MicroStrategy: A High-Volatility ‘Lever for the Believer’ in Bitcoin

Founded as an enterprise software company in 1989, MicroStrategy’s name has become synonymous with Bitcoin. In 2020, it became the first major publicly traded

(Bloomberg) -- MicroStrategy Inc. shares rose after the enterprise software company said it purchased an additional 229 Bitcoin, bringing its total cryptocurrency holdings to about 471,107 units.

The company’s Bitcoin yield, which represents the period-to-period change in the ratio of its Bitcoin holdings to its total assumed shares outstanding, was 2.9% for the period from Jan. 1 to Jan. 26, according to a filing Monday. If the company’s number of Bitcoin held increases faster than the share count, MicroStrategy achieves “positive Bitcoin yield,” which signals to shareholders that the acquisition of the crypto is accretive rather than dilutive.

MicroStrategy shares advanced as much as 2.1% in premarket trading Monday after closing Friday at $223.63. Shares slipped last week when President Donald拡大する画像を開く

MicroStrategy is a ‘high-volatility stock,’ analysts say, rising and falling with the price of Bitcoin. Photographer: Michael Nagle/Bloomberg , despite promising a strategic Bitcoin reserve and less stringent regulations on the campaign trail.

Some details emerged Thursday in the form of an executive order, though the mandate fell short of establishing any sort of reserve.

Bitcoin, the world’s largest digital currency by market value, gained 0.8% over the past 24 hours to $101,969 on Wednesday, according to CoinDesk data. As of Wednesday, there were 19.28 million Bitcoins in circulation.

At the current mining rate, it could take over a century for that number to reach the maximum 21 million. However, Mizuho analysts expect the scarcity to act as a catalyst, boosting value appreciation in the form of a 25% to 30% Bitcoin price compound annual growth rate through 2027, “albeit with extreme volatility.”

Bitcoin has “no intrinsic value” on its own, though growing enthusiasm around the finite number of Bitcoins could nudge the price higher, the analysts noted. They also pointed out that MicroStrategy, which is set apart from Bitcoin exchange-traded funds and the cryptocurrency itself, is able to access debt and equity capital markets to raise money for incremental Bitcoin purchases.

Mizuho analysts expect the company to continue snapping up more digital currency, coupled with anticipated Bitcoin price appreciation, to give MicroStrategy a 75% premium to the underlying value of its Bitcoin holdings. This premium allows the company to grow its Bitcoin holdings at a faster rate than its share dilution from capital markets activities.