MicroStrategy, the world's largest business intelligence company, spends $250 million to buy Bitcoin

MicroStrategy (NASDAQ: MSTR), the world’s largest business intelligence trading company, has officially adopted Bitcoin (BTC) as its primary reserve asset.

The move is a novel one for a publicly traded company. While many companies put surplus capital into bonds and other investments as part of their money management strategies, such a large bet on Bitcoin is almost unheard of.

“Investing in cryptocurrencies not only provides a reasonable hedge against inflation, but also offers the prospect of earning higher rates of return than other investments,” the company said in a statement.

Founded in 1989, MicroStrategy has a market value of approximately $1.2 billion and made a profit of $34 million in 2019. Its customers reportedly include large retailers such as PepsiCo and Adidas, while IBM and Oracle are its competitors.

MicroStrategy’s decision to pump $250 million into Bitcoin may be more than just a capital allocation strategy. Barry Silbert, founder of cryptocurrency group DCG, noted on Twitter that the move could help tie MicroStrategy’s valuation to Bitcoin.

MicroStrategy isn’t the only company to have investors align its valuation with bitcoin’s market performance. Online retailer Overstock has also invested heavily in cryptocurrencies, a strategy that may have boosted its stock price as its core business slumped.

The strategy could work if bitcoin prices, which have rallied in recent months, continue to rise. The cryptocurrency rose to around $12,000 in August after plunging for much of 2019.

Many cryptocurrency promoters believe the price surge is linked to the massive amounts of money that central banks have printed in recent months as countries try to stave off an economic crisis sparked by the pandemic. Unlike national currencies, Bitcoin has a limited supply of 21 million, leading Silbert and others to argue it can act as a hedge against inflation, just like gold.

MicroStrategy disclosed its purchase of bitcoin in an SEC filing this week. But Tuesday’s press release did not disclose how or where MicroStrategy acquired the bitcoin.