MicroStrategy’s big investment in Bitcoin has yielded considerable gains for its investors, as the company’s stock has experienced a remarkable 308% increase over the course of this year.
MicroStrategy has come out as one of the biggest gainers in the US among companies valued at $5 billion or more in terms of share prices.
According to a report by CNBC on Dec. 26, MicroStrategy’s allure to investors stems almost exclusively from its Bitcoin (BTC) holdings, unlike its technology counterparts, which depend on revenue growth and market share.
The company’s stock has soared by 308% this year, surpassing Bitcoin’s 156% gain. As of Dec. 27, MicroStrategy’s stock (MSTR) traded at $603.89 in after-hours, according to Google Finance.
Bitcoin is the cornerstone of MicroStrategy’s success. The company started buying BTC in 2020 amid global economic uncertainty to hedge its balance sheet against rising inflation.
Since then, the leading cryptocurrency has increased in value severalfold, peaking at $69,000 during the height of crypto’s bull run in 2021 and possibly making its way back to all-time highs on the back of spot Bitcoin ETF optimism.
MicroStrategy currently boasts a BTC war chest that has now accumulated approximately 174,530 BTC, the largest corporate holding of Bitcoin, valued at around $7.36 billion.
According to stock analyst Joseph Vafi, Bitcoin plays a pivotal role in the firm’s performance, noting that while MicroStrategy’s other business aspects are healthy and leading in their sector, Bitcoin remains the central focus.
MicroStrategy’s market capitalization stands at $8.5 billion, with 86% of its value directly tied to its Bitcoin holdings. Michael Saylor, the former CEO, pioneered a method for investors to gain exposure to Bitcoin without having to buy it directly.
Vafi lauded Saylor’s vision, noting his strategic use of the company’s robust balance sheet to embark on this Bitcoin treasury experiment, which has proved successful.
However, the potential approval of spot Bitcoin ETFs in January could introduce competition to MicroStrategy’s model. These ETFs, filed by Wall Street titans such as BlackRock, Grayscale, and Hashdex, are expected to draw billions of dollars into the cryptocurrency sector, as per experts.
Despite this potential competition, Vafi views the ETFs positively, anticipating they will drive Bitcoin’s price higher, benefiting MicroStrategy.
Saylor recently commented that the approval of a spot Bitcoin ETF could be the most significant Wall Street development in 30 years.
Furthermore, MicroStrategy shows no signs of reducing its Bitcoin accumulation. In November, the firm made its largest purchase since 2021, acquiring an additional 16,130 BTC for approximately $593 million.