Investors contemplating the future trajectory of MicroStrategy’s shares, which witnessed a remarkable 343% surge this year, might find insights in the latest research note from 10x Research, led by Markus Thielen, who accurately predicted this year’s Bitcoin rally.
According to 10x’s recent analysis, MSTR’s shares could be overvalued by 26%. This conclusion is derived from the firm’s regression model, which meticulously examines the relationship between the dependent variable, MSTR, and the independent variable, BTC’s spot price.
The research note states, “As the regression model shows, MicroStrategy is +26% overvalued and has a 20% downside based on the current Bitcoin prices. It is time to take profit,” urging a cautious approach to MSTR’s current valuation.
MicroStrategy, a company that holds a substantial amount of Bitcoin, has seen its shares increase more than fourfold this year, reaching a 25-month high of $673 on Wednesday, making it one of the top-performing crypto-related stocks of 2023. The firm, listed on Nasdaq, possesses 189,150 BTC, accumulating the cryptocurrency as a reserve asset over the past three years. In comparison, Bitcoin, the leading cryptocurrency, has experienced a 160% gain this year, with a 60% surge in the current quarter, primarily driven by the spot ETF narrative.
The performance of crypto-related stocks, such as MSTR and Coinbase shares, in relation to Bitcoin, is often regarded as a gauge for institutional interest in digital assets. These listed instruments provide a means for market participants to gain exposure to digital assets without direct ownership.
The analysis employs a scatter plot and an upward-sloping line of best fit to illustrate the positive relationship between Bitcoin and MSTR. The R² value of 0.8232 indicates that 80% of the variation in MSTR can be explained by changes in BTC’s price. According to 10x, at the closing price of $673 on Thursday, MSTR is considered overvalued by 20% relative to Bitcoin’s prevailing market rate of around $43,000.
10x suggests a cautious stance, advising investors to take profits and reduce long positions. While noting that HIVE, HUT, and GALAXY still offer some value, 10x believes that significant gains have already been made in these stocks.
