• MicroStrategy’s stock skyrocketed 337% in 2023, mainly because of its massive Bitcoin holdings, making it a standout in the market.

• Unlike traditional tech companies, MicroStrategy relies heavily on Bitcoin, with 90% of its value tied to the cryptocurrency.

MicroStrategy, a company once known primarily for its business intelligence software, has recently achieved an astounding 337% surge in its stock value in 2023. This meteoric rise has placed it among the top gainers in the U.S. market for companies valued at $5 billion or more, outpacing giants like Nvidia and Meta. What sets MicroStrategy apart from its tech peers is its unique investment strategy: Bitcoin.

Unlike most tech companies, which boost their stock prices by relying on traditional metrics such as revenue growth and market share, MicroStrategy’s appeal to investors stems almost entirely from its substantial Bitcoin holdings. The company embarked on this unconventional path in mid-2020, making its first investments in the cryptocurrency. Since then, MicroStrategy has acquired a staggering 174,530 Bitcoins, currently valued at approximately $7.65 billion.

The Dominance of Bitcoin

MicroStrategy’s market capitalization, now $8.5 billion, directly ties 90% of its value to its Bitcoin holdings, exemplifying its reliance on Bitcoin. Consequently, the stock’s performance closely mirrors the volatility of Bitcoin itself. In 2022, when Bitcoin’s value plummeted by 64%, MicroStrategy’s stock price followed suit with a 74% drop. Despite the substantial gains this year, MicroStrategy shares remain below their 2021 peak, reached during the height of the cryptocurrency frenzy.

While several companies have ventured into alternative investments, MicroStrategy is a unique entity, increasingly perceived as a Bitcoin holding company. Analysts view Michael Saylor’s vision as a pioneering move to leverage the company’s substantial cash reserves and capitalize on Bitcoin’s potential. Saylor’s strategic foresight has paid off handsomely, and MicroStrategy continues to tread this path with conviction.

Currently, Bitcoin futures ETFs exist but are based on contracts to buy and sell Bitcoin rather than owning the cryptocurrency itself. Investors can also consider the Grayscale Bitcoin Trust, a fund that holds Bitcoin and trades over the counter. The recent legal victory of Grayscale against the SEC has raised expectations of more ETFs entering the market, with asset management giants like BlackRock, Fidelity, and Invesco expressing interest.

Analysts like Joseph Vafi believe that the potential approval of Bitcoin ETFs could drive higher prices. This development may not significantly threaten MicroStrategy’s position but rather enhance its value proposition.

MicroStrategy’s Diverse Potential

MicroStrategy’s appeal extends beyond a simple bet on Bitcoin’s direction. Unlike ETFs, MicroStrategy has the flexibility to utilize its Bitcoin holdings in various ways, including using them as collateral to create additional business opportunities.

The company sees promise in the maturing regulatory environment around Bitcoin and the increasing institutional demand, anticipating a positive impact on Bitcoin’s adoption among mainstream investors and corporations. Additionally, MicroStrategy’s software business remains a robust cash flow generator, enabling it to continue expanding its Bitcoin holdings.

A Tough Year for Short Sellers

While MicroStrategy has been on a remarkable journey, short sellers have faced a challenging year. Crypto stock short sellers have incurred substantial losses in 2023, with MicroStrategy being one of the companies contributing to their struggles. Approximately 23% of MicroStrategy’s publicly available shares are shorted, a figure second only to Bitcoin miner Marathon Digital among crypto companies, far surpassing the U.S. stock market’s average of 5%.

Despite the skeptics, MicroStrategy continues its relentless pursuit of Bitcoin investments. In November alone, the company purchased approximately 16,130 Bitcoins for over $593 million, demonstrating its unwavering commitment to its unique investment strategy.