NAIROBI (CoinChapter.com) — MicroStrategy’s stock price surged 528% in 2024, riding the wave of Bitcoin’s explosive rally to a new record high of over $94,000. Yet gold advocate Peter Schiff has cast doubts on its sustainability, labeling the company’s strategy as a risky feedback loop tied directly to cryptocurrency markets.
Peter Schiff Warns of a Looming ‘Bloodbath’
Gold investor and Bitcoin critic Peter Schiff labeled MicroStrategy “the most overvalued stock in the MSCI World Index.” He warned its reliance on Bitcoin creates risks, predicting severe fallout if Bitcoin prices drop.
Schiff’s critique focuses on MicroStrategy’s feedback loop, where Bitcoin’s rising value increases the company’s stock price, enabling it to sell shares and acquire more Bitcoin. This cycle artificially inflates both MicroStrategy’s stock and Bitcoin’s value. Schiff argued that this model cannot last indefinitely and would collapse if Bitcoin’s price falls.
If Bitcoin’s price drops, Schiff warns MicroStrategy could face severe challenges. The value of its Bitcoin holdings would shrink, leading to unrealized losses. Its debt-driven strategy could become unsustainable, making it harder to meet obligations. Schiff described these interconnected risks as a potential “bloodbath” for the company.
BitMEX Research supports these concerns, calling MicroStrategy’s strategy an “infinite money glitch.” While Bitcoin’s price rise has benefited the company so far, the research warned that this approach depends heavily on continuous growth and exposes the firm to liquidation risks if Bitcoin crashes.
Record Bitcoin Purchase and Rising Risks
MicroStrategy holds 331,200 Bitcoin, valued at over $30 billion. Its latest purchase, 51,780 Bitcoin for $4.6 billion at $88,627 per coin, highlights its commitment to the cryptocurrency.
Bitcoin prices hit $94,000 the day after MicroStrategy’s announcement, further boosting the company’s stock. However, this increases the company’s dependence on Bitcoin’s volatility. A price crash could lead to asset sales and financial instability.
Institutional Investors Bet Big on MicroStrategy
Despite these warnings, institutional investors have shown considerable interest in MicroStrategy. Data reveals that institutional ownership of the company’s shares more than doubled in Nov. 2024. Vanguard holds 17.45 million shares worth $6.71 billion, with Capital International leading at 17.53 million shares.
Wall Street giants such as Morgan Stanley and BlackRock have also increased their stakes, collectively owning billions in MicroStrategy shares.
A Bitcoin downturn could result in steep losses for institutional investors, given MicroStrategy’s stock volatility. As of Nov. 2024, MSTR’s volatility stood at 32.65%, compared to Bitcoin’s 16.86%, making it riskier than the cryptocurrency itself.
For now, MicroStrategy’s fortunes are tied to Bitcoin’s performance. But as Schiff pointed out, no system built on endless growth can last forever.
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