Summary
MicroStrategy’s shares, which have historically been used as a proxy for Bitcoin due to the company’s large holdings of the cryptocurrency, may face competition from newly launched spot Bitcoin ETFs. While the ETFs may reduce the premium at which MicroStrategy trades relative to Bitcoin, the company’s shares still offer unique advantages such as no management fee and the cash flows from its operating software business. Some industry watchers believe that MicroStrategy’s premium over Bitcoin may fall from 40% to 15-25%, but the company’s strong fundamentals and potential increase in Bitcoin’s price could offset this contraction.
Key Points
1. MicroStrategy is the largest publicly traded holder of bitcoin, with holdings totaling 189,150 BTC as of December 26th.
2. The launch of spot bitcoin ETFs provides investors with a new access point to easily gain BTC exposure, potentially shrinking the premium at which MicroStrategy stock trades relative to BTC.
3. Despite the potential impact of spot bitcoin ETFs, industry watchers believe that MicroStrategy shares still offer certain advantages over such funds, such as no management fees and the company’s operating software business generating free cash flow.