MicroStrategy, one of the world’s largest providers of cloud-based business intelligence solutions, achieved notoriety in the crypto space this year after converting a large chunk of its financial reserves to Bitcoin. New details have now emerged about the company’s decision and how it managed to pull it off.
A Careful Trading Process
Coinbase has now announced that it was behind MicroStrategy’s purchase of $425 million in Bitcoin earlier this year. In a blog post, Brett Tejpaul, head of institutional sales at Coinbase, explained that the move was in line with the company’s desire to attract institutional investment.
Tejpaul particularly praised the company’s over-the-counter (OTC) trading desk and advanced execution capabilities, explaining that they helped Coinbase make such a high-volume purchase without moving the market or spooking investors.
The blog post also highlighted tools like smart order routing and trading algorithms as reasons why MicroStrategy chose to partner with the San Francisco-based exchange.
A case study on MicroStrategy trades showed that Coinbase had executed several pre-trade calls with the firm before the purchase. This allowed them to understand optimal trade execution and develop an air-tight trading plan.
Following the successful test, the exchange began executing larger trades. After completing a $250 million trade over the first five days, MicroStrategy added an additional $175 million to its Bitcoin portfolio.
The Bitcoin investment appears to have paid off significantly. The Virginia-based firm reported its $175 million additional purchase to the Securities and Exchange Commission (SEC) on September 15. At the time, Bitcoin traded at $10,680. With Bitcoin holding firm above $18,500 at press time, MicroStrategy has managed to turn $425 million into $736.1 million at least.
Catching the Big Fish
In his blog post, Tejpaul added that Coinbase is open to helping other institutions get into the crypto space. He explained:
“We hope that this is an inflection point for the cryptoeconomy and look forward to helping more corporate companies and institutions looking to diversify their capital allocation strategies with crypto. Working on an agency basis, clients can be sure our interests are aligned as we seek to find the best prices available in the market.”
The exchange has been doing a great deal of work to improve its offering and compatibility with institutional investment. Besides providing custody and brokerage service, it can now add the successful onboarding of MicroStrategy to its list of wins.
Coinbase is also putting itself in a position to capture a fledgling market. Data from Bitcoin treasuries shows that public companies currently hold $14.4 billion in Bitcoin. Commentators have also pointed to a possible increase in this metric as Bitcoin stabilizes and continues to grow.
With institutional investors showing a propensity for large Bitcoin purchases, Coinbase could benefit substantially in fees from its operations.