U.S. cryptocurrency platform Coinbase facilitated MicroStrategy’s $425 million bitcoin buy earlier this year.
In an announcement Tuesday, both companies revealed that MicroStrategy’s initial $250 million investment, which occurred over a five-day period in August, came via Coinbase Prime, the exchange’s crypto brokerage arm formed following the acquisition of Tagomi in May.
That was followed up in September by a further $175 million investment from 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.
Michael Saylor, MicroStrategy’s CEO, said via the announcement that investing in bitcoin is part of the firm’s “new allocation strategy.” The strategy aims to maximize long-term value for shareholders while reflecting the cryptocurrency’s use as a store of value with greater “appreciation potential than holding cash.”
In Tuesday’s announcement, Coinbase outlined three reasons why MicroStrategy chose the San Francisco-based exchange: the firm’s smart order routing, trading algorithms and white-glove service. Coinbase also said it had been involved in several pre-trade calls with the firm during the onboarding process and was asked to conduct a small “test trade.”
The test trade assessed data gathered from Coinbase and was analyzed by the exchange’s OTC and Coverage teams. When an optimal pace to minimize market impact was decided upon and successfully executed, Coinbase received a green light from MicroStrategy to proceed with the “larger investment.”
Following the test, Coinbase executed real-time trades using the time-weighted average price algorithm – a strategy that takes into account the average price of an asset over a specified time to minimize market impact.
“Our system takes a single large order and breaks it into many small pieces that are executed across multiple trading venues,” Coinbase said via email. “The trading team achieved an average execution price that was less than the price at which buying started.”
Armstrong’s exchange can now claim bragging rights in the market as the one that helped a publicly listed company take a nine-figure leap of faith on bitcoin as a reserve asset.