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by Stella Osoba, CMT
Microstrategy, Inc. (MSTR) is a software company that was founded in 1989. It provides enterprise analytics and other software platforms through licensing agreements and cloud-based solutions. With its recent announcement of the acquisition of another $452 million worth of Bitcoin in September 2024, making the company the largest corporate holder of Bitcoin, does this make MSTR a proxy play for the cryptocurrency?
Position: N/A
Stella Osoba, CMT
Stella Osoba is a trader and financial writer. She is a frequent contributor to "Technical Analysis of Stocks and Commodities" magazine and "Traders.com Advantage" as well as other financial publications.
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TECHNICAL ANALYSIS
Is MSTR A Proxy For Bitcoin?
10/16/24 03:37:08 PMby Stella Osoba, CMT
Microstrategy, Inc. (MSTR) is a software company that was founded in 1989. It provides enterprise analytics and other software platforms through licensing agreements and cloud-based solutions. With its recent announcement of the acquisition of another $452 million worth of Bitcoin in September 2024, making the company the largest corporate holder of Bitcoin, does this make MSTR a proxy play for the cryptocurrency?
Position: N/A
| MSTR holds 1% of the total amount of all Bitcoin or approximately 252,220 BTC of the 21 million BTC that will ever exist. Does this effectively make the purchase of MSTR an effective proxy for holding BTC? |
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| Figure 1. Weekly chart for MSTR. |
| Graphic provided by: StockCharts.com. |
| |
| Figure 1 is a long-term weekly chart of MSTR. The chart shows price action from 2007 to the present day. A glance at the chart will show that price declined along with the rest of the market in 2008/9 and then entered a prolonged trading range. The breakout did not occur until August 2020 when MSTR announced that it had acquired 21,454 BTC for approximately $250 million. |
| After the August 2020 announcement, price proceeded to make an impressive, almost vertical rise for the next several months. It rose from a preadjusted high of $121 in August 2020 to $1,310 per share in just six months. In February 2021, the rally paused and price fell to test the prior August 2020 high. During this time MSTR did not halt its BTC buying spree. |
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| Figure 2. Daily chart for MSTR and BTC. |
| Graphic provided by: StockCharts.com. |
| |
| Figure 2 is a daily line chart of MSTR superimposed on a daily line chart of BTC over a two-year period. Both lines track each other closely. Rises in the price of BTC is followed by similar rises in the price of MSTR. It would appear that due to their substantial holdings of BTC, MSTR now effectively acts as a cheaper substitute for the cryptocurrency or its proxy. |
Stella Osoba is a trader and financial writer. She is a frequent contributor to "Technical Analysis of Stocks and Commodities" magazine and "Traders.com Advantage" as well as other financial publications.
| E-mail address: | stellaosoba@gmail.com |
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