Bitcoin Made Michael Saylor A Crypto Star. But He, And Microstrategy, Fell To Its Brutal Volatility

Bitcoin, once a trillion dollar asset, has tumbled since the beginning of the year and its price even ducked below $20,000 in June. And the brutal realities of the crypto market have finally caught up with Microstrategy's founder and well-known Bitcoin bull Michael Saylor.

Microstrategy said Tuesday that Saylor, one of the crypto billionaires who enjoyed a kind of demigod status among the crypto investor community, will step down as its CEO and will become the executive chairman. Phong Le, MicroStrategy's current president, will replace Saylor as the new CEO.

While MicroStrategy sells analytics and intelligence software, Saylor made the decision to buy Bitcoin and hold it in the corporate treasury in 2020. That one decision had cost the firm more than $1 billion, leading to Saylor getting "kicked upstairs."

Under Saylor, Microstrategy had gone about accumulating BTC with a laser focus — almost disregarding the market direction. It now holds around 129,699 BTC at an average price of $30,650 per BTC, as per BuyBitcoinWorldWide. In other words, Microstrategy has invested a whopping $3.98 billion in the world's biggest cryptocurrency.

To compare, the company's market cap was 3.68 billion, based on Wednesday's close of the stock on Nasdaq.

Its first BTC purchase was made around two years ago on Aug. 11, 2020, when MicroStrategy bought 21,454 Bitcoins for $250 million. It accumulated 70,470 BTC at a price of $1.125 billion throughout 2020, amid the global pandemic.

The first purchase of 2021 was made on Jan. 22 when the price of Bitcoin was around $33,000. While MicroStrategy continued to buy Bitcoin throughout last year, the biggest purchase was 19,452 BTC for $1.026 billion on Feb. 24.

Saylor gradually turned extremely bullish on Bitcoin and purchased the coin for $59,339 in May of that year.

MicroStrategy bought 7,002 BTC on Nov. 28, 2021, when Bitcoin was above $57,000. All bets were off when its wholly owned unit MacroStrategy borrowed $205 million from Silvergate Bank to buy the leading cryptocurrency.

Saylor tweeted that the loan required $410 million as collateral and the company had enough BTC to meet the requirements. He said if Bitcoin fell below $3,562, MicroStrategy will offer some other collateral but still won't sell its BTC holding.

But in Q2 2022 MicroStrategy recorded a loss of $918.1 million, 99% of which, or $917.8 million, was due to the huge hole created on its balance sheet by Bitcoin's recent crash.

It was time for Saylor to go.

In hindsight, Saylor's fall was not unexpected. Regulators around the world have warned for long that the extreme volatility in crypto prices made them highly risky assets, despite crypto billionaires trying to regularly pump prices. Microstrategy's troubles show even big companies with star CEOs are not immune to punishment from such volatility.

Saylor, on Thursday, posted on Twitter a video of his interview with Fox Business' Charles Payne where he doubled down on his bullish view of Bitcoin.

In the video, Saylor said Mircrostrategy's stock is up by 123% and Bitcoin is up by 94% since the software firm decided to incorporate BTC into its treasury, noting that "we have outperformed every major asset class, all big tech stocks, all enterprise software stocks."

The billionaire also pointed out that MicroStrategy's enterprise value is up from $666 million in 2020 to "5 and a half or more billion dollars," marking a growth of 730% in enterprise value. He said, "no strategy could've done that other than Bitcoin strategy."

Saylor said he remains the principal and controlling shareholder of MicroStrategy, adding that "it's my idea and I want to do this."

Microstrategy said Saylor will "provide oversight of the company’s Bitcoin acquisition strategy" as head of the board’s investments committee." The billionaire took to Twitter to confirm that he will "focus more on Bitcoin."

Twitter draws parallels with Jack Dorsey

The Twitter community was quick to react to Saylor's departure as Microstrategy's CEO as well as his new role.

It highlighted two CNBC articles, one about former Twitter CEO Jack Dorsey's exit from the social networking company and the other on Saylor's transition to a new role in MicroStrategy.

Dorsey, like Saylor, is a known Bitcoin maximalist.

The striking similarity between the two billionaires' career moves may sound amazing, but both seemed to have gone overboard with the idea of Bitcoin adoption.

A member of the crypto community even called Saylor a "delusional optimist with a literal Hold On for Dear Life mindset."

Peter Schiff, chief economist and global strategist at Europac.com and one of the biggest critics of Saylor's Bitcoin adoption, sarcastically commented that "listening to Saylor claim that a billion dollar loss on Bitcoin is a home run for shareholders is like listening to Democrats claiming that two consecutive quarters of declining GDP is not a #recession, but a strong economy that is continuing to grow."

The Wall Street Journal tweeted a link to its article about Saylor, noting, "If you ask Michael Saylor why he bet the future of MicroStrategy on Bitcoin, he'll tell you he didn't have a choice. The decision backfired, badly. On Tuesday, the tech company announced he would step down as CEO amid mounting losses tied to Bitcoin."

The WSJ noted that MicroStrategy was an ill-performing stock that failed to be at par with other tech giants. However, its decision to hold Bitcoin had added to the stock's troubles. The stock is down 43.81% so far this year.

Crypto stocks like those of Coinbase move in tandem with the price of Bitcoin. This correlation, analysts have said, is the Achilles heel of Microstrategy stock. "MicroStrategy is not an ideal investment for most traders," Oanda analyst Edward Moya told WSJ.

BTC sending positive signals

After starting 2021 at $29,374, BTC rose to $63,500 and then dropped to $29,800 in July. It then touched an all-time high of $68,800 in November, kicking off a market frenzy. The current price of BTC is 66% lower than that all-time high. The crypto was trading at $23,078 at 2.55 a.m. ET on Thursday, per data from Coinmarketcap, down more than 65% from its all-time high.

On-chain data from Glassnode suggests that the amount of Bitcoin "HODLed or Lost Coins just reached a 20-month high of 7,399,153.535 BTC."

The on-chain data is sending positive signals amid the general gloom, as the "number of addresses in loss (7-day moving average) just reached a 1-month low of 16,569,638.512," while the "number of addresses in profit just reached a 1-month high of 26,062,502.655," according to Glassnode.

The "number of addresses holding 1+ Bitcoin reached an all-time high of 891,971," breaking the previous high of 891,970 observed on Aug. 2.