more than those who do not. Boosted rewards on a $5.27B stake could net more than $527M each year if ETH’s price is steady.
Performance of Microstrategy’s BTC holdings over time. Source: Bitcoin Treasuries
There are other implications of the theoretical move. If Microstrategy had invested in ETH rather than BTC, it would own 2.8% of Ether’s supply and could be a centralizing force for the network. If the entire hypothetical ETH stash were staked, it would represent more than 20% of staked Ether.
“It’s fine for large corporations to stake on mainnet, but they must stake in a relative proportion to others so that they don’t exert undue influence over the network,” Superphiz, the co-founder of the EthStaker community and a strong advocate for staking diversification, told The Defiant.
“I’m completely okay with any single entity operating about 2% of the network, but when they creep above that it puts us at high risk of centralization,” he continued. “At this time, a 2% stake from a new entity could actually decentralize the chain by bringing in a new party.”
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Instead Saylor resigned from the company he co-founded in 1989 in August, though he has maintained a sense of humor about the situation. In May, he tweeted a photo-shopped image of himself selling fries at a McDonald’s.
A true believer that Bitcoin would fulfill its destiny as the global economy reserve asset, Saylor, 57, pioneered the strategy of filling a corporate treasury with the cryptocurrency instead of the usual cash and U.S. government bonds. He adopted not just laser eyes but thunderbolt eyes for his Twitter profile pic. Saylor was fond of making grandiose statements about Bitcoin to his 2.7M followers.
Fire of Truth
“Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth,” he tweeted in 2020. “Exponentially growing ever faster, smarter, and stronger behind a wall of encrypted energy.”
That year the software honcho initiated Microstrategy’s BTC purchases. The first seven tranches mobilized $2.2B to buy 90,531 Bitcoin between August 2020 and February 2021. While those early BTC positions are worth $1.8B, the same investment in Ether would now be valued at a staggering $4.64B.
The company then slowed its buying, investing $80M into BTC between March 2021 and June 2021, before injecting another $1.26B during the second half of 2021, and $215M in the first half of 2022.
ETH/BTC price on Binance since mid-2020. Source: TradingView
Only five of Microstrategy’s BTC purchases were made below Bitcoin’s current price.
Money on the Table
“Sometimes as an investor you end up leaving money on the table (even if it’s not your choice) and that is certainly what we see with MicroStrategy given how much they are down on their BTC purchases,” Mark Monfort of web3 venture studio, NotCentralised, told The Defiant.
“The equivalent they have in BTC reserves could have garnered a significant windfall in ETH had they purchased that instead (and they could also add to those earnings via staking that Ether).” Monfort continued. “That said, they were making sizeable purchases in over 20+ tranches since early 2021, so how they would have moved the dial when it comes to ETH instead of BTC is a hypothetical we may never know.”