MicroStrategy’s Bitcoin Bet: A Stunning 337% Gain in 2023

MicroStrategy, a software company founded almost 35 years ago, has experienced a remarkable surge in its stock value, soaring 337% in 2023. This impressive gain outpaces almost all U.S. companies valued at $5 billion or more, surpassing Nvidia’s 234% rally and Meta’s 194% surge.

The primary driver behind MicroStrategy’s success is its strategic decision to invest in bitcoin. The company began purchasing bitcoin in mid-2020 and has since accumulated approximately 174,530 bitcoins, currently worth around $7.65 billion. This bold move has attracted significant attention from Wall Street, leading to a doubling of bitcoin’s gain this year.

MicroStrategy’s market cap is currently $8.5 billion, with 90% of its value directly tied to its bitcoin holdings. This means that when the price of bitcoin rises or falls, so does MicroStrategy’s stock price. In 2022, bitcoin’s 64% drop caused MicroStrategy’s shares to decline by 74%. Despite this, MicroStrategy’s shares are still trading below their peak value in 2021, during the height of the crypto market.

The company’s bitcoin strategy was initiated by its co-founder, Michael Saylor, who served as CEO at the time. Saylor recognized the potential of investing in alternative assets, such as digital currencies, as traditional investment options like real estate, stocks, bonds, and commodities were yielding low returns.

Saylor’s decision to invest in bitcoin was based on the belief that it represents a form of “digital gold.” He argued that bitcoin is harder, smarter, stronger, and faster than gold, making it an attractive investment option. Saylor’s vision has resonated with investors, leading to a significant increase in MicroStrategy’s stock value.

MicroStrategy’s unique approach to investing in bitcoin has garnered attention and admiration from the investment community. Joseph Vafi, an analyst at Canaccord Genuity, has a buy recommendation on the stock and believes that the company’s software business, which is performing well, is not a significant concern.

In addition to its bitcoin holdings, MicroStrategy’s software business serves as a reliable cash flow generator, enabling the company to continue investing in bitcoin. This dual-pronged strategy has positioned MicroStrategy as a formidable player in the market, with a strong focus on both software and digital assets.

As the demand for bitcoin continues to grow, MicroStrategy’s stock is expected to benefit from the increasing popularity of the cryptocurrency. The company’s vice president of treasury and investor relations, Shirish Jajodia, expressed optimism about the future of bitcoin and its potential impact on mainstream investors and corporations.

Despite the success of MicroStrategy’s bitcoin investment, there are concerns about competition from potential bitcoin exchange-traded funds (ETFs). However, Vafi believes that this competition poses little threat to MicroStrategy, as the price of bitcoin is likely to rise significantly if ETFs are approved.

In conclusion, MicroStrategy’s remarkable 337% gain in 2023 can be attributed to its strategic decision to invest in bitcoin. The company’s focus on digital assets, combined with its robust software business, has positioned it as a formidable player in the market. As the demand for bitcoin continues to grow, MicroStrategy’s stock is expected to benefit from the increasing popularity of the cryptocurrency.