MicroStrategy (MSTR) began its life in 1989 as a business intelligence software company. In recent years, the company has shifted its focus and capital towards hoarding Bitcoin ($BTC-USD) to now stand as the largest Bitcoin holder in the world. MSTR’s bold move, combined with widespread crypto proliferation worldwide, has seen its share price rise even faster than Bitcoin’s over the past five years.
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In fact, MSTR’s share price has mushroomed by 813% over the past 3 years, while Bitcoin has gained 167% over the same period.
While I recognize the overarching long-term value of MSTR as a neat option for obtaining legitimized cryptocurrency exposure, the current bullish sentiment for the stock is overextended. I am cautious of a potential re-rating as investor sentiment settles down to a more reasonable level and MSTR’s valuation pares back its frothy gains.
Investing in MicroStrategy Means Buying Leveraged Bitcoin
In case investors didn’t already know, MicroStrategy currently wields the most enormous Bitcoin horde of any corporate entity with a massive 471,107 BTC in its arsenal, worth ~$47 billion at current prices.
However, what’s really interesting is how the company acquires it.
By issuing stock and corporate bonds, MicroStrategy raises money to buy more Bitcoin, increasing the so-called “Bitcoin per share” and generating what MicroStrategy’s management calls the “Bitcoin yield.” The strategy works because MSTR’s shares trade at a premium to the value of its Bitcoin holdings. For instance, with 288.25 million diluted shares outstanding, each share costs $327.80 but represents only 0.00163 BTC or $163.50 worth of Bitcoin. This means MicroStrategy shares trade at roughly double the value of their Bitcoin holdings—a premium referred to as “intangible value.”
Since MSTR’s shares are worth more than the Bitcoin they represent, MicroStrategy can issue shares to buy even more Bitcoin than it could if its shares were priced equally to Bitcoin. The company also uses debt to fund Bitcoin purchases, which can push its share price higher when Bitcoin’s value rises. Later, the debt can be paid off by issuing more stock, converting it into common shares, or refinancing it.
When Bitcoin Crashes, MicroStrategy Crashes Harder
Despite the bullish sentiment underpinning MSTR’s valuation, the company must mitigate severe medium-term risks. The biggest drawback of owning MicroStrategy shares is that when Bitcoin’s price crashes, MicroStrategy’s share price tends to crash even harder. This is because the stock trades at a premium to the actual value of its Bitcoin holdings, making it more sensitive to big price swings.
Historically, Bitcoin’s price peaks 12 to 18 months after halving events—when the rewards for mining Bitcoin are cut in half. The last halving was in April 2024, so Bitcoin’s next peak is expected between April and November 2025. After these peaks, Bitcoin’s price has typically dropped by 70-80%, and MicroStrategy’s share price has fallen more acutely by 80-90%.
Since investors now understand that MicroStrategy’s shares are a proxy for “leveraged” Bitcoin, the market will likely turn bearish on MicroStrategy before Bitcoin’s next peak, which means the time in which short-term investors can benefit is running out.
Based on current trends, I think MicroStrategy’s share price could reach $600 at its peak before declining in mid-2025. This estimate includes Bitcoin reaching ~$192,000 per coin by the end of 2025, based on a conservative 3x multiple of its $64,000 price at the April 2024 halving.
Long-Term MSTR Returns Could Be Phenomenal
The most significant benefit of owning MicroStrategy shares will likely materialize over several years, but the timing is key. Buying the stock right now will likely deliver limited upside and could leave investors with losing positions as volatility eventually arrives. That’s why I plan to wait for the trough of the next major price drop, likely in 2026, before considering an investment in MSTR. If I do initiate a long position, it will necessarily be a small fraction of my broader portfolio—around 2-3%—to allow me to ride out the ups and downs over the long term.
Bitcoin’s price could potentially exceed $1 million per coin within 10 years. If it takes exactly a decade to reach that milestone from the current ~$100,000, the annual growth rate would be approximately 26%. This projection feels realistic, especially with Cathie Wood forecasting Bitcoin could hit $3.8 million by 2030 and Chamath Palihapitiya estimating $1 million by 2040. While optimistic, my estimate is relatively conservative compared to other market participants.
MicroStrategy’s share price has grown at an impressive 84% annually over the past five years, compared to Bitcoin’s 60%. This shows how MicroStrategy could be even more profitable than Bitcoin in the long run. As the company continues to increase its Bitcoin holdings per share and Bitcoin’s price keeps compounding, MicroStrategy is likely to maintain faster growth than Bitcoin.
For example, if Bitcoin grows at an annual rate of 26% over the next eight years, MicroStrategy’s share price could grow at 45% per year or more. This would push its price to at least $13,450 per share in 10 years time.
Is MicroStrategy (MSTR) Stock a Good Buy?
Wall Street analysts have an average MSTR price target of $529.57, based on eight Buy, zero Hold, and zero Sell ratings. This suggests a potential upside of 58% over the next 12 months, highlighting the stock’s appeal in the short term. However, these targets may underestimate the likelihood of heightened volatility sometime before 2026.
Market Turbulence to Disrupt MSTR’s Bitcoin Hoarding Strategy
For anyone considering buying MicroStrategy stock right now, caution is paramount.
Given how Bitcoin’s price behaves after halving events and its impact on MicroStrategy’s share price, significant volatility in MicroStrategy’s valuation seems inevitable later this year. I expect severe price volatility to affect MSTR by early 2026 at the very latest.
I recommend setting a price target of $475 for anyone holding the stock and selling sooner rather than later to avoid the likely decline. In a longer-term outlook, I’d look to buy back at lower prices and hold the stock for the long term. However, this strategy involves enduring higher volatility over time, which requires disciplined risk management and sufficient self-control to avoid overcommitting to a stock with so much exposure to cryptocurrency price volatility. Committing no more than 3% of your portfolio to MicroStrategy may not deliver the rate of return crypto investors seek, but at least you’ll sleep peacefully at night.
