Published: June 26th, 2024
Bitcoin dipped below USD 60,000 at the start of the week, the first time it had been under the 60k threshold since early May. The fall occurred after administrators for the now defunct Mt. Gox crypto exchange announced that creditors will be paid in Bitcoin and Bitcoin Cash next week for losses incurred during 2015’s infamous hack.
The world’s number one crypto had been losing steam throughout June after what had been a (mostly) robust first have of the year. In the aftermath the SEC’s about-face on spot Bitcoin ETFs BTC spiked and then kept climbing. The Mt. Gox announcement lands the hardest blow of 2024, sending the coin downward by 6.2 per cent over the 24 hours between Sunday 23rd June and Monday 24th June.
At its lowest, data from CoinGecko shows BTC touched USD 59,967. Figures from Coinbase show an even deeper dip, falling as low as USD 59,783.
Mt. Gox, formerly a successful Japanese cryptocurrency exchange, suffered a major hack in 2014 where cyber thieves made off with USD 63.6 million in Bitcoin. That amount of BTC would be worth about USD 46 billion in today’s money. Ten years on, Mt. Gox Trustees said in a press statement that those who lost money in the cyber-attack would begin receiving payments in early July.
The prospect of so much dormant BTC potentially flooding the market spooked wary crypto traders, who began liquidating positions before the anticipated dip. Data from CoinGecko shows that the three wallets under Mt. Gox’s control contain a total of 141,686 BTC worth approximately USD 8.7 billion.
For the sake of comparison, it would be similar to the amount of capital inflow that U.S. Bitcoin ETFs saw in immediate weeks after the SEC’s January approval.
In January, JP Morgan was voicing concern about crypto analytics firm and Bitcoin whale MicroStrategy’s approach to BTC buying. Analysts said the company’s debt-funded Bitcoin purchases were adding leverage and inflating the crypto rally then underway. In a note to investors published on 16th January, they wrote that there was a risk of sharp deleveraging should Bitcoin suffer a downturn in the future.
Bitcoin enthusiasts had been highly supportive of MicroStrategy Chairman Michael Saylor and his aggressive BTC buying strategy. He recently told Bloomberg that Bitcoin is ‘the best investment asset going. He who gathers the most Bitcoin wins. It's the only endgame.’
Saylor and MicroStrategy have consistently used current Bitcoin holdings as collateral for loans to purchase more Bitcoin. In a round conducted at the start of this week, MicroStrategy announced it was offering up to USD 500 million in convertible senior notes so that it could purchase more Bitcoin.
Despite that move, Morgan analysts said the market wasn't seeing record-high amounts of leverage, which refers to the practice of borrowing funds to grow the returns on an investment. A crypto trader, for example, might make an agreement for 5x leverage to open a USD 500 Bitcoin futures contract, despite having only USD 100 in BTC in their trading account.
In September 2023, MicroStrategy announced a new acquisition of BTC. The firm made an SEC filing stating it had purchased approximately 5,445 Bitcoin in early August, with total cash value listed at USD 147.2 million.
At the time, Bitcoin was trading hands at approximately USD 27,051 per coin. MicroStrategy was already the world’s number one corporate holder of Bitcoin
With its latest purchase, MicroStrategy stuffed its vault to roughly 158,245 BTC. Analysis by CoinGecko puts the average purchase price at circa USD 29,580. Using figures provided in the filing, the aggregate purchase price paid by MicroStrategy for its BTC holdings to be USD 4.67 billion.
While the company’s continuing accumulation of Bitcoin supports its public pronouncements in support of the asset, calling it both a store of value and an appreciable long-term asset, the ongoing chill affecting crypto markets currently also pushes its BTC balance sheet notably into the red. That’s especially true of historical investments made when Bitcoin was riding high near the USD 60,000 mark.
As if on cue, Bitcoin was down 1.6 per cent on the day, trading just north of USD 26,090 at time of writing. That would value the total Bitcoin held by MicroStrategy at circa USD 4.1 billion.
In June of 2023, the firm purchased 12,330 BTC for USD 346 million. The average purchase price for one coin at the time was USD 29,667.
MicroStrategy began its cryptocurrency acquisition in August of 2020, with co-founder and CEO Michael Saylor saying that the firm's main motivation was to hold BTC as an inflation hedge.
Earlier in 2022, Saylor said the company remains committed to its approach, which is to keep buying and holding Bitcoin over the long term.
‘What's important for us is to be transparent, responsible and consistent.’
Saylor and MicroStrategy have often been at the forefront of BTC adoption, paving the way for risk-averse corporates and institutions to extend their Bitcoin exposure.
When forex traders went bear-ish on BTC in March 2020, a major corporate buy from MicroStrategy played a huge part in returning liquidity to crypto markets. It kicked off a slow but steady appreciation that accelerated in 2021, sending BTC's above USD 60,000.
When Elon Musk purchased Twitter in April of 2022, MicroStrategy CEO Michael Saylor offered Musk congratulations via Twitter, quoting the American Constitution’s first amendment, which guarantees that governments can't place limits on free speech.
Saylor’s very public show of support amid controversy about how Musk would run the social network helped drive up the price of DOGE (then rumored to become a form of payment on Twitter) by 24 per cent.
Traditional finance definitely needed to be won over. As recently as January of 2022, analysts at Wall Street stalwart JP Morgan published a report saying Bitcoin would struggle to win over new institutional investors due to its volatility.
