🪙 Big on bitcoin

What’s going on here?

The biggest corporate holder of bitcoin – MicroStrategy – has just raised $3 billion to add to its huge cryptocurrency stash.

What does this mean?

MicroStrategy is a software company, but its stock has long been considered more of a bitcoin play. In essence, it's a tiny company with a massive pile of bitcoin. And the wild demand it saw in its latest fundraising bid shows investors are amped to back its unconventional strategy. See, this latest funding round is part of MicroStrategy’s new plan to raise $42 billion in the next three years to plow into bitcoin. Already, the company’s well on its way: it owns 331,000 bitcoin – worth around $32 billion.

Why should I care?

Zooming in: Playing it a different way.

If you want to get involved with bitcoin, this stock might not be the best way to do it. That’s because, in an ideal world, you’d buy shares when they’re undervalued. And right now, MicroStrategy’s stock-market value is around $87 billion – well above the rough value of its assets – i.e. its $32 billion in bitcoin. Needless to say, paying way above the stock’s fair value is generally not a good money-making tactic. And perhaps more worryingly, if bitcoin falls, MicroStrategy’s share price could fall even more.

For you personally: Not impossible, but a stretch.

If bitcoin keeps moving up, MicroStrategy’s holdings will increase in value and could catch up to the firm’s market capitalization. That said, if you do the math, the rough estimate is that bitcoin would have to triple to reach MicroStrategy’s market value. So investing in a spot bitcoin exchange-traded fund is likely a safer bet. Or, if you’re an experienced investor, you could check out the new options on Blackrock’s iShare Bitcoin Trust ETF – they began trading this week. Jon’s got the lowdown on how you might play them here.

What’s going on here?

Europe’s business activity saw a sharper-than-expected slowdown this month – pointing to the possibility that the overall economy could shrink this quarter.

What does this mean?

The eurozone’s purchasing managers’ index (PMI) is essentially a report card, showing how companies across Europe are doing. And, well, this one was far from A+ work: activity in the region dropped to a ten-month low of 48.1 – below the flat 50 level that separates the good grades (growth) from the bad (declines). In fact, there were not a lot of bright points to be seen anywhere in the update: manufacturing sank deeper into contraction territory with a reading of 45.2, and the services sector ended two months of expansion and slipped to 49.2. The data is just the latest worry for the bloc, which has been hobbled by rising geopolitical tensions and China’s continuing economic doldrums.

Why should I care?

Zooming in: Glass half-full.

Taken together, the eurozone ranks as the third-biggest economy in the world – tucked in behind the US and China. So its woes tend to travel beyond borders. Luckily, there’s a slim silver lining to the latest gloomy data: the slowdown in business activity does boost the likelihood that the European Central Bank might slash interest rates by as much as half a percentage point when it meets next month. That would infuse the region with the kind of stimulus that comes with lower borrowing costs.

Zooming out: Rough neighborhood.

The UK isn’t included in those stats, but it’s in a very similar boat. Britain’s business activity also crumbled like a stale crumpet in November – dipping just a whisker below the 50 mark for the first time in a year. Stock valuations across Europe and the UK look cheap now, but they could have a tougher time next year if the US follows through with plans to impose stiff new tariffs.