Microstrategy’s Bitcoin Portfolio Value Soars to $13.2 Billion, Marking a 116% Gain

March 9, 2024 Bitcoin.com

Microstrategy Augments Bitcoin Portfolio by 3,000, Reaching 193,000 BTC Worth $9.88 Billion

February 26, 2024 Bitcoin.com

Microstrategy’s Bitcoin Investment Flourishes, Valued at Nearly $10 Billion

February 16, 2024 Bitcoin.com

What are the 3 assets most correlated with Bitcoin?

August 23, 2023 Coin Telegraph

Analysis

Bitcoin price is closely linked to several financial assets but the reasons for correlation with certain precious metals and stocks can be quite different.

The financial media often points out Bitcoin’s (BTC) correlation to big tech. “Bitcoin is trading like a tech stock” is a common narrative alongside BTC's often acute inverse-relationship with the United States dollar.

But are these correlations set in stone, and can they be useful for predicting future price moves? Let's take a closer look at several reports analyzing the relationship between Bitcoin and various asset types.

Bitcoin's historic correlations vary across timeframes

A report published in October 2022 by the Multidisciplinary Digital Publishing Institute arrived at several key conclusions regarding Bitcoin’s correlations with traditional financial assets, including:

The extreme volatility of the Bitcoin market means that long-term correlations are stronger than short-term correlations;
The “positive linkage between Bitcoin and risk assets increases during extreme shocks” such as COVID-19;
Bitcoin can be positively correlated with risk assets and negatively correlated with the US dollar;
Bitcoin can serve as a hedge against the US dollar.

While some of these points can be countered with newer price data over the last 9 to 10 months, such as a major drop in volatility, insight can still be gained from examining them. In addition, other researchers have gone deeper into the relationship of specific assets to Bitcoin during set timeframes.

Crypto-specific stocks

A few crypto-related equities have been more correlated to Bitcoin than any other assets on the market. The 90-day correlation coefficient for BTC/MSTR, BTC/COIN, and BTC/RIOT have all remained near 1 for the last several months. The symbols "BTC/xxxx" indicate the correlation coefficient for each asset as measured against Bitcoin.

For MSTR, the coefficient has fallen no lower than 0.68 since September 2022. The coefficient for RIOT fell to roughly 0.75 in June 2023, while COIN trended near 0 for a time during May and June.

*COIN, ROIT, and MSTR year-to-date chart with 90-day correlation coefficients compared to BTC. Source: TradingView*

All of these stocks have outperformed Bitcoin so far this year while also showing greater volatility. Investors may be using these assets as proxies for Bitcoin, which can't be bought through a brokerage account.

One reason these three stocks are so closely correlated to Bitcoin has to do with the balance sheet of their respective companies. They all have a substantial amount of Bitcoin holdings.

As seen in the table below, MSTR has the most holdings of any public company with 152,333 Bitcoin. COIN comes in 4th place with 10,766 Bitcoin, and RIOT is in 8th place with 7,094 Bitcoin.

*Bitcoin holdings by public companies. Source: CoinGecko*

Precious metals

When it comes to correlation with commodities and precious metals, in particular, silver actually beats gold in mirroring Bitcoin's price moves since 2019.

A November 2022 report by Jordan Doyle and Urav Soni of the CFA Institute entitled “How do cryptocurrencies correlate with traditional asset classes?” shed some light on Bitcoin's most-correlated assets.

*Crypto and Commodities correlation heat map. Source: CFA Institute*

Silver has been the commodity most closely-correlated to Bitcoin from October 2019 and to October 2022 with a correlation coefficient of 0.26, according to the report. Gold’s correlation, by comparison, was just 0.15, perhaps due to silver’s greater volatility.

The report notes:

Silver has the highest correlation, peaking at 0.26 for silver and bitcoin. Bitcoin, the so-called 'digital gold,' exhibits only weak correlation with the precious metal.

Passive and active equity funds and bonds

When speaking of stocks as a whole and their correlation to Bitcoin, looking at an index or ETF would be the most common way to make a comparison. This provides an overview of the asset class in general rather than zeroing in on one specific stock, which may have any number of factors affecting it.

As might be expected, growth funds tend to be more correlated with cryptocurrencies, presumably due to their more speculative nature. Notably:

“Growth funds exhibit a stronger correlation to cryptocurrencies than value funds. The correlation coefficient between small-cap growth funds and bitcoin, for instance, is 0.41, compared to 0.35 for small-cap value funds and bitcoin.”

*Crypto, equity funds, and bonds correlation heat map. Source: CFA Institute*

In other words, crypto markets as a whole are “weakly sensitive to interest rate dynamics” that were at least partially responsible for a broad drawdown in equities throughout 2022.

Finally, Bonds bear little to no relationship with Bitcoin. Passive bond funds showed a correlation of just 0.11, while active bond funds were just two basis points higher at 0.13. All data points are for the timeframe of October 2019-October 2022.

Bitcoin's correlations are not a crystal ball

Due to Bitcoin’s large price swings, all correlations can change at a moment’s notice. Still, the data used here provides an accurate picture of the assets most closely correlated to Bitcoin in the recent past.

It's likely that crypto-specific stocks will continue having a strong correlation due to their Bitcoin holdings, while the correlation with commodities and equity funds could quickly change course going forward.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Top Analyst Predicts Rallies for Coinbase and Three Other Crypto-Proxy Stocks, Updates Outlook on Bitcoin (BTC)

July 26, 2023 The Daily Hodl

MicroStrategy stock MSTR hits 3-month high after CEO’s exit

August 3, 2022 Coin Telegraph

Bitcoin

Poor earnings coupled with overvalued fundamental metrics pose long-term bearish risks for MSTR.

MicroStrategy (MSTR) stock opened higher on Aug. 3 as investors digested the news of its CEO Michael Saylor's exit after a depressive quarterly earnings report.

Microstrategy stock up 142% since May lows

On the daily chart, MSTR's price surged by nearly 14.5% to $324.55 per share, the highest level since May 6.

The stock's intraday gains came as a part of a broader recovery that started on May 12 at $134. Since then, MSTR has grown by 142% versus Nasdaq's 26.81% gains in the same period.

*MSTR daily price chart. Source: TradingView*

Bad Q2, Saylor's resignation

The Aug. 3 MSTR rally came a day after MicroStrategy reported a billion dollar loss in its second quarter (Q2) earnings call. Interestingly, the company's major Bitcoin exposure was a large reason for its poor quarterly performance.

To recap: MicroStrategy is an information technology firm that provides business intelligence, mobile software, and cloud-based services. But one of its primarily corporate strategy is to invest in Bitcoin to hold it long-term.

Unfortunately, holding Bitcoin has cost MicroStrategy an impairment loss of $917.84 million from its 129,698 BTC holdings in Q2, primarily due to the crypto's 50% year-to-date (YTD) price drop. In comparison, MSTR plunged 42% in the same period.

*BTC/USD daily price chart. Source: TradingView*

Furthermore, MicroStrategy's revenue fell 2.6% year-over-year to $122.07 million. The net quarterly losses prompted Saylor—who has strongly backed the Bitcoin investment strategy since August 2020—to quit as the firm's CEO and become an executive chairman.

MSTR responded positively to Saylor's resignation and the appointment of Phong Le, President of MicroStrategy, as his replacement, suggesting that investors are comfortable with the change in leadership.

What's next for MSTR?

MSTR's course for the remainder of 2022 depends largely on Bitcoin's performance, given their consistently positive correlation in recent years. But several metrics are hinting at a correction ahead.

*The weekly correlation coefficient between MSTR and BTC/USD. Source: TradingView*

For instance, MicroStrategy's enterprise value-to-revenue (EV/R) ratio was at 10.76 on Aug. 3, or in "overvalued" territory.

Similarly, MSTR's forward price-to-earnings (P/E) ratio has reached 54.95, more than double the market average of 20-25. In other words, the market expects MicroStrategy to show enormous future earnings growth despite its underperformance in recent quarters.

MicroStrategy also has amassed $2.4 billion in long-term debts with $46.6 million in interest expense. Therefore, the company could find it unable to meet its debt obligations if it continues to suffer losses at the current pace.

*MSTR long-term debt table. Source: S&P Capital IQ*

In other words, MicroStrategy could pledge its nearly $2 billion worth of Bitcoin holdings as collateral or sell them to raise capital.

"Nonetheless, crypto and MSTR bulls may remain invested," noted Juxtaposed Ideas, a Seeking Alpha contributor, in its latest analysis, saying that most are willing to "gamble on Bitcoin's eventual recovery to $40,000" or beyond by 2023 or 2024.

"That would be a positive catalyst for its future stock recovery, returning some much-needed capital to the highly volatile investment."

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

“Don’t Sell Your Bitcoin”: Wood and Saylor Evangelize for Bitcoin in Miami

April 7, 2022 The Crypto Briefing

MicroStrategy’s Bitcoin treasury exceeds cash held by 80% of S&P 500 non-financial companies

September 15, 2021 Coin Telegraph

Alphabet

The Nasdaq-listed company recently announced it added another 5,050 Bitcoin to its coffers for about $242.9 million.

The value of MicroStrategy’s massive Bitcoin (BTC) holdings has surpassed what most S&P 500 companies hold in their cash treasuries.

The Nasdaq-listed enterprise software firm purchased an additional 5,050 Bitcoin for about $242.9 million, raising the value of its 114,042 BTC holdings to nearly $5.3 billion. That comes out to be higher than what 80% of non-financial S&P 500 companies hold in their cash coffers, as per data compiled by Bloomberg.

Cash spending up among corporations

MicroStrategy made buying Bitcoin its official corporate strategy in 2020, with its celebrated CEO, Michael Saylor, calling the move a defense against the U.S. dollar’s potential devaluation. Companies like Tesla and Square later copied the strategy to replace a portion of cash reserves with Bitcoin.

On the other hand, firms with lower risk appetites continued to increase their cash holdings. For instance, in the second quarter, non-financial companies on the S&P 500 boosted their treasuries by 12% from a year ago due to escalating uncertainty caused by the COVID-19 pandemic.

*Cash holdings by non-financial S&P 500 companies in recent quarters. Source: Bloomberg*

Some of those firms — including General Electric, Ford and Boeing — started spending the cash during the ongoing third quarter. For instance, in July, non-financial S&P 500 companies slashed their dollar reserves by $30 billion, or 2%, from a year ago.

At the same time, companies like Amazon and Alphabet (Google’s parent company) were still amassing cash but did little to change overall dollar spending. The total cash stockpiles held by United States corporations fell to $1.52 trillion from $1.55 trillion as they acquired new businesses, bought back shares and increased dividends, Bloomberg data reveals.

Overall, the declining cash holding trend shows that publicly traded companies have become more comfortable with spending their money, led by expectations that the COVID-19 pandemic is almost over.

MSTR gives de facto Bitcoin exposure

Shares of MicroStrategy have surged by almost 359% in the past 12 months, in lockstep with Bitcoin, whose value has surged by 314% in the same period.

Since MSTR appreciation has outpaced Bitcoin’s price growth, some analysts believe that owning shares gives investors easier exposure to the benchmark cryptocurrency market through traditional infrastructure.

*MicroStrategy vs. Bitcoin vs. Nasdaq. Source: Ecoinometrics*

“It’s no secret that MSTR is being valued above the NAV [net asset value] of coins currently owned, and I don’t think investors are buying it for the legacy business upside,” said analyst Kingdom Capital.

“The [clearest] reason I can see is it is one of the few companies with a large market capitalization in the BTC space.”

For instance, the Amplify Transformational Data Sharing ETF, which manages $1.2 billion worth of investments, has gained 6.5% exposure in MSTR after snubbing Grayscale Bitcoin Trust, the leading Bitcoin investment vehicle in the U.S. that trades over-the-counter, which restricts it from receiving capital from certain funds and exchange-traded funds.

Similarly, the Siren Nasdaq NexGen Economy ETF has exposure to MSTR but holds no GBTC.

As a result, MicroStrategy stock and Bitcoin prices are expected to trend in sync, unless more crypto stocks become available. Kingdom Capital weighed in:

“There appear to be better vehicles available to investors for BTC equities, and as they become more widely accessible I expect some ETFs will reduce their MSTR exposure.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, and you should conduct your own research when making a decision.

MicroStrategy stock flips bullish with MSTR a Bitcoin ‘proxy’ for institutional investors

September 2, 2021 Coin Telegraph

Bitcoin

The bullish setup has appeared after MSTR’s increasingly positive correlation with Bitcoin, the flagship cryptocurrency that has surged 339% year-on-year and is now struggling to close above $50,000.

MicroStrategy’s stock, MSTR, is preparing to undergo a massive bull run in the sessions ahead.

So shows a technical setup, dubbed inverse head and shoulder, that has a history of predicting upside moves with an accuracy of 83.44%, as per Samurai Trading Academy’s research. MSTR appears to have formed a similar bullish structure, as shared by independent market analyst Bob Loukas.

*MicroStrategy stock daily chart featuring inverse head and shoulder setup. Source: Bob Loukas, TradingView*

In detail, an inverse head and shoulder (IH&S) is when the price forms three troughs in a row, with the middle one (head) deeper than the other two (shoulders). Meanwhile, all the troughs hang by a price ceiling (neckline).

Traditional chartists consider IH&S as bullish if the price breaks above the neckline with higher volumes. In doing so, the price expects to rise by as much as the distance between the middle trough’s bottom and neckline.

Applying the classic definition to the MSTR chart, the next profit target for the stock appears near $1,478, almost twice the current bid range.

Is MSTR a shortcut to gain Bitcoin exposure?

The upside outlook for MSTR appears as it continues to stay positively correlated to Bitcoin (BTC), a highly volatile cryptocurrency propagated as “digital gold” by its hardcore enthusiasts.

MicroStrategy owns 105,085 BTC worth around $5.23 billion as Bitcoin’s price returns to $50,000. In fact, the Nasdaq-listed company’s exposure to Bitcoin has made MSTR a quasi-proxy for the flagship cryptocurrency.

*MSTR daily price chart versus BTC/USD. Source: TradingView*

MSTR has gained momentum, especially amid aggressive traders — those with a higher appetite for risks — with its year-to-date returns now at 65.21%.

At the same time, Bitcoin prices have climbed 68.22%, with many analysts now anticipating the BTC/USD rates to have doubled by the end of 2021 and hit $100,000.

But MSTR and BTC/USD showed signs of decoupling after June. In the period, the MicroStrategy stock limited its downside moves against a comparatively aggressive bearish trend in the Bitcoin market. Financial analyst Alexander J Poulos spotted the deviation, noting that it could have been due to Capital Group’s investment in MicroStrategy.

In June, the United States-based financial services company, which runs the American Funds family of mutual funds, bought a 12.2% stake in MicroStrategy. Poulos stressed that Capital Group’s $600-million investment was an indirect way for it to gain exposure to Bitcoin.

“With the SEC not approving a pure-play BTC ETF [exchange-traded fund], MSTR will continue to serve as a proxy for fund families,” he said, adding:

“The move by the Capital Group is not an outlier. I expect others to initiate or add to their existing positions.”

A high-risk play

MicroStrategy has amassed heavy debts to purchase Bitcoin. Therefore, considering it could sell its crypto holdings to respect its financial commitment to bond investors could be a potentially negative event for MSTR.

In his SeekingAlpha op-ed, Joshua Sorto, the staff accountant at MNCPA, wrote that MicroStrategy could easily pay back the debt on its first $650-million convertible note — MSTR is already trading above $517 to convert notes into shares that do not require MicroStrategy to sell the Bitcoin inventory.

But the second convertible note has a conversion rate benchmark set at $1,432.46. That said, MicroStrategy would need to have tripled its market valuation by 2027, which means MSTR would need to rise over 100% before the bond’s maturity.

“In order for MSTR to do that, the analytics business will have to produce cash flows of $125 million per quarter; at the moment, it’s running at less than half that level,” Sorto said while referring to MicroStrategy’s second-quarter earnings.

The third note is not convertible. MicroStrategy has bought 13,005 BTC with nearly half a billion dollars worth of proceeds. So, whether or not the firm will pay off its debt depends majorly on Bitcoin’s performance until 2026.

In its filings with the U.S. Security and Exchange Commission, MicroStrategy revealed a total of 49 risks, 47% of which concerns finance and corporates. Also, the risk tally comes to be higher than the S&P Average of 31.

*MicroStrategy risk disclosures. Source: TipRanks*

Poulos admitted that he is bullish on Bitcoin in the coming years, which, in extension, means he is also bullish on MicroStrategy. Sorto also expressed a similar outlook, noting that MSTR’s association with a booming Bitcoin industry would have the stock retain its upside outlook long term.

“There are no storm clouds on the horizon, but a few clouds in the distance are worth monitoring,” Sorto wrote.

Capital International Buys Nearly 1 Million Shares of Bitcoin-Focused Microstrategy

July 12, 2021 Bitcoin.com

MSTR