MicroStrategy Faces Tough Competition After Bitcoin ETF Approval
Following the approval of Bitcoin spot ETFs by the SEC, MicroStrategy Inc. (NASDAQ: MSTR) has taken a hit in the market. The company, led by Michael Saylor, is now facing strong competition from Wall Street players who offer indirect exposure to Bitcoin.
In response to the ETF approval, Bitcoin reached a high of $48,965. However, MicroStrategy’s stock did not follow suit.
Traditionally, MicroStrategy’s stock price has closely correlated with the price of Bitcoin since Saylor began accumulating BTC for the company’s treasury. However, this correlation shifted at the beginning of 2024, although MicroStrategy still outperformed Bitcoin in 2023.
MicroStrategy experienced significant losses starting on January 11, the first trading day for Bitcoin ETFs. Within 48 hours, the stock price dropped by 19%, opening at $589.99 and closing at $485.53 per share on January 12.
MicroStrategy Holds More Bitcoin Than Its Market Cap
Interestingly, MicroStrategy currently holds 189,150 BTC in its treasury. This amount is worth $8.09 billion, exceeding the company’s market capitalization of $6.64 billion.
Saylor began purchasing Bitcoin for MicroStrategy on August 11, 2020. To date, the company has acquired a total of 189,150 BTC at an average price of $29,582 per Bitcoin.
The reported total cost of these holdings is $4.68 billion, resulting in an unrealized profit of $3.41 billion or a 72.8% increase.
Investing in MicroStrategy not only provides indirect exposure to Bitcoin’s volatility but also allows shareholders to participate in the company’s business. This presents both risks and opportunities, enabling shareholders to hedge their positions in a diversified manner.
Hot Take: MicroStrategy’s Future Amidst Bitcoin ETFs
With the approval of Bitcoin spot ETFs, MicroStrategy faces intensified competition from other Wall Street players offering similar exposure to the cryptocurrency. The company’s stock price has experienced a significant decline since the introduction of these ETFs.
MicroStrategy’s unique position lies in its substantial holdings of Bitcoin, exceeding its market capitalization. This gives investors the opportunity to benefit from both the performance of Bitcoin and the growth of MicroStrategy as a business.
However, investing in MicroStrategy also carries risks due to the volatility of Bitcoin and potential challenges faced by the company. Shareholders must carefully consider these factors when making investment decisions.
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