Although Bitcoin (BTC -2.87%) has seen a remarkable rise of 600% since August 2020, it might seem shocking that any tech stock could possibly match that extraordinary growth.
However, one tech stock has exceeded expectations, soaring over 1,800% in the same timeframe. This stock is Strategy (MSTR -1.31%), previously known as MicroStrategy, which might very well be the tech stock with greater potential than any cryptocurrency.
Performance of Strategy’s Stock
Since August 2020, Strategy has outshined all companies within the S&P 500. As shown in the accompanying chart, even tech giant Nvidia (NVDA -2.05%), boasting an impressive increase of 855%, has struggled to keep pace with Strategy.
Bitcoin / U.S. dollar chart by TradingView
Strategy’s significant growth can be attributed to its major Bitcoin acquisition strategy initiated in August 2020. The company has amassed nearly 500,000 Bitcoins, making it the largest corporate Bitcoin holder worldwide.
The Evolution to a Bitcoin Treasury Company
Prior to 2020, Strategy operated as an enterprise software firm but has since transformed into a Bitcoin Treasury Company (BTC) focused primarily on acquiring Bitcoin. Michael Saylor, the company’s founder and executive chairman, explains that a BTC’s mission is straightforward: purchasing as much Bitcoin as possible.
In February, the company even rebranded to reflect this shift, now featuring the Bitcoin symbol in its identity. The change from “MicroStrategy” to “Strategy” emphasizes its singular focus on Bitcoin as its overarching strategy.
Going all-in, Strategy has announced plans to purchase $42 billion worth of new Bitcoin over the next three years, financing half with equity and the other half through debt. This decision to incur debt for Bitcoin acquisition has raised concerns, akin to neighbors maxing out credit cards to buy Bitcoin. During a keynote speech at Bitcoin 2024, Saylor encouraged attendees to take extreme measures to increase their Bitcoin ownership.
Potential Risks
Yet, risks loom. The volatile nature of Bitcoin may lead to price declines, contributing to a nearly 20% drop in Strategy’s stock this year. The company’s fortunes are closely tied to Bitcoin, making it highly reactive to price fluctuations. Some analysts question Strategy’s valuation, as it significantly exceeds the worth of its Bitcoin reserves—valued at $60 billion while its Bitcoin holdings sit at approximately $40 billion. Notably, Strategy’s software division is now a loss-making venture and is not the company’s primary focus.
Despite this, many analysts expect Strategy’s value to rise over time, believing that the price of Bitcoin will also increase. If Strategy continues to “out-Bitcoin” Bitcoin, this scenario may well be plausible. Moreover, the establishment of a Strategic Bitcoin Reserve by the U.S. government could lead to increased Bitcoin buying globally, with Saylor advocating for the U.S. to acquire 25% of all circulating Bitcoin by 2035. Such aggressive initiatives could propel Strategy’s value upward as Bitcoin prices likely rise.
Investment Decisions: Buying Strategy or Bitcoin?
Strategy demonstrates significant potential for growth, and its stock market performance over the last five years has been impressive. However, I personally prefer Bitcoin, as I believe Strategy is too exposed to the volatility of the cryptocurrency market. In the long run, I remain skeptical that any tech stock, including Strategy, can consistently outperform Bitcoin.
