MicroStrategy (NASDAQ: MSTR) shares have doubled in 2024 and more than tripled over the last 52 weeks.
When Bitcoin (CRYPTO: BTC) jumps, MicroStrategy soars; the enterprise software specialist has transformed into a Bitcoin manager on steroids. The correlation between this stock and Bitcoin prices has been similar to the statistical link between the S&P 500 and Dow Jones Industrial Average market indexes in the last three years.
MicroStrategy owns 226,500 Bitcoin nowadays, worth $13.4 billion at today's Bitcoin prices. It only has $67 million of cash equivalents on hand, the rest of its cash reserves being converted into Bitcoin. The strategy includes investing fresh software-business cash flows into more Bitcoin holdings, taking on new debt, and selling stock on the open market to finance further cryptocurrency buys.
"Our objective is to accumulate Bitcoin holdings at a faster rate than we issue shares," MicroStrategy CEO Phong Le said in this month's second-quarter earnings call.
MicroStrategy as a leveraged Bitcoin ETF
Later in the sameearnings call co-founder and executive chairman Michael Saylor described MicroStrategy as a more flexible and ambitious version of spot Bitcoin exchange-traded funds (ETFs). The ETFs simply buy and sell Bitcoin to match their shareholders' demand for the cryptocurrency. MicroStrategy goes one step further, attempting to outperform the pure Bitcoin chart and spot Bitcoin ETFs by adding more capital to its cryptocurrency holdings.
"The key for us to outperform is to responsibly use that capital and responsibly use our operational flexibility," Saylor said.
So if you believe that Bitcoin will rise in value over time, you can see MicroStrategy as a leveraged play on that trend. It's a risky idea, since MicroStrategy's stock also will amplify the cryptocurrency's bearish moves and could go to zero in an extra-cold crypto winter. At the same time, the long-term upside could be tremendous as long as MicroStrategy survives every challenge along the way.
So it's not too late to buy MicroStrategy, as long as you agree that Bitcoin will keep on growing, smoothly enough to keep this company in business.
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Anders Bylund has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
