An analyst broke down the strategy behind the aggressive Bitcoin acquisition being done by MicroStrategy which is gaining attention due to rising price of the alpha crypto.

Anthony Pompliano, Founder & CEO of Skilled Capital Management, understood the mathematical reason behind the corporate’s investment move but additionally warned that any investment is exposed to potential risks.

MicroStrategy’s Bitcoin Acquisition

Pompliano said that MicroStrategy is making a daring move to purchase more Bitcoin and construct up its crypto reserve by utilizing convertible debt to finance the cryptocurrency’s acquisition.

The investment firm offers its shares at a better price than the present price per share to generate funds for its Bitcoin acquisition.

Pompliano explained that MicroStrategy is selling future equity at a 55% premium to assist the corporate buy more Bitcoin, saying that could be a financially attractive move, saying, “This strategy is sensible from a financial perspective.”

Image: Crypto Economy

The analyst said that it’s a helpful strategy for MicroStrategy since it allows the investment firm to achieve significant capital which the corporate is now using to purchase a variety of the leading crypto, saying that this approach is sensible mathematically.

The Bitcoin Investment Plan

In October this yr, MicroStrategy announced that it will be conducting a Bitcoin shopping spree by raising $42 billion in latest capital in the following three years to finance its goal of shopping for more BTC.

Some analysts consider this Bitcoin investment strategy as a daring move being eyed by the investment firm.

Bitcoin market cap currently at $1.92 trillion. Chart: TradingView.com

Based on the corporate’s executive, the target of MicroStrategy’s capital-raising approach is to get $21 billion in fresh capital from equity offerings and generate one other $21 billion from fixed-income securities between 2025 and 2027.

As of September 2024, MicroStrategy is already the most important Bitcoin holders among the many publicly traded corporations worldwide. Buying more of the crypto would further boost its position at the highest spot amongst public corporations.

Image: Theya Blog

Associated Risks

Pompliano understood the appeal of the Bitcoin proposition, saying that the move may very well be lucrative for the investment company.

Nevertheless, the analyst identified that investors must not overlook the risks related to such investments, saying anyone who desires to embrace MicroStrategy’s approach should understand the risks before dipping their feet into it.

“Now, the counterweight to that’s there’s a hell of a variety of people I see saying nothing can go fallacious. I’m not in that camp,” he said.

Pompliano explained that the investment firm’s strategy is just not foolproof, saying that some people assumed that nothing could derail the investment plan.

“I couldn’t sit here and inform you what can go fallacious, but what I can inform you is that an alarm goes off in my head once I start seeing everyone saying nothing can go fallacious,” he expressed.

He pointed on the market are volatility risks when people spend money on Bitcoin, adding that the uncertain regulatory environment could amplify the risks related to the aggressive purchasing of BTC.

Featured image from Canva, chart from TradingView