MicroStrategy, a prominent business intelligence software company co-founded by Michael Saylor, has been making headlines due to its soaring stock price in recent weeks and months. The company, which is also the largest corporate holder of Bitcoin, has outperformed major US stock market indexes by a significant margin. Since the beginning of the year, MicroStrategy’s stock price has surged by more than 50%, reaching over $1,000 last week and approaching its all-time high of $1,300 set in February 2021. This remarkable performance sets it apart from most other US-based stocks, indicating a possible correlation with its exposure to Bitcoin.
As of now, the US financial markets have been showing promising results in 2021. The S&P 500, a benchmark index tracking the performance of the top 500 publicly traded companies in the US, has gained over 8% and reached an all-time high of over 5,100. The Dow Jones Industrial Average is also up year-to-date by 3.6%, while the Nasdaq Composite, which focuses on leading technology companies, has seen a modest 1% increase within the same period. However, MicroStrategy’s performance on the Nasdaq exchange significantly outpaces these indexes, indicating a unique trend in the market.
In August 2020, MicroStrategy made a bold move by adding Bitcoin to its balance sheet, setting a new trend in corporate investing. Initially making multi-million dollar purchases, the company continued to accumulate Bitcoin over the next three and a half years despite market fluctuations. Even as the price of Bitcoin fell from $69,000 to under $20,000, MicroStrategy’s CEO, Michael Saylor, remained a staunch supporter of the cryptocurrency. This dedication paid off, as the company’s total Bitcoin holdings now stand at a staggering 193,000 BTC, acquired at a cost of over $6 billion. With the recent surge in Bitcoin’s value, MicroStrategy now holds an unrealized profit of $6 billion, showcasing the power of its long-term investment strategy and dollar-cost-averaging approach.
Impact on Stock Price
Given its substantial exposure to Bitcoin, MicroStrategy’s stock price movements closely mirror the fluctuations in the cryptocurrency market. This correlation explains the significant spike in MSTR’s stock price, which has reached multi-year highs in recent weeks. As the company with the largest direct stake in Bitcoin, MicroStrategy’s stock performance is heavily influenced by the cryptocurrency’s price movements. This close relationship underscores the growing influence of digital assets like Bitcoin on traditional financial markets and the need for investors to consider non-traditional assets in their portfolios.
MicroStrategy’s remarkable stock performance can be attributed to its strategic investment in Bitcoin and its unconventional financial strategy. By embracing digital assets like Bitcoin and holding a substantial amount on its balance sheet, the company has positioned itself for significant growth and profit. As the market continues to evolve and embrace cryptocurrencies, MicroStrategy’s innovative approach may serve as a blueprint for other companies looking to diversify their portfolios and maximize returns in the digital age.