The value of MicroStrategy shares has taken a hit as the price of Bitcoin dropped, leading to a market correction.
Markus Thielen, an analyst at 10x Research, suggests that the stock may be closer to its actual value now. Back in March, Thielen's firm estimated MicroStrategy's fair price to be around $1,000, advising investors to consider direct Bitcoin investments instead.
MicroStrategy, often regarded as a substitute for a Bitcoin ETF, operates differently from traditional ETFs, lacking mechanisms like market makers or redemption processes. Consequently, its stock price can fluctuate significantly based on market sentiment.
With a market cap of $21.37 billion and 214,400 BTC on its balance sheet valued at $13.26 billion as of Friday, MicroStrategy's unique tactics include using cheap debt to acquire more Bitcoin or selling stock at a premium.
Earlier this year, such strategies drew criticism due to the stock's notably high premium, which some argued was unwarranted.
Supporters contend that the premium reflects expectations regarding the company's future capacity to acquire additional Bitcoin per share.
According to James Butterfill from CoinShares, MSTR behaves akin to a leveraged wager on Bitcoin, typically experiencing movements 1.5 times greater than Bitcoin's price fluctuations. He observes that the company's stock is more heavily influenced by monetary policy than conventional business metrics.
Butterfill also suggests that the recent decline in Bitcoin's price was an exaggerated response to the Federal Open Market Committee's initial shift in monetary policy, which later reverted to a more supportive stance.
He anticipates that this will lead to the stabilization of both MSTR and Bitcoin prices in the near future.
May 2024, Cryptoniteuae