Is there an end to MicroStrategy’s (MSTR) Bitcoin madness?

MicroStrategy continues to grow its Bitcoin holdings. Just last week, the company purchased another 2,138 bitcoins, bringing its total to a staggering 446,400 cryptocurrencies. At today’s Bitcoin prices, this translates to a staggering value of US$41.51 billion, making it a leader in Bitcoin investing.

MicroStrategy is a US-based company that provides cloud, business intelligence (BI) and software development services. It develops real-time dashboards and software that process big data for its clients.

However, the company has shifted its focus to purchasing Bitcoin. To arrange funds to finance these purchases, the company continues to sell its own shares. Before last week’s purchase, it also purchased 5,262 BTC at an average price of $106,662 from December 16 to 22, 2024. After the recent shopping spree, the company’s total holdings reached 446,400 BTC.

The company’s 21/21 plan, which plans to raise $21 billion from the sale of fixed-income securities and its own equity, continues to drive its forward-looking strategy. It is clear that the company is very bullish on Bitcoin. Its stock price has risen more than 360% this year, far outpacing Bitcoin’s price rise. But where does this rise end?

By concentrating its portfolio in Bitcoin, the company is taking a huge risk. Bitcoin remains volatile, and there is a good chance that much of the good news as a result of Trump’s election win has already been priced in. Furthermore, the company takes on this risk by raising capital rather than using cash. This magnifies the risks, especially when the company can better use the cash to improve its main line of business. Clearly the priority lies elsewhere, and no investor would want to invest in management that ignores its own business.

There is some optimism that easing regulation and institutional adoption of Bitcoin will bring multiple returns for MicroStrategy. There is no denying that this could happen one day, but we believe it is not worth the risk at the current high price levels.

MicroStrategy (NASDAQ:MSTR) is not on our latest list of companies 31 most popular stocks among hedge funds. According to our database, 25 hedge fund portfolios were holding MSTR at the end of the third quarter which was 26 in the previous quarter. While we recognize MSTR’s potential as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for higher returns, and to do so in a shorter time frame. If you’re looking for a promising AI stock like MSTR but trading at less than 5 times earnings, check out our report on Cheapest artificial intelligence stocks.

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