MicroStrategy, the business intelligence firm led by founder and executive chairman Michael Saylor, is riding high on a surge in Bitcoin prices, with the company’s stock soaring more than sixfold in 2024. The firm, which has aggressively invested in Bitcoin since 2020, now holds over $36 billion in the cryptocurrency, making its stock a popular way for investors to gain exposure to digital assets.
While Bitcoin prices have jumped more than 30% since the US election, MicroStrategy’s market value has outpaced even the digital currency. With a market capitalization of $91 billion, the company is currently trading at more than double the value of its Bitcoin holdings, attracting investors eager to bet on the future of cryptocurrency under President-elect Donald Trump. As of recent trading, Bitcoin hovers around $94,000, after briefly nearing $100,000.
“We found a way to outperform Bitcoin,” Saylor explained. “The way we outperform Bitcoin is by leveraging it.” The firm has committed to a bold strategy of leveraging borrowed funds to acquire more Bitcoin, announcing plans to raise $42 billion in capital over three years through stock and bond offerings. Despite the volatility in cryptocurrency markets, MicroStrategy remains resolute in its approach, with $4.3 billion in convertible debt as of late October.
However, Saylor’s Bitcoin-maximalist strategy has drawn both praise and skepticism. While it has paid off so far, concerns linger about the long-term sustainability of this high-risk approach. In 2022, during the crypto market crash triggered by the collapse of Sam Bankman-Fried’s FTX exchange, MicroStrategy faced significant losses as Bitcoin prices plummeted below $16,000. This forced Saylor to step down as CEO, a position he had held since founding the company in 1989.
Andrew Left, a well-known short seller, voiced concerns about the company’s future. “This stock has become detached from reality,” said Left, who initially supported MicroStrategy’s Bitcoin purchases but has now bet against the company’s stock. Some analysts warn that the company’s stock surge may be driven more by speculative euphoria than solid fundamentals. David Trainer, founder of New Constructs, criticized MicroStrategy’s business model, noting that the company has posted net losses for several consecutive quarters. “If you like Bitcoin, go buy Bitcoin. But don’t invest in a company that’s losing money and also buying Bitcoin, because then you’ve sort of doubled your risk,” he cautioned.
Despite these warnings, some investors are attracted to MicroStrategy’s volatility, which amplifies gains in the short term. Garrett Shirey, a barber from Alabama, made a quick profit trading MicroStrategy stock in his retirement account. “MicroStrategy went up 8% in the last 24 hours, but Bitcoin didn’t,” he said, highlighting the potential for rapid returns.
Saylor’s bet on Bitcoin came at a critical juncture for MicroStrategy, which was struggling to compete with tech giants like Microsoft. Faced with stagnant growth, Saylor took a risk in 2020, embracing Bitcoin as a way to rejuvenate the company and deliver value to shareholders. “It was either a fast death or a slow death, or take a risk, do something out of the box,” he explained.
For some traders, MicroStrategy’s stock is now a compelling alternative to direct Bitcoin investment. Funds like the Defiance Daily Target 2x Long MSTR ETF have attracted significant assets, with investors hoping to double their returns by leveraging the company’s stock price movements. For Chase Furey, a 25-year-old trader, shifting to MicroStrategy-related ETFs has been a lucrative strategy. His portfolio has grown from $112,000 to $400,000, with some of his parents’ retirement funds also enjoying substantial gains.
However, even Bitcoin bulls like Mike Novogratz, CEO of Galaxy Digital, have expressed concerns about the risks associated with leveraged bets on companies like MicroStrategy. “The crypto community is levered to the gills right now, so there will be a correction,” he warned, suggesting a potential 20% decline in Bitcoin’s price following its recent peak.
Conclusion: The Volatile Path Ahead for MicroStrategy and Bitcoin Investors
MicroStrategy’s meteoric rise reflects the growing speculation surrounding Bitcoin and the broader cryptocurrency market. While the company’s strategy has paid off thus far, its heavy reliance on leverage and the volatile nature of digital assets leave many questioning whether this success can be sustained. As investors flock to the stock, the risks of a correction or market backlash remain ever-present, reminding all involved of the unpredictable nature of the crypto economy.
