How correlated is MicroStrategy stock to the Bitcoin price?

Kay Takeaways

• 1 in every 127 Bitcoins are owned by MicroStrategy
• The stock price tracks the price of Bitcoin remarkably well
• Despite price correlation, there are additional risks to the stock, while it violates the “not your keys, not your coins” mantra
• For investors unable to purchase Bitcoin directly, however, it does provide an alternative means of Bitcoin exposure
• With 0.79% of the circulating supply owned by the company, it also throws up concern about a centralisation of wealth

Google “MicroStrategy” and Wikipedia will tell you that it is “an American company that provides business intelligence, mobile software, and cloud-based services”.That may technically be true, but in reality it has become a Bitcoin investment vehicle. 

MicroStrategy, under the borderline-religious leadership of Michael Saylor, currently owns 152,800 Bitcoin. That is 0.79% of the circulating supply; in other words, 1 in every 127 Bitcoin is now owned by MicroStrategy. When omitting the portion of the Bitcoin supply which is lost (for which estimates generally come in at about 1.5 million), the company owns 1 in every 118 coins.

What’s more, since MicroStrategy’s first Bitcoin purchase on August 8th, 2020, there have been just over one million coins created. This means MicroStrategy’s stash equates to 15.3% of the total coins created since they started buying. 

Clearly, no matter what way you swing it, MicroStrategy own an enormous stash of Bitcoin. Here, we will assess how it affects their stock price.

https://twitter.com/saylor/status/1686468084574412800

Performance vs Bitcoin

The place to start is, unsurprisingly, MicroStrategy’s correlation with the Bitcoin price. On the next chart, we can see that the correlation has picked up markedly since the company began buying up the supply. Bar a brief dip in August last year, the relationship has been extremely strong since late 2021. 

This is not surprising when one looks at the numbers. MicroStrategy has averaged $497 million of revenue over the last three years, with an average EBITDA of $50 million. And yet these numbers are dwarfed by its Bitcoin supplies – it owns approximately $4 billion worth of Bitcoin at the time of writing, purchased for $4.53 billion.

The market cap of the company is only marginally more than the value of its Bitcoin, coming in at $4.7 billion.