What happened
Shares of MicroStrategy (MSTR 1.06%) plunged as much as 15.1% in trading on Monday as the value of Bitcoin (BTC 1.80%) plummeted. Shares have recovered slightly and were down just 8.2% at 1 p.m. ET today as Bitcoin has recovered slightly as well.
So what
The big moves for MicroStrategy have been caused by Bitcoin because of the company's high exposure to the cryptocurrency. MicroStrategy had 114,042 bitcoin worth $2.406 billion on its balance sheet as of Sept. 30, 2021, with plans to buy even more. That position would be worth $3.90 billion today, which would be down nearly 50% from its peak.
Image source: Getty Images.
The problem for MicroStrategy is that it has sold both debt and stock to fund the acquisition of more bitcoin, so it's leveraged to the token's price. That's great when Bitcoin is going up, but terrible when the price is going down.
Now what
The reality is that investing in MicroStrategy right now is a leveraged bet on Bitcoin. CEO Michael Saylor has become an ardent supporter of the cryptocurrency and is literally betting the company's future on its value, and that's a risky bet. Today, the move isn't looking very good, but overall, Saylor's investments are profitable. Wherever Bitcoin goes in the next few months and years, MicroStrategy will follow.
