Is Microstrategy a buy after Friday’s crash?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jan 22, 2022
  • SEC rejects Microstrategy Bitcoin reporting.
  • Microstrategy tanks in tandem with the crypto market.
  • Analysts still bullish on MSTR.

Microstrategy Inc. (NASDAQ:MSTR) took a hit on Friday after the SEC announced their objection to the company’s method of Bitcoin reporting.

In a communique to Microstrategy, the SEC stated that they were not happy about Microstrategy’s decision to remove the Bitcoin adjustment from GAAP numbers. They further asked MSTR to change and start reporting their true BTC performance in future filings.

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While the broader equity markets took a hit on Friday, Microstrategy took an even bigger hit and closed lower by 17%.

Microstrategy tanks as Bitcoin crashes

Microstrategy is the world’s largest corporate owner of Bitcoin. As it stands now, Micro Strategy holds 124 391 bitcoins purchased at an average price of $30k.

With the price of Bitcoin tanking, Microstrategy has taken a hit too, due to its significant exposure to the cryptocurrency.

That said, MSTR still has a buy rating among analysts. This has a lot to do with Bitcoin’s potential as an investment. Bitcoin has got a lot of institutional adoption recently. Given its scarcity, there is a high chance of Bitcoin shooting up in value within a short time, a factor that could positively impact MSTR’s price momentum long-term.

Bitcoin is already one of the best-performing assets ever, and if its 10-year price action is anything to go by, companies like Microstrategy that have heavy exposure could reap big.

Microstrategy gaps down as selloff accelerates

Microstrategy has been in a selloff since November 2021. That’s also the time when the Bitcoin bear market started. MSTR gapped down on Friday and closed lower by 14%.

Source: TradingView

If Bitcoin and other cryptocurrencies bounce back in the short-term, Microstrategy could potentially make a bullish reversal too.

However, if the cryptocurrency market remains bearish, MSTR could trade in the red in short to medium term.

Summary

Microstrategy is heavily exposed to the cryptocurrency market. As such, it has taken a hit following the recent crash in the crypto market. However, if the crypto market rebounds, MSTR could rebound as well.

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