MicroStrategy, the enterprise business firm known for its bullish stance on Bitcoin (BTC), has seen its stock soar to a two-year high. The technology company’s shares closed above $500 on Black Friday, a level not seen since December 2021, according to data from Yahoo! Finance. As of now, MicroStrategy boasts a market cap of $7.55 billion.
Bitcoin Investment Drives Profitability
MicroStrategy’s strategic decision to hold significant amounts of Bitcoin has proven to be a lucrative move. Despite starting the year with a quarterly loss, the company’s stock price doubled within a month. As one of the largest institutional holders of Bitcoin, MicroStrategy’s founder and chairman, Michael Saylor, began accumulating the cryptocurrency in August 2020 as a hedge against inflation.
“That’s why all of us are fairly bullish over the next 12 months. Demand’s going to increase, supply’s going to contract, and this is fairly unprecedented in the history of Wall Street,”
– Michael Saylor
MicroStrategy’s fortunes continued to improve throughout the year. By April, the company’s Bitcoin holdings were in the green as the price of Bitcoin surpassed $30,000. With the purchase of an additional 1,045 Bitcoin, increasing its total holdings to 140,000 Bitcoin, the average purchase price of the digital asset fell to $29,803 per coin.
Positive Outlook for MicroStrategy
Although the second-quarter earnings report included a $24 million Bitcoin impairment charge, MicroStrategy as a company returned to profitability. The largest publicly traded company with Bitcoin on its balance sheet continued its BTC buying spree, accumulating 152,800 coins worth about $4.4 billion. Interestingly, the stocks of companies with exposure to Bitcoin outperformed the cryptocurrency itself, which had already seen an 87% increase in value this year.
MicroStrategy’s most recent quarterly report, released in early November, showed a net loss of $143.4 million, a deeper shade of red compared to the $27 million loss reported in the same period last year. However, the company remained undeterred in its Bitcoin acquisition strategy, purchasing an additional 6,067 Bitcoin for $167 million. With its significant holdings, MicroStrategy now controls approximately 0.75% of Bitcoin’s total circulating supply.
Bitcoin Halving and MicroStrategy’s Stock
It is worth noting that Microstrategy shares are also poised to benefit from the upcoming Bitcoin halving event. Bitcoin halving occurs approximately every four years and is ingrained in the Bitcoin protocol. It refers to the reduction in the rate at which new bitcoins are created and awarded to miners for validating transactions. The halving mechanism is designed to control inflation and limit the supply of bitcoins in circulation. Halving events have significant implications for the supply and demand dynamics of Bitcoin, which can ultimately impact its price. The reduction in new coin issuance creates a scarcity effect. With fewer BTC tokens entering the market, the available supply decreases. Given the strong correlation between Microstrategy’s stock price and the price of Bitcoin at approximately 90%, Berenberg suggests that Microstrategy’s stock is likely to rally alongside Bitcoin.
