Microstrategy Up Over $100 Million on Bitcoin Investments #33

Market Meditations | October 28, 2020

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Today’s Meditations:

  1. Microstrategy Reports Financial Results, Up Over $100 Million on Bitcoin Investment

  2. Singapore’s Biggest Bank Dbs Is Launching a Crypto Exchange

  3. JPMorgan’s ‘JPM Coin’ Is Live, Execs Say

  4. Ledger Is Investigating Phishing Scam That Targets Wallet Users

  5. Microstrategy Reports Financial Results, Up Over $100 Million on Bitcoin Investment

  6. JPMorgan Asset Says to Pick Corporate Debt Over Stocks in Near Term

  7. Stocks Tumble as Restrictions Spread

  8. Crypto Scammers Deface Trump Campaign Website One Week from Elections

  9. The Surprising Power of Tiny Habits

Microstrategy Reports Financial Results, Up Over $100 Million on Bitcoin Investment

When Michael Saylor’s MicroStrategy first announced to the world that the firm had bought Bitcoin to put it on their balance sheet, the crypto industry was positively surprised. Being the first publicly-traded company to do so, the firm took a risk that would have a very binary outcome: They would either win big or fail badly.

The firm initially announced they had bought $250 million worth of bitcoin (BTC) and a few weeks later, the firm announced that they had bought an additional $175 million. In total, the firm bought 38,250 BTC at an average price of $11,111. In their statement in August, CEO Micheal J. Saylor said that “Our investment in Bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our shareholders. This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. Since its inception over a decade ago, Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions. MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.” The firm effectively put 90% of their balance sheet into bitcoin. Talk about having a high conviction.

Q3 2020 Earnings Call

During the earnings call of the third quarter financial results, CEO Michael Saylor said that MicroStrategy delivered one of their strongest quarters in years, with meaningful growth in both product licenses and subscription services. Saylor also took the time once again to explain his Bitcoin thesis and why the firm uses bitcoin as their primary treasury reserve asset. In a report on the call from The Block, we read that revenue in Q3 was the highest since 2016, with an increase of 6% since last year. Total profit reached $19.8 million, compared to $11.6 last year.

The company’s president and chief financial officer (CFO) Phong Li said that their Bitcoin purchase boosted the firm’s reputation and brought in more potential customers. “Our investment in Bitcoin has also allowed MicroStrategy to tap into the passion of the broader crypto market in smart sophisticated technologies to advocate for the independent and open markets, whether for financial assets or digital ones,” said Li. “We’ve seen a notable and unexpected benefit from our investment in Bitcoin in elevating the profile of a company in the broader market.” He continued that Square’s purchase of $50 million worth of Bitcoin was another huge confidence booster for his firm’s bet and conviction.

Users on Twitter have been eagerly tracking MicroStrategy’s profits on their bitcoin bet since the news came out and yesterday, profits exceeded $100 million(!) for the first time. Not bad for a few month old investment. Twitter user Kevin Rooke visualized this in a pretty chart, claiming that profits from MicroStrategy’s bitcoin investment were higher than 3 years worth of net income for the firm.

The exact numbers are not what’s important here. If we wanted, we could write that their balance sheet lost +$20 million on the market correction today. What’s important is that Michael Saylor’s and MicroStrategy’s bold bet made the topic debatable for other major publicly traded companies. You can bet that other firms noticed the increase in stock price, the abundance of media attention and of course the hard-won profits that MicroStrategy now proudly talks about in public. Success stories like these could pave the way for other firms to consider this move as well.

Michael’s Personal Allocation

Earlier today, MicroStrategy’s CEO tweeted that he personally made an investment in bitcoin as well before the firm bought bitcoins themselves. With 17,732 BTC at an average price of $9882, Michael made a personal investment of ~$175 million. An investment that, at the time of writing, is worth ~$235 million yielding a solid $60 million return in the span of a few months. Michael Saylor and his firm took a rather risky bet but are currently reaping the rewards in many ways. Chances that we’ll see other major firms put 90% of their balance sheet in BTC are very small, but they will no longer ignore the topic either. Now that the genie is out of the bottle, expect other firms to put a small percentage of their treasury into bitcoin over the next couple of years, one step at a time.

  • Singapore’s Biggest Bank Dbs Is Launching a Crypto Exchange. Singapore’sbiggest bank DBS is launching a fiat-to-cryptocurrency exchange, dubbed “DBS Digital Exchange” according to The Block. The platform will allow users to trade in 4 different (crypto) assets: BTC, BCH, ETH and XRP. These pairs will be tradeable against the Singapore dollar (SGD), Hong Kong dollar (HKD), Japanese yen (JPY) and U.S. dollar (USD). A webpage was also published that the exchange would also conduct security token offerings (STOs) “in due course” but the page got deleted shortly after. In terms of custody of costumer’s funds, the Digital exchange will utilize the infrastructure of its parent DBS Bank. After the report came out, a spokesperson for DBS told The Block: “DBS’ plans for a digital exchange are still work in process, and have not received regulatory approvals. Until such time as approvals are in place, no further announcements will be made.” Read more.

  • JPMorgan’s ‘JPM Coin’ Is Live, Execs Say. One of the biggest investment banks in the world JPMorgan is about to perform the first commercial transactions with its own cryptocurrency, JPM coin. In a CNBC report on Tuesday, JPMorgan global head of wholesale payments Takis Georgakopoulos said that the coin would be used commercially for the first time this week by a large technology client to send payments around the world. As the bank sees blockchain technology becoming commercially viable, it has also created a business unit with around 100 employees, Onyx to house related projects. JPM coin was first revealed in February 2019 and JPMorgan officially started trials last summer. The token was built on Quorum, a private version of Ethereum, and was designed to speed transactions between forms or bond transactions. Read more.

  • Ledger Is Investigating Phishing Scam That Targets Wallet Users. The French hardware wallet producer Ledger is looking into an apparent impersonation scam after several customers reported on social media that they had received phishing emails. The email contains a message that appears to come from Ledger, in which it says that Ledger Live service has been hit with a malware attack and encourages users to download their latest version, which redirects users to a site where users have to write down their private keys. Ledger promptly responded on Twitter that the firm would never ask for their user’s private keys. This is the second data breach after the one in June which exposed customer information and over one million user emails. Read more.

  • JPMorgan Asset Says to Pick Corporate Debt Over Stocks in Near Term. Favour U.S. corporate debt rather than global stocks in the near term given political froth and pandemic woes, said JPMorgan Asset Management. This year’s rally in global stocks has slowed since September as investors took profits ahead of the U.S. presidential election and assessed the resurgence of the virus outbreak in America and some of Europe’s marquee cities. The MSCI All Country World Index has yet to recoup September’s 3.4% fall while U.S. corporate debt – particularly high yield – continues to benefit from ultra-loose Fed policy. A gauge of U.S. high yield bonds is up about 1.8% this year. Read more.

  • Stocks Tumble as Restrictions Spread. U.S. stocks dropped and European equities tumbled to a five-month low as rising coronavirus infections and tougher lockdowns added to worries about the economic hit from the pandemic. Today we had reports of tighter restrictions in Germany and France. Angela Merkel proposed closing bars and restaurants for a month to curb the spread of the virus. France favors a one-month lockdown. The S&P 500 Index fell almost 2% as earnings rolled in amid a surge in Covid-19 hospitalizations, especially in the Midwest. General Electric Co. gained after the company reported a surprised profit and predicted gains in free cash flow. Airplane maker Boeing Co. slumped after it beat on earnings, but forecast more jobs cuts. Microsoft Corp. slipped as investors focused on a forecast that fell short of analysts’ highest projections, looking past a decisively upbeat profit and sales report. Elsewhere, oil retreated back below $38 a barrel in New York after an industry report pointed to a bigger than expected increase in U.S. crude stockpiles. Bitcoin slumped after reaching the highest since January 2018. Read more.

  • Crypto Scammers Deface Trump Campaign Website One Week from Elections. One of United States President Donald Trump’s re-election campaign websites was briefly defaced yesterday, according to an Oct. 28 article on TechCrunch. Hackers managed to replace donaldjtrump.con’s usual campaign rhetoric and request for donations with a spoof of the FBI’s ‘this site was seized’ message. The unknown attackers claimed to have obtained ‘strictly classified information’ and encouraged people to essentially vote on whether they wanted the data released, using payments to two Monero wallets. Among the insider information reportedly on offer was evidence discrediting Trump as president and connecting his government to “the origin of the coronavirus”. The cryptocurrency world is eagerly watching the U.S. presidential election race and wondering how the results could potentially affect the price of Bitcoin and other tokens. A negative reaction to the result in traditional markets will increase demand for safe haven assets like gold and Bitcoin, although it must be stated that Bitcoin has shown signs of correlation with the stock market in 2020. Read more.

Trader Mayne: What Traditional Markets Can Teach Us About Crypto Trading


Mayne (@Tradermayne) is a Canadian price action trader with experience in both traditional and crypto markets. He quit his job to pursue trading full-time, asked for his job back after the market turned and ultimately came back stronger and turned into the profitable trader he now is. He’s also the owner of a popular Twitter account with +45k followers, where he shares his analysis on the market on an almost daily basis.

In this episode, we talk about Mayne quitting his job to pursue his passion for trading full time. We dive into the prerequisites for becoming a full-time trader, putting the time in and backtesting your ideas, the difference between traditional markets and crypto and the importance of finding the right mentors. Besides trading, we also talk about more passive investing strategies, having multiple sources of income and becoming a healthier & happier person by quitting his weed addiction

Things I learned:

  • Losing money is the tuition you pay to get better in the markets.

  • Most people shouldn’t trade full-time. As soon as you have pressure to pay the bills, trading full-time will consciously or subconsciously mess with your trading. Anyone thinking about going full-time should have proven profitability for at least a few months.

  • You don’t have to take the trade. Sometimes it’s best to sit on your hands until the setup you know works starts developing. Knowing exactly when to get involved in the market will make you a better trader.

  • Majority of indicators that you put on a chart are basically a visual representation of price and volume.

  • If you own bitcoin, you’re automatically attached to the price and you want it to go up whether you realise it or not. This creates a little bit of a bullish bias that can lead to some cognitive dissonance in terms of looking at the charts.

  • A strategy can be very specific. Find something that speaks to you and execute on it consistently. What works for others doesn’t necessarily mean it will work for you.

  • You want to grow towards zero-attachment to the money. Look at gains and losses as percentages of your trading portfolio, not absolute values.

  • Although it’s still viewed as a contrarian opinion, correlation between stocks and bitcoin has been growing over the last few years. Especially after the Corona-crisis sell-off in march, Bitcoin has been trading in lockstep with the stock market more often than not.

  • There’s only so many hours in the day. Figuring out how to allocate your time to what’s going to make you the most money while also bringing you the most enjoyment is different for everyone.

The Surprising Power of Tiny Habits

In Atomic Habits, James Clear invites us to transform our lives with tiny changes in behavior. This is because success is the product of daily habits rather than once in a lifetime transformations. He challenges us to be more concerned with our current trajectory than our current results.

“Your outcomes are a lagging measure of your habits. Your net worth is a lagging measure of your financial habits. Your weight is a lagging measure of your eating habits. Your knowledge is a lagging measure of your learning habits. Your clutter is a lagging measure of your cleaning habits. You get what you repeat.”

The idea is that time magnifies the margin between success and failure; it will multiply whatever you feed it. Good habits make time your ally and bad habits make time your enemy.

Breakthrough moments become the result of many previous actions, which build up the potential required to unleash a major change.

What often stands in our way is the “Plateau of Latent Potential”.

True long term thinking is goal-less thinking. It’s not about any single accomplishment. It is about the endless cycle of refinement and continuous improvement. It is our commitment to this process that will determine our progress and whether we make it out of the plateau.

Getting 1% better each day counts for a lot in the long run. Make this your focus rather than immediate or overnight success.

Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. I am not a financial advisor. Every investment and trading move involves risk. Do your own research when making a decision.