MicroStrategy Inc. (MSTR) stock has once again hit a new 52-week high of $379.99 this morning, just a day after Bitcoin (BTC) touched an all-time high of $28,365. For those who do not know, the Virginia-based business development company owns a lot of Bitcoin. Therefore, any hike in bitcoin price would likely have a positive impact on the stock price of MSTR.
The company has recently bought 29,646 Bitcoins for $650 million, translating to an average price of about $21,925 per BTC.
MicroStrategy CEO Michael Saylor stated in a tweet last week that the company now holds about 70,470 Bitcoins that were acquired for $1.125 billion. It is now the fifth-biggest individual holder of the largest cryptocurrency, and even ahead of the U.S. government, which reportedly holds 69,420 Bitcoins.
The company started its Bitcoin journey this summer with a purchase of 21,000 Bitcoins for $250 million, as a part of its strategy to adopt BTC as its primary reserve currency. The company’s market value skyrocketed from nearly $1.4 billion in August to approx. $3.3 billion in December. The surge was mainly driven by a significant increase in the price of Bitcoin, especially over the past two months.
There have been mixed views about the aggressive Bitcoin purchase policy of MicroStrategy. Earlier this month, Citigroup downgraded MSTR stock after the company revealed its plans to buy more Bitcoin by offering $400 million convertible senior notes. Citigroup analyst Tyler Radke decreased his ratings from “Neutral” to “Sell,” saying the recent increase in the stock’s price is overextended. Radke added that the stock may be overvalued considering the recent insider selling.
We came across a Reddit user who thinks investors should short MSTR on valuation. The post said before the bitcoin purchase this summer MSTR was trading at a valuation of $1.3 billion. Today, it is trading at a valuation of $2.6 billion (this figure increased to $3.45 billion as of today). The Reddit user says that MSTR’s bitcoin profits are less than the increase in MSTR’s market value. Investors are inflating the market value of MSTR because they don’t know of any easy and safe ways to invest in Bitcoin. Since MSTR’s underlying software business isn’t thriving, MSTR is a short candidate.
On the other hand, Saylor believes that Bitcoin is the most widely adopted digital currency in the world. He also thinks that BTC is a lucrative investment with massive profit gains as compared to holding cash.