If you’re thinking about buying Bitcoin (BTC), think again: savvy investors are starting to consider MicroStrategy (MSTR) a far more appetizing trade.
In a series of posts to X this week, Blockstream CEO Adam Back has argued that shares in the Bitcoin-bullish software business are trading at a massive discount relative to their underlying BTC holdings.
MicroStrategy is owned by self-identified Bitcoin maximalist Michael Saylor, and is one of the largest Bitcoin investors on the planet. Per Saylor’s latest updates, the company currently owns at least 189,150 BTC worth $8.09 billion.
Based on the company’s market cap before converting its balance sheet to Bitcoin, Back estimated the value of its software business to be roughly $2 billion.
“So the fair market value if you ask me is about $10.5 billion to $11.5 billion,” wrote Back to X on Tuesday.
“So in my opinion MSTR price should be around $625-$685 at least (dividing $10.5 – $11.5m by 16.78m shares),” he continued.
MSTR rallied from $329 to $685 between the start and finish of Q4 2023, outpacing even Bitcoin’s seismic gains during that period.
Both assets rallied amid excitement for the launch of Bitcoin spot ETFs on U.S. exchanges, which were successfully approved last week.
While both BTC and MSTR dumped once the launches actually took place, MSTR suffered a far more significant slide to $482 by January 16 – down 30% since its high at the start of the year.
The company has largely been used by investors as a proxy for an ETF until this year, due to its strategy of issuing new shares to buy BTC. The launch of actual ETFs proved unfortunate for other crypto-adjacent stocks, like Coinbase (COIN; down 15% year to date) and Cleanspark (CLSK; down 33% year to date).
Despite the drop, critics of Back’s position claim that MSTR may still be trading at a premium when the company’s $2 billion debts are factored in. Back noted that this debt is long-dated, however, and will effectively “inflate away” with time.
According to calculations by Bitcoin ETF analyst Fred Krueger on X, MSTR will still slightly underperform BTC itself if the latter were to rally to $200,000 per coin.
“Nobody’s going to complain if this happens, but it still underperforms BTC, and will definitely underperform IBIT leveraged at 1.3x in a margin account,” he wrote, referring to BlackRock’s newly launched Bitcoin ETF.
As a whole, MicroStrategy is up 36.11% ($2.14 billion) on its Bitcoin holdings.