The first six months of the year have been extraordinary for Bitcoin (BTC -0.03%). The world's largest cryptocurrency by market capitalization is now up more than 80% for the year, and analysts are increasingly bullish about the crypto's long-term prospects. In fact, some analysts are now predicting that Bitcoin could hit $100,000 by the end of 2024.

But what if you are not ready to hold Bitcoin directly in your portfolio? Well, there's another way to get access to the upside potential of Bitcoin without taking on as much risk, and it comes in the form of MicroStrategy (MSTR -3.65%), an enterprise software stock that's up almost 170% for the year. The company holds a tremendous amount of Bitcoin on its balance sheet, and that's what makes it a fantastic indirect play on the price of Bitcoin.

Bitcoin on the balance sheet

In August 2020, MicroStrategy became the first publicly-traded company to buy Bitcoin as part of its capital allocation strategy. Since then, MicroStrategy has been binge-buying Bitcoin and the company's founder, Michael Saylor, has become one of the biggest Bitcoin bulls in the world. The company now holds more than $4.6 billion worth of Bitcoin on its balance sheet. That's far more than even Coinbase, the world's second-largest cryptocurrency exchange.

Gold coin with Bitcoin symbol on it.

Image source: Getty Images.

Moreover, MicroStrategy shows no signs of letting up on its Bitcoin strategy. Over the past two months, according to Securities and Exchange Commission filings, the company bought another 12,000 Bitcoins worth $347 million. The company now holds 152,333 Bitcoins on its balance sheet, worth about $4.6 billion. By way of comparison, the total market capitalization of MicroStrategy is about $4.9 billion. Thus, the market is essentially saying that the total value of Bitcoin accounts for almost all of the company's market value. 

Safer than Bitcoin?

MicroStrategy was founded 34 years ago and is generally considered to be one of the top business intelligence software providers in the world. The company has clients in a number of different segments, including retail, financial services, healthcare, technology, and the public sector. And it's all those paying customers who provide a certain margin of safety. Even if the crypto market were to crash, the company would still have a sustainable software business to fall back on.

Right now, MicroStrategy is modestly profitable. In the first quarter of 2023, for example, MicroStrategy posted a gross profit of $94 million, nearly identical to the $93.6 million gross profit that it posted in the year-earlier period. As long as the company can increase its enterprise software business, this number should continue to tick upward. For example, the company is now getting involved with artificial intelligence in order to find new ways to embed AI functionality into its core enterprise analytics packages. And the company is also working on ways to provide Bitcoin payment solutions to clients.

A proxy for Bitcoin

The big caveat here, of course, is that MicroStrategy appears to be extremely correlated with the price of Bitcoin. Thus, the price of MicroStrategy increases if the price of Bitcoin rises. And, conversely, the price of MicroStrategy falls if the price of Bitcoin declines. This chart below, showing the relationship between Bitcoin and MicroStrategy in 2023, says it all:

Chart of MicroStrategy vs. Bitcoin.

Data by TradingView

In short, there's a good reason some institutional investors view MicroStrategy stock as a proxy for holding Bitcoin. The company simply holds so much Bitcoin right now -- equivalent to nearly 0.7% of all Bitcoin in circulation -- that the market is valuing it as an indirect play on the price of Bitcoin.

As MicroStrategy itself pointed out in its last earnings release in May, one major prong of its corporate strategy is to acquire and hold Bitcoin. And there's no reason to think that MicroStrategy is going to pull back on its current Bitcoin strategy anytime soon.

Thus, if you're bullish on Bitcoin, then you should be bullish on the prospects of MicroStrategy. With MicroStrategy, you can get access to the upside of Bitcoin without all the risk of investing in cryptocurrency directly.