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US cryptocurrency platform Coinbase facilitated MicroStrategy’s $ 425 million bitcoin purchase earlier this year, the exchange said.
In an announcement Tuesday, Coinbase revealed that MicroStrategy’s initial $ 250 million investment, which took place over a five-day period in August, came through Coinbase Prime, the crypto-brokerage arm of the exchange formed after the acquisition of Tagomi in May.
This was followed in September by an additional $ 175 million investment by the Virginia-based business intelligence firm, bringing MicroStrategy’s total investment to $ 425 million in bitcoin. MicroStrategy became the first publicly traded company to acquire a large chunk of bitcoin to hold on its balance sheet as a primary treasury reserve asset.
In retrospect, data on the chain suggests that Coinbase was transacting with a large customer in the months leading up to MicroStrategy’s August announcement. A series of large amounts of bitcoins – nearly 80,000 in total – started coming out of Coinbase Pro’s stock starting in the middle of the year and ending in the fall. “Those outflows went to Coinbase Custody wallets (interoperated with over-the-counter wallets), not exchange wallets,” explained Ki Young Ju, CEO of analytics firm CryptoQuant, adding that Coinbase typically uses 8,000 BTC to create a portfolio of initial custody and a minimum deposit of $ 10 million.
Michael Saylor, CEO of MicroStrategy, did not respond to CoinDesk’s request for comment at press time. Coinbase’s announcement quoted him from a previous MicroStrategy press release saying investing in bitcoin is part of the company’s “new allocation strategy”. The strategy aims to maximize long-term shareholder value while reflecting the use of cryptocurrency as a store of value with a greater “potential for appreciation than holding cash.”
In Tuesday’s announcement, Coinbase outlined three reasons MicroStrategy chose the San Francisco-based exchange: the company’s intelligent order routing, trading algorithms, and white glove service. Coinbase also said it was involved in several pre-trade calls with the company during the onboarding process and was asked to conduct a small “test trade”.
The test trade evaluated data collected by Coinbase and was analyzed by the exchange’s OTC and Coverage teams. When an optimal pace was decided and successfully executed to minimize market impact, Coinbase received the green light from MicroStrategy to proceed with the “largest investment”.
After the test, Coinbase executed trades in real time using the time-weighted average price algorithm, a strategy that takes into account the average price of an asset over a specified time period to minimize the impact on the market. .
“Our system takes a single large order and splits it into many small chunks that run across multiple trading venues,” Coinbase said via email. “The trading team has reached an average execution price below the price at which the purchase started.”
Armstrong’s exchange can now claim bragging rights in the market as the one that helped a publicly traded company take a nine-figure leap of faith on bitcoin as a reserve asset.
UPDATE (December 1st, 13:30 UTC): Changed the title and fourth paragraph to clarify that the Michael Saylor quote included in the Coinbase announcement was from an old MicroStrategy press release.
UPDATE (December 1st, 14:17 UTC): Added chart and comments from CryptoQuant CEO Ki Young Ju.
