Coinbase: This is how we helped MicroStrategy purchase Bitcoin

The U.S. publicly traded company MicroStrategy is planning to buy a large amount of Bitcoin. How can they avoid causing market fluctuations and buy at an ideal price? The exchange Coinbase recently shared how they helped MicroStrategy buy Bitcoin and save millions of dollars.

Coinbase Completes $250 Million Purchase in Five Days

Coinbase stated that before the trading began, they first discussed the trading goals with MicroStrategy and evaluated and analyzed global liquidity, as well as determined the best buying strategies that would not impact the price. They then formulated a trading plan.

The first step involved conducting small-scale test trades to assess the effectiveness of the trading plan. After MicroStrategy reviewed the results, the large trades were executed.

Subsequently, the large trades commenced, using a Time Weighted Average Price algorithm over a period of five days, while closely coordinating with MicroStrategy to adjust the preferred buying times for their clients. Coinbase held meetings with MicroStrategy every morning at 9 a.m. to discuss the execution, and reviewed the progress in the afternoon at 2 p.m. and 9 p.m.

MicroStrategy later purchased an additional $175 million worth of Bitcoin, bringing the total investment to $425 million, including all fees.

Coinbase's Self-Identified Advantages

Coinbase mentioned three advantages they possess: smart order routing, trading algorithms, and white glove service.

Smart Order Routing refers to Coinbase's ability to find the best prices across exchanges and market makers worldwide.

Regarding Trading Algorithms, Coinbase emphasized that in the case of MicroStrategy, their algorithms could split orders into nearly 200,000 trades, with the actual traded order amount averaging less than 0.3 BTC, ensuring that large trades do not impact market prices. They also avoid detection by other traders through random trade sizes and order times.

Michael Saylor, CEO of MicroStrategy, mentioned that they had traded continuously for 72 hours, executing tens of thousands of trades in a short period.

To acquire 16,796 BTC (disclosed 9/14/20), we traded continuously 74 hours, executing 88,617 trades ~0.19 BTC each 3 seconds. ~$39,414 in BTC per minute, but at all times we were ready to purchase $30-50 million in a few seconds if we got lucky with a 1-2% downward spike.

— Michael Saylor⚡️ (@saylor) September 18, 2020

White Glove Service - Coinbase stated that, based on the principle of avoiding conflicts of interest, the Bitcoin purchased for MicroStrategy did not come from Coinbase's inventory.

According to Coinbase, their services saved MicroStrategy a total of $4.25 million.

Recognizing Institutional Trading Business

Coinbase's business of buying coins for institutions provided an excellent advertising opportunity for MicroStrategy. Recently, we have seen phenomena such as Singapore's DBS Bank launching a digital asset exchange for institutional services, American MassMutual purchasing $100 million in Bitcoin, and BitPay and Paxos applying for a national trust bank charter from the OCC to provide trading and custody services. It can be expected that institutional investors' interest in Bitcoin will become increasingly easier to satisfy.