Originally a business intelligence and analytics software company, MicroStrategy (MSTR) has since evolved into an upwardly mobile Bitcoin proxy—with remarkable success. Over the past year, MSTR stock has surged 379%. Over three years, 746%. And nearly 2,152% over five years. While its impressive growth is undeniable, the question remains: Can it sustain this momentum? Of course, serving as a Bitcoin proxy comes with skepticism. While blockchain technology and decentralized markets have reshaped the financial landscape, individual cryptocurrencies remain highly volatile. But what if there was a hedging opportunity available?
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Fortunes can be made and lost instantly, making strong conviction and disciplined risk management essential. However, it’s also fair to point out that broader market themes are stubbornly favorable for cryptos. In particular, inflation woes could potentially bolster demand for virtual currencies like they have for gold bullion. Gold is investable because its supply is naturally restricted. Despite digital cryptos being utterly different from gold in all other respects concerning limited supply, they are the same.
Cryptos, especially bellwether front-runners like Bitcoin and Ethereum, are gradually attaining safe-haven status among a new generation of investors. MicroStrategy could inadvertently transform from a risky swing for the fences to being a dependable safe haven when macroeconomic strife draws near.
MSTR as the Best of Both Worlds
Gold has been increasing amid dollar fluctuations and occasional anxieties hitting global markets. Geopolitical pressures and uncertainty over how the Trump administration will handle the world’s most pressing matters continue to buttress the bullion price. Inflation anxiety and geopolitical uncertainty further boost positive gold sentiment.
Gold currently enjoys a positive backdrop, and the same argument is gradually being made about cryptocurrencies. As governments and central banks demonstrate their inability to collar inflation, gold has demonstrated that limited supply can do the trick. What gold can do, Bitcoin can do better. In modern times, millennials and young adults represent the new generation of investors who see Bitcoin as a valid alternative to cash, stocks, bonds, or even gold when hedging against undesirable market events such as inflation.
While crypto investors inherently skew young, evidence of broader adoption of blockchain assets is emerging. In fact, nearly 20% of U.S. voters now use crypto. That’s not a fringe element of society, and this figure continues to grow.
With MSTR stock being a proxy for Bitcoin and the crypto narrative generally, two opposing market themes support the company’s prospects. In other words, MSTR could be the ultimate hedge. In good times, risk aversion is low, so stocks and Bitcoin tend to rise, so MSTR shareholders would benefit. Risk aversion is high in bad times, so stocks and Bitcoin should fall. However, if cryptos become legitimized, ubiquitous, and considered a viable alternative to gold and cash, MSTR’s stock will still rise because it is a proxy for Bitcoin.
A Positive Bias Could Attract Speculators
Although MicroStrategy rightfully carries a reputation of being a high-risk, high-reward investment, it also commands objectively encouraging attributes. One of them is the security’s positive bias. Using data over the past five years, a temporal or stochastic view of MSTR’s price history shows that a position entered at the beginning of the week has a 53.38% chance of rising by the end.
Interestingly, the long odds remain enticing over four weeks at 53.61%. Therefore, if you bet long enough on MSTR stock, you theoretically should come out ahead. It was disappointing that MSTR only gained 1.27% last week. One-week returns of up to 5% (which is a dynamic calculation accounting for a specific event) see the subsequent week’s long odds dip to 49.12%. However, over the next four weeks, the chances of success improve to 52.63%.
That said, had MSTR stock gained between 5% to 10% instead, the long odds would have been closer to 59%. Again, the reasoning appears to be that MSTR runs well under a framework of moderate bullishness.
At the same time, when MSTR stock moves, it really flies. Not too long ago, the security printed a one-week return of just under 28%. Notably, the median return of four weeks between stochastic and dynamic forecasting models comes to about 20% under the positive scenario (when the stock gains up to 5% in one week). Therefore, MSTR could potentially be due for a significant gain.
Two Options Strategies to Consider
Two aggressive options strategies are currently in play for traders who believe in MSTR stock’s bullish narrative and seek short-term gains.
The first strategy is to consider the 345/355 bull call spread for the options chain expiring on March 14. A bull spread involves buying a call option and simultaneously selling a call for the same expiration date. Primarily, the idea behind this multi-leg strategy is to use the credit received from the short call to partially offset the debit paid for the long call. This action discounts the overall net long position while also lowering the breakeven threshold, thus reducing probabilistic risk on a relative basis. In the case of the 345/355 spread, the investor wants MSTR stock to rise to $355 or above at expiration, thus triggering the maximum payout.
An even more aggressive trade would be the 365/370 bull spread for the same expiration date. Under the most optimistic scenario, MSTR stock could rise to around $405 per share. Therefore, the $370 short call strike price provides some margin for error while simultaneously offering a big payout.
Is MicroStrategy (MSTR) Stock a Good Buy?
On Wall Street, MSTR stock carries a Strong Buy consensus rating based on 11 Buy ratings. Not a single analyst considers MSTR as a Hold or a Sell. Currently, MSTR’s average price target is $548.91 per share, implying a 62% upside potential.
MSTR’s Bitcoin Gamble Could End up Being Safe as Houses
MicroStrategy’s transformation into a Bitcoin proxy has made it one of the most explosive stocks in any stock market. With external catalysts like inflation concerns and shifting generational investment preferences, the company could benefit from continued interest in digital assets. While volatility remains a given, the broader trend suggests that safe-haven demand could extend beyond traditional assets like gold.
For investors seeking to take advantage of the jaw-dropping business strategy cooked up by MSTR’s management, options markets could be the optimal trading instrument to do so. MicroStrategy’s trading patterns indicate a positive bias, with historical trends favoring extended rallies under the right conditions. With a mix of fundamental and behavioral tailwinds, speculators may want to watch this crypto-fueled juggernaut closely.
