MicroStrategy’s investment in Bitcoin has led to a significant premium of almost 300% compared to its Bitcoin holdings. However, according to a report by Steno Research, this premium is unlikely to last. The report highlights that the positive impact of MicroStrategy’s recent stock split is fading, and the launch of options on spot Bitcoin ETFs will reduce demand for the company’s stock.
Analyst Mads Eberhardt emphasized that the recent stock split carried out by MicroStrategy has contributed to the surge in its premium. The company’s valuation is currently diverging significantly from a straightforward calculation of its assets and business fundamentals. Steno Research suggests that as regulators become more favorable towards Bitcoin and cryptocurrencies, investors may opt to hold Bitcoin directly instead of investing in MicroStrategy stock.
With Bitcoin expected to perform strongly in the coming quarter and beyond, the report notes that sustaining MicroStrategy’s current premium would require even higher buying demand. However, during the 2021 crypto bull market, the company’s premium was typically below 200%, indicating that the current premium is unsustainable in the long run.
Despite MicroStrategy’s stock reaching a new all-time high and surging over 240% year-to-date, Steno Research remains skeptical about the sustainability of the premium. The report also speculates that if Donald Trump is re-elected, the regulatory trend favoring Bitcoin and cryptocurrencies is likely to continue, further impacting the demand for MicroStrategy stock.
In conclusion, while MicroStrategy’s investment in Bitcoin has led to a significant premium, the report by Steno Research suggests that this premium is unlikely to last. As the cryptocurrency market evolves and regulatory attitudes towards Bitcoin change, investors may shift their focus away from holding MicroStrategy stock. As such, the future of MicroStrategy’s premium relative to its Bitcoin holdings remains uncertain.
