MicroStrategy is bad at timing the market

In case you missed it: MicroStrategy just bought another 7,420 bitcoin for $458 million, bringing the company's total holdings to 252,200 bitcoin worth approximately $9.9 billion, with an average cost of $39,266 per coin.

While bitcoin has smoked the stock market since MicroStrategy made its first bitcoin investment in August 2020, gaining 430% vs. an 82% gain for the Nasdaq 100 index (a 5.25x outperformance), the performance of MicroStrategy's holdings has been less impressive, only gaining a cumulative ~62%.

The reason for MicroStrategy's relative underperformance: inopportune investment timing. Real-time bitcoin dashboard Bitbo has tracked all of MicroStrategy's bitcoin purchases, showing the cash spent and number of coins purchased in each investment, and we can use those values to calculate the company's average price paid per coin each time.

Since MicroStrategy made its first bitcoin investment, there have been three multi-month periods in which bitcoin traded below $40,000: August 2020 through early February 2021, May 2021 through July 2021, and May 2022 through November 2023.

MicroStrategy only bought $2.7 billion of its $9.9 billion in bitcoin during these windows, which are highlighted below in red:

The other ~$7 billion, or more than 70%, of its bitcoin purchases occurred near market highs. This is despite bitcoin trading below $40,000 in 59% of days since MSTR made its first bitcoin investment.

MicroStrategy didn't respond to a request for comment.

While MicroStrategy founder Michael Saylor has long been one of bitcoin's biggest proponents, saying it was "absolutely" a buying opportunity when the cryptocurrency's price fell below $20,000 in 2022, even he was gun-shy when prices were hovering at multi-year lows.

Even for the biggest bulls, investing during bear markets is easier said than done.