Bitcoin Climbed Back Above $80,000. Michael Saylor’s Strategy Isn’t Going to Zero, But Its Fate Rests on the Same Thing.

Bitcoin coin dark background by Johannes Blumel via Pixabay

After a brutal stretch, Strategy (MSTR) is winning back some believers. Canaccord Genuity recently raised its price target from $130 to $175 and kept a “Buy” rating on MSTR stock. Analyst Joseph Vafi said the company’s balance sheet is now “war-chested” with enough cash to do more than just cover its dividends. The stock, which is essentially a bet on Bitcoin (BTCUSD), jumped about 12% on Aug. 27 as the cryptocurrency rallied above $80,000. Formerly known as MicroStrategy and chaired by Michael Saylor, Strategy is the world’s largest corporate holder of Bitcoin.

Strategy is coming off a rough patch. From mid-May to late June, MSTR stock was cut by well over half. When BTC crashed to around $58,000 in late June, Strategy sat on a paper loss of roughly $13 billion, about a fifth of what it paid for its coins. The recent rally flipped that loss back into a profit, with Bitcoin now trading above Strategy’s average purchase price but below the $80,000 mark again, currently changing hands at around $77,300 per coin.

The Number That Really Drives This Stock

Strategy’s whole model depends on trading above the value of the Bitcoin it owns. When Strategy sits well above the value of its coins, Saylor can sell new shares at the higher price, buy more Bitcoin, and lift the amount of Bitcoin behind each share. This is exactly what he did on Aug. 24. That gap is the engine that makes the whole thing work.