MicroStrategy (MSTR) remains one of my favorite long-term holds as a fantastic play on the gigantic future potential of Bitcoin as an asset class and potential disruptor to fiat currencies.
MicroStrategy CEO Michael Saylor is well known as a huge Bitcoin HODLer who entertains us with plenty of funny quotes and memes on his Twitter feed.
The company just posted its Q4 2021 results and I have recently bought the dip in MSTR shares because I believe MicroStrategy stock, along with several other tech stocks, looks very attractive at these price levels.
In this article, I’ll cover some of the biggest updates and explain in-depth the reasoning behind MicroStrategy’s Bitcoin accumulation strategy for those who seek more information.
MicroStrategy Q4 2021 Update
MicroStrategy finally posted its results for Q4 2021 after the SEC required the company to post impairment losses on Bitcoin to follow GAAP.
In Q4 2021, MicroStrategy posted a net income loss of $90 million or $8.43 per share due to suffering $146.6 million in Bitcoin impairment charges.
According to Coindesk:
The impairment reflects the decline in the price of bitcoin versus the price at which the bitcoin was acquired. Under standard accounting rules, the value of digital assets such as cryptocurrencies must be recorded at their cost and then only adjusted if their value is impaired, or goes down. But if the price rises, that does not get reflected until an asset is sold.
Bitcoin has always been a risky asset class so don’t be too alarmed by these short-term impairment charges.
The good news is MicroStrategy posted a $110.5 million gross profit from its software & analytics business, which continues to spit off positive free cash flow YoY.
I’m most impressed with Michael Saylor and his consistent accumulation strategy despite all the noise in the crypto industry.
With a 125k BTC stash, MicroStrategy holds nearly 13% of Satoshi Nakamoto’s 1 million Bitcoin holdings yet continues to stack Bitcoin quarter after quarter.
Now many of you reading this article may roll your eyes at Michael Saylor for his carelessness and point to his epic failures during the dot com bubble where MicroStrategy shares lost nearly 99% of their value.
I want to answer some common questions about why MicroStrategy is doing the right thing by stacking Bitcoin and how investors can benefit from holding MSTR stock over the long run.
Bitcoin Is The Best Store Of Value In The 21st Century
So what exactly is the long-term plan of MicroStrategy buying and holding 125k Bitcoin?
MicroStrategy CEO Michael Saylor made it clear that he doesn’t plan on selling any Bitcoin in the future but may consider lending some out to earn yield.
Saylor isn’t speculating on higher Bitcoin prices but rather sees Bitcoin as the most powerful form of digital energy that currently exists in the universe.
Everything in our world is energy whether it’s water, food, sunlight, or fiat currency like the USD dollar.
The whole premise of holding Bitcoin over say a traditional asset like the US dollar is that Bitcoin is the hardest, strongest, and most long-lasting form of digital energy due to its low supply of 21 million coins and bulletproof network backed by miners.
I think every smart company will add Bitcoin to its balance sheet over the next 10 years simply because hyperinflation will cause consumers to lose trust in government currencies and people will seek a better alternative like Bitcoin.
In fact, this is already happening in countries like El Salvador, Turkey, and Afghanistan where inflation and societal issues have caused people to flock towards Bitcoin as a safe haven.
I Bought More MSTR Shares During The Current Crypto Bear Market
MSTR shares trade at an 11% discount to its Bitcoin holdings that are currently valued at $4.6 billion as of writing this article.
Many Bitcoin bulls like Cathie Wood predict Bitcoin will soar to $1 million by 2030 but Fidelity stole the show with its recent $1 billion BTC price prediction by 2038.
$1 billion BTC sounds ridiculous but who predicted Tesla (TSLA) would rise from a little-known electric car company in 2010 to one of the largest tech companies in the world?
In 2010, everyone was laughing at Elon Musk when he talked about electric vehicles taking over the road. In 2022, Musk is the richest person in the world while Tesla trades just under a $1 trillion market cap.
(Source: Y Charts)
We as humans often underestimate the power of new disruptive technology in the beginning but try to jump on board once everyone else believes in the movement.
If Bitcoin does soar in value towards massive valuations then MicroStrategy will benefit more than any other publicly-traded company.
Risk Factors: Lower Bitcoin Prices And Reduced Free Cash Flows
MicroStrategy generated a lot of free publicity with its massive Bitcoin stash and that has helped attract new clients to its software business.
Of course, MSTR stock plummets along with Bitcoin prices so there is some risk in the short term depending on the crypto market.
MicroStrategy maintains an average purchase price of $30,200 so its Bitcoin investment is currently profitable unless BTC prices crash even further.
If Bitcoin dips below $30,000 then the whole world will point at Saylor and laugh at making one of the worst trades of all time.
Another risk factor is the potential collapse of free cash flow from the software business. MicroStrategy relies on cash flow to fund Bitcoin purchases but may dilute shares with stock offerings or issue convertible bonds if FCF dries up.
Conclusion
I will continue to buy MSTR stock at these price levels with a long-term dollar-cost averaging strategy.
If you want to get exposure to a Bitcoin-related asset without paying Grayscale’s 2% annual fee on Grayscale Bitcoin Trust (OTC:GBTC) or holding BTC privately then MSTR stock is the best Bitcoin proxy until the SEC approves an actual BTC spot ETF.
Even if the SEC finally approves a Bitcoin spot ETF in 2023, I will still hold MSTR shares due to the massive upside potential.
MSTR stock sits at a $4 billion market cap and many experts predict Bitcoin will 10 to 100x within this decade. That’s all I need to hear and why I will HODL my shares no matter what.
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