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Why MicroStrategy Stock Soared Today

By Jon Quast - Mar 9, 2021 at 12:34PM

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With Bitcoin inching back to highs, MicroStrategy stock is reversing recent losses.

What happened

Shares of MicroStrategy (MSTR -1.50%) soared on Tuesday as the price of popular cryptocurrency Bitcoin (BTC -3.49%) spiked higher. As of noon EST, MicroStrategy's stock was up 14%. For its part, Bitcoin is up about 7% over the past 24 hours, according to CoinDesk. 

So what

MicroStrategy held over 91,000 Bitcoins on its balance sheet as of March 5. As of this writing, the price of Bitcoin is around $54,200 each, placing the total value of MicroStrategy's holdings at over $4.9 billion. Just for context, the company acquired its Bitcoin for just under $2.2 billion. 

A businessman rides a rocket ship expelling cash exhaust over a multi-colored bar chart.

Image source: Getty Images.

Now with a market capitalization under $7 billion, it's clear the market is only assigning small-cap stock value to MicroStrategy's actual business -- the majority of the market-cap value is tied to the price of Bitcoin. Therefore, on days like today when Bitcoin is surging, MicroStrategy's stock soars along with it. On other days, the reverse is true. 

Now what

After listening to MicroStrategy's management over the past several months, I think it's safe to say that the company will continue holding and even acquiring more Bitcoin for the foreseeable future. Therefore, if you're a shareholder, you're accepting the volatility risk that comes with this strategy. 

Furthermore, if you understand why MicroStrategy stock is volatile and you accept this, then there's nothing you need to do on days like today. Of course, that's true of most stock moves. Business fundamentals typically don't change drastically overnight, giving us the luxury of patiently allowing our stocks to create value over the long haul. 

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Stocks Mentioned

MicroStrategy Incorporated Stock Quote
MicroStrategy Incorporated
MSTR
$201.51 (-1.50%) $-3.06
Bitcoin Stock Quote
Bitcoin
BTC
$30,103.64 (-3.49%) $-1,087.57

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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