- MicroStrategy shares surged 488% in 2023, yet Adam Back views them as significantly undervalued due to Bitcoin holdings.
- Unlike Bitcoin ETFs, MicroStrategy avoids compounding decay issues, offering a stable option for leveraged Bitcoin exposure.
- Adam Back believes shorts on MicroStrategy stock are risky and anticipate strong growth for the company’s Bitcoin-backed strategy.
MicroStrategy (MSTR) stock has seen an impressive 488% increase in value on a year-to-date basis. However, Adam Back, CEO of Blockstream, maintains that the stock remains significantly undervalued. His conviction stems from the company’s substantial Bitcoin holdings, which he believes are not fully reflected in its current stock price.
Adam Back Criticizes Short-Selling Strategy
Back expressed strong confidence that short-sellers targeting MicroStrategy stock would face substantial losses. He highlighted that attempts to short MicroStrategy’s net asset value while maintaining a position in Bitcoin would also fail. According to him, the company’s stock remains an underappreciated asset in the financial markets.
Back emphasized that buying MicroStrategy shares presents a lower-risk alternative to more sophisticated financial products such as Bitcoin ETFs and leveraged ETFs. For instance, 2x leveraged ETFs, designed to amplify Bitcoin’s daily price movements, often lose value during periods of market stagnation due to compounding effects.
Bitcoin ETFs Face Challenges
Unlike MicroStrategy, Bitcoin ETFs are prone to “decay” issues caused by fluctuating price movements and daily rebalancing. Consequently, such products may result in losses even during periods of sideways trading, making them a less favorable choice for Bitcoin exposure.
Back further contrasted MicroStrategy’s leveraged exposure to Bitcoin with that of Bitcoin options. He pointed out that Bitcoin calls often expire worthless if market timing is incorrect, leading to a complete loss of the premium. In contrast, MicroStrategy shares provide a consistent and straightforward way to gain exposure to Bitcoin’s long-term potential.
MSTR Gains Amid Bitcoin Volatility
The Virginia-based business intelligence firm saw its shares rise nearly 12% last Friday, reflecting continued investor interest. Besides its software business, the company’s strategy of holding Bitcoin as a primary treasury asset has positioned it as a unique vehicle for Bitcoin investment.
Back reiterated his belief that MicroStrategy is a balanced choice for those seeking leveraged Bitcoin exposure. Unlike other financial products, MicroStrategy avoids the risks of compounding decay, providing a more reliable investment. Consequently, he remains confident that the company’s stock will outperform short-sellers expectations.
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