Bitcoin (CRYPTO:BTC) climbs again Monday after MicroStrategy continued its massive buying spree. This time, the company announced the acquisition of an additional 1,070 Bitcoins over the past week and announced that it would raise another $2 billion to purchase even more.
Investors turned again to higher risk assets like cryptocurrencies and growth stocks to start trading in 2025 and this continues today. As of 4 p.m. ET, over the past 24 hours, Bitcoin is up 4%, Ethereum (CRYPTO: ETH) climbed a more modest 1.1%, and Dogecoin (CRYPTO:DOGE) is up 1.4%.
MicroStrategy implemented what it calls a Bitcoin yield strategy, which involves issuing equity and debt in order to purchase Bitcoin. If the value of MicroStrategy’s shares exceeds the value of Bitcoin held on the balance sheet, the company can issue shares to purchase Bitcoin, thereby increasing the amount of Bitcoin held per share. This is called “yield”.
This is why MicroStrategy has been such a big buyer of Bitcoin in recent weeks. The stock price is more than double the value of Bitcoin per share, meaning the company can increase “yield” quickly. In 2024, the company had a Bitcoin return of 74.3%, according to management.
What’s unclear is how long MicroStrategy shares will maintain a premium to their underlying Bitcoin assets or what the downside risk is if MicroStrategy stops buying. With such a big buyer in the market, investors know there is always a buyer in MicroStrategy, but that momentum could reverse if the stock falls.
There is no big news regarding Ethereum or Dogecoin, but that is not surprising given the recent price action of cryptocurrencies. The flow of funds into the industry has been the main driver of value appreciation.
What investors should watch over the next year is the improving utility of these tokens, which are much more likely to generate value than memes or non-fungible tokens (NFTs) which have led the last cycle.
Major crypto and cryptocurrency companies have already discussed plans to increase utility under the Trump administration, which takes over this month. If regulation is clear, the industry could move from Wild West trading at the height of the COVID-19 pandemic to more fundamental innovations on blockchain, such as disrupting global financial and payments infrastructure. But having a fast and cheap blockchain will be essential. I’m not sure if Ethereum or Dogecoin fall into this category.