MicroStrategy (MSTR) Breaks Out: Time to Buy the Bitcoin Proxy?

10/12/2024 03:38

Bitcoin has several bullish catalysts into 2025. Stock Strategist Andrew Rocco explains why MicroStrategy is the best to be involved.

MicroStrategy Company Overview

MicroStrategy Incorporated (MSTR) is a software firm focues on business intelligence (BI) and analytics solutions. It offers a platform that empowers businesses to analyze and present their data for making decisions. Its tools support data exploration, interactive dashboards, data visualization and reporting functions. Before going public in 1988, MSTR secured fast food juggernaut McDonalds (MCD) as a major client.

MicroStrategy Adopts the Bitcoin Standard

For years, MicroStrategy Chairman (and former CEO) Michael Saylor had been concerned that the monetary system has been expanding by ~7% per year while inflation has risen at a clip of ~2% annually. After conducting an extensive Bitcoin deep dive, Michael Saylor took the unprecedented and creative steps to adopt the “Bitcoin Standard.” During an interview, Saylor reasoned, “What we (MSTR) were doing was that we were inverting the balance sheet such that we’re floating on a Bitcoin sail, on a crypto sail, if you will, and as the liquidity and the monetary system gets pumped, we want it to float, rather than sink on that pool of liquidity.” Today, MicroStrategy holds over $15 billion in Bitcoin, making it one of the world’s top holders.

Bitcoin Catalysts

Since adopting the Bitcoin Standard, MicroStrategy has morphed from a software firm to a leveraged Bitcoin proxy. As such, to understand where MSTR is going, one must understand where Bitcoin is going. Below are four bullish Bitcoin catalysts:

1. Bitcoin Seasonality & “Uptober”: Historically, the fall has been the best time to be long Bitcoin. Since 2010, October has averaged a robust 29.5%, and November has averaged 37.9%.

Image Source: Glassnode, ETC Group

2. FTX Repayments: The FTX crypto exchange collapsed in 2022 after a brutal “crypto winter.” However, in a twist of fate, Bitcoin and most crypto assets have appreciated handsomely since then and all customers will be made whole to the tune of $16 billion in December. Many of these crypto enthusiasts will reinvest their money in Bitcoin, driving the price higher.

3. The Bitcoin Halving: The Bitcoin halving occurs every four years and reduces the reward for mining new Bitcoin in half. Previous Bitcoin halvings have led to triple-digit gains one year later. Though Bitcoin has been relatively flat since its last halving in April, history is on the side of the bulls.

Image Source: TradingView

4. Bitcoin ETFs: Several SpotBitcoin ETFs, such as the Fidelity Wise Origin Bitcoin ETF (FBTC), Ark 21Shares Bitcoin ETF (ARKB), and WisdomTree Bitcoin Fund (BTCW) were approved in 2024.These ETFs should further enhance adoption among money managers and retail investors who do not have crypto accounts. Meanwhile, the iShares Bitcoin ETF (IBIT), the most successful ETF launched ever, will allow traders to trade options.

MicroStrategy Relative Strength

MSTR printed fresh 52-week highs Friday as volume swelled. Not only is MSTR strong relative to Bitcoin, but the stock is also exhibiting relative strength versus other crypto proxies, such as Coinbase Global (COIN).

Image Source: Zacks Investment Research

Furthermore, as the old Wall Street adage goes, “The longer the base, the higher in space.” MSTR is emerging from a seven-month base structure.

Image Source: TradingView

Bottom Line

Bitcoin has several bullish catalysts. MicroStrategy is the best way to be involved in a Bitcoin breakout.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report