Investing in cryptocurrencies, such as Bitcoin (BTCUSD), has helped investors derive game-changing returns over the past decade. Bitcoin prices have surged 120x in the last eight years, 7x in the last five years, and more than doubled in 2023. Despite these market-thumping returns, Bitcoin is also down 40% from all-time highs, allowing investors to buy the dip.
Bitcoin is a decentralized cryptocurrency, which means it is not governed by any regulatory authority such as a central bank. It uses peer-to-peer technology and blockchain technology to record transactions - effectively, a distributed public ledger that can be verified or accessed by anyone. Miners verify and process these transactions and are rewarded with a set amount of BTC, as well as transaction fees.
Bitcoin was created 15 years ago, and the first block was mined in January 2009. The total supply of BTC is limited to 21 million, making it deflationary in nature. More than 19 million BTC have already been mined and are in circulation.
Investors can gain exposure to this alternate asset class by purchasing Bitcoin and other cryptocurrencies on exchanges such as Coinbase (COIN). Further, you can buy shares of Coinbase and other crypto-related stocks to gain exposure to digital assets by proxy.
Another way is to buy shares of MicroStrategy (MSTR), which acts as a Bitcoin holding company. Let’s see why.
MicroStrategy Goes Big on Bitcoin
Valued at $7.34 billion by market cap, MicroStrategy provides enterprise-facing analytics software and services. In Q3 of 2023, MicroStrategy reported revenue of $129.5 million, an increase of 3.3% year over year.
While it is involved in the enterprise software segment, the CEO of MicroStrategy, Michael Saylor, is quite bullish on Bitcoin, and has famously allocated significant company resources to purchase BTC over the years. While MSTR has $45 million in cash, it also holds 140,000 Bitcoin worth over $4.4 billion at current prices.
MicroStrategy is among the largest institutional holders of Bitcoin, and first began purchasing the digital asset as a hedge against inflation back in August 2020. In fact, MicroStrategy has also raised debt to fund its BTC purchases, and now owns 0.75% of the total Bitcoin circulating supply.
Will Bitcoin Prices Keep Rising In 2024?
It's evident that the price of MSTR stock will be tied to the performance of Bitcoin. For instance, BTC prices have risen 129% year-to-date, while MSTR is up 259% in 2023.
There are two key drivers for BTC in the near term. First is the possible launch of multiple spot Bitcoin ETFs by institutions such as BlackRock (BLK), Invesco (IVZ), and Ark Invest. With trillions of dollars in assets under management, there is a good chance for Bitcoin demand to move higher once the ETFs are approved, possibly within the next six months.
Another positive catalyst for BTC prices is the upcoming halving event. Every four years, the amount of BTC that can be mined is reduced by 50%, resulting in an extended bull run due to the supply-demand economics.
Here's a look at how Bitcoin has performed over the last three halving cycles.
- Bitcoin prices surged over 5,000% between November 2011 and November 2013
- Bitcoin prices again surged by over 5,000% between November 2015 and December 2017
- Bitcoin prices rose 600% between November 2019 and November 2021
If you're bullish on Bitcoin, it makes sense to buy MSTR right now. Each of the four analysts tracking MicroStrategy stock has a “strong buy” recommendation. The average price target for MSTR is $516, which is only about 1% higher than the current trading price. However, BTIG sees about 10% upside, and called MSTR the best vehicle for institutional investors to gain BTC exposure in a recent note.
