For investors seeking insights into the future trajectory of MicroStrategy, a prominent business intelligence firm that has experienced a remarkable 343% surge this year, consider the analysis provided by 10x Research. Led by the esteemed Markus Thielen, who accurately predicted the recent rally of Bitcoin, their perspectives may offer valuable guidance in assessing the potential prospects of MicroStrategy’s shares.
Shares of MSTR Are Overvalued by 26%
According to the most recent research note from 10x, it has been observed that the shares of MSTR exhibit an overvaluation of approximately 26%. The conclusion is derived from an analysis conducted using the firm’s regression model, which examines the correlation between the dependent variable, MSTR, and the independent variable, BTC’s spot price.
According to the regression model analysis findings, it is evident that MicroStrategy is currently exhibiting a state of overvaluation, with an estimated excess value of approximately 26%. Furthermore, considering the prevailing Bitcoin prices, a potential downside risk of roughly 20% exists for the company above. The individual, identified as “10x,” expressed their belief that the current circumstances warrant the pursuit of profit.
The shares of MSTR, a prominent bitcoin-holder, have experienced a remarkable surge this year, increasing by over four times their initial value. On Wednesday, these shares reached a 25-month peak of $673, solidifying MSTR’s position as one of the most successful stocks in the cryptocurrency sector throughout 2023.
The company above, which is listed on the Nasdaq, currently possesses a total of 189,150 BTC. This accumulation of cryptocurrency commenced three years ago to utilize it as a reserve asset. Bitcoin, the preeminent cryptocurrency in market value, has experienced a notable increase of 160% this year. Particularly noteworthy is the surge of 60% witnessed in the current quarter, which can be primarily attributed to the prevailing narrative surrounding the spot ETF.
The correlation between the performance of crypto-related stocks such as MSTR and shares in Coinbase, in comparison to Bitcoin, is frequently highlighted as an indicator of institutional engagement with digital assets. The instruments above allow market participants to acquire exposure to digital assets without requiring direct ownership.
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The provided chart exhibits an upward-sloping line of best fit, depicted in green, which has been carefully drawn through many data points on the scatter plot. This line has been positioned to ensure a relatively balanced distribution of points both above and below it.
The observed trend of the line exhibits an upward trajectory, indicating a discernible positive correlation between the values of bitcoin and MSTR. As the value of Bitcoin (BTC) experiences an upward trajectory, it consequently leads to a corresponding increase in the market value of MicroStrategy Incorporated (MSTR). The R² value, also known as the coefficient of determination, is calculated to be 0.8232. This indicates that changes in BTC’s price can account for approximately 80% of the variability observed in MSTR.
Based on the analysis, it is evident that the closing price of MSTR on Thursday, which stood at $673, indicates an overvaluation of approximately 20% when compared to the prevailing market rate of Bitcoin, which is roughly $43,000.
Based on the analysis conducted by 10x, it has been observed that several stocks associated with the cryptocurrency sector are trading at levels near their fair value, as determined by the prevailing price of bitcoin.
Our recommendation is to consider taking profit and reducing long positions. According to 10x, it is worth noting that HIVE, HUT, and GALAXY still retain a certain degree of value in the current market. However, it is essential to acknowledge that substantial profits have already been generated from investing in these particular stocks.
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