Bank of America

MicroStrategy’s stock price more than doubles in 2023 in lockstep with Bitcoin

Bank of America and Fidelity have increased their MicroStrategy exposure in what appears to be a passive Bitcoin investment.

MicroStrategy’s bold Bitcoin (BTC) investment strategy is playing out profitably so far into 2023.

Today, MicroStrategy’s stock, MSTR, is up roughly 140% year-to-date (YTD) to $350 per share, its highest level since September last year. It mirrored Bitcoin’s 90% YTD gains, maintaining a strong positive correlation with the top cryptocurrency.

*MSTR daily price chart featuring its daily correlation with BTC. Source: TradingView*

Proxy Bitcoin investment boom

To recap, MicroStrategy is essentially a proxy for direct BTC investment without a spot Bitcoin exchange-traded fund (ETF) in the United States. It holds 140,000 BTC worth $4.26 billion, the most by a publicly traded company as a part of its treasury strategy.

MSTR investors typically get their buying or selling cues from the same catalysts that drive Bitcoin market trends.

As a result, the stock has mirrored the BTC price uptrend so far in 2023, led by rush-to-safety trades amid the U.S. banking crisis and anticipation that the Federal Reserve would stop hiking rates.

*BTC/USD daily price chart. Source: TradingView*

For instance, CNN data shows Bank of America’s entities owns 86,147 MSTR shares. Similarly, Fidelity purchased 97,199 MSTR shares throughout 2022, suggesting growing institutional interest in proxy Bitcoin investments.

Coinbase’s COIN, another stock offering indirect crypto exposure, has doubled in value this year as well.

MicroStrategy’s core business is unhealthy

MicroStrategy is essentially an enterprise software solution company and generates its revenue from software licensing and subscription services.

The firm realized a net loss of $193.7 million during Q4 2022, up from $137.5 million a year ago, led by a Bitcoin impairment loss of $197.6 million. Furthermore, its operating cash flow was $18.2 million compared to a positive cash flow of $3.2 million in the same quarter a year ago.

Revenue isn’t what you’re making it out to be. If a lemonade stand does $100M in revenue and spends $99,999,999 to generate that revenue, then a $1.00 profit isn’t all that amazing.

Microstrategy isnt far from that example. Their expense to generate that revenue leaves them with… pic.twitter.com/ZhA80tWn3J

— Alby (@albyva) April 2, 2023

Of course, MicroStrategy could sell its Bitcoin holdings to boost its balance sheet reserves. But the company said it would not alter its BTC buying strategy under financial stress. Instead, it employs strategies like share dilutions and debt offerings to raise capital to buy BTC.

“The risk here will come from its inability to buy Bitcoin with positive cash flows in future quarters as per its strategy,” said Pacifica Yield, a financial blogger at Seeking Alpha, adding:

“Dilution to buy assets that you lose money on if Bitcoin returns to its near-term lows would not be a shareholder-friendly strategy.”

20% correction for MSTR stock in Q2?

From a technical standpoint, MSTR has a high probability of a 20% price correction in Q2.

The stock’s yearly rally has landed its price near a resistance range — between $320 and $340 — notorious for capping breakout attempts. Suppose a pullback occurs, the price could drop toward its 50-3D exponential moving average (50-3D EMA; the red wave) below $260 by June.

*MSTR 3-day price chart. Source: TradingView*

MicroStrategy is expected to release its Q1 earnings report by May 2.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin market cap grows 60% in 2023 as top Wall Street banks lose $100B

Bitcoin has decoupled from stocks and continues to rise 10 years after the Cyprus banking crisis coincided with a BTC price boom.

The market capitalization of Bitcoin (BTC) has added $194 billion in 2023. Its 66% year-to-date (YTD) growth vastly outperforms top Wall Street bank stocks, particularly as fears of a global banking crisis are rising.

*BTC market cap daily performance chart. Source: TradingView*

Moreover, Bitcoin has decoupled from United States stocks for the first time in a year, with its price rising about 65% versus S&P 500’s 2.5% gains and Nasdaq’s 15% decline in 2023.

*SPX and NDAQ YTD performance vs. BTC/USD. Source: TradingView*

Wall Street banks lose $100B in 2023

The six largest U.S. banks — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs — have lost nearly $100 billion in market valuation since the year’s start, according to data gathered by CompaniesMarketCap.com.

Bank of America’s stock is the worst performer among the Wall Street banking players, with a nearly 17% YTD drop in valuation. Goldman Sachs trails with an almost 12% YTD decrease, followed by Wells Fargo (9.74%), JPMorgan Chase (6.59%), Citi (3.62%) and Morgan Stanley (0.84%).

*Wall Street banks YTD performance. Source: TradingView*

U.S. bank valuations have slid amid the ongoing U.S. regional banking collapse. That includes the announcement last week that Silvergate, a crypto-friendly bank, was closing its doors, followed by regulators’ subsequent takeover of Signature Bank and Silicon Valley Bank.

The crisis further expanded with the near-collapse of First Republic Bank, which was saved at the last moment through a $30 billion combined injection by Wells Fargo, JPMorgan Chase, Bank of America and Citigroup — among others.

Cyprus and Greece deja vu?

The rise of Bitcoin in the face of a growing U.S. banking crisis is similar to how it reacted during banking collapses in Cyprus and Greece.

BTC’s price grew by up to 5,000% amid the Cyprus financial crisis in 2013, prompted by the exposure of Cypriot banks to overleveraged regional real-estate companies.

*BTC/USD performance during Cyprus banking crisis. Source: TradingView*

The situation was so dire in March 2013 that Cyprus authorities closed all banks to avoid a bank run.

When Greece faced a similar crisis in 2015 and imposed capital controls on citizens to avoid a bank run, Bitcoin’s price gained 150%.

*BTC/USD performance during the Greece banking crisis. Source: TradingView*

“Fears over the stability of the banking system, along with declining real interest rates, creates a good environment for Bitcoin to rebound,” commented Ilan Solot, co-head of digital assets at London broker Marex, adding that the crypto “is seen by some investors as a hedge against systemic risks.“

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Gold vs BTC correlation signals Bitcoin becoming safe haven: BofA

Bitcoin’s growing correlations with gold, S&P 500 and Nasdaq 100 indicate that investors see BTC as a “relative safe haven,” BofA strategists wrote.

Despite the ongoing cryptocurrency bear market, investors have been increasingly looking at Bitcoin (BTC) as a safe haven, a new study suggests.

The rise in the correlation between Bitcoin and gold (XAU) is one of the major indicators demonstrating investors’ confidence in BTC amid the ongoing economic downturn, according to digital strategists at the Bank of America.

Bitcoin’s correlation with gold — which is commonly viewed as an inflation hedge — has been on the rise this year, hitting its highest yearly levels in early October. The growing correlation trend started on Sept. 5 after remaining close to zero from June 2021 and turning negative in March 2022, BofA strategists Alkesh Shah and Andrew Moss said in the report.

“Bitcoin is a fixed-supply asset that may eventually become an inflation hedge,” the strategists wrote. The growth in BTC/XAU correlation is not the only indicator signaling growing investors’ confidence in Bitcoin as a store of value though.

Bitcoin has also been increasingly correlated with major stocks like the S&P 500 (SPX) and Nasdaq 100 (QQQ). The correlation between Bitcoin and both SPX and QQQ reached all-time highs on Sept. 13, the BofA strategists wrote, adding:

“A decelerating positive correlation with SPX/QQQ and a rapidly rising correlation with XAU indicate that investors may view Bitcoin as a relative safe haven as macro uncertainty continues and a market bottom remains to be seen.”

BofA strategists also mentioned massive Bitcoin outflows from exchanges to personal or self-hosted wallets. According to the study, weekly BTC exchange outflows in early October were the largest since mid-June, marking the third consecutive week of outflows. The strategists emphasized that large and continuous outflows to personal wallets indicate limited near-term sell pressure, stating:

“Investors transfer tokens from exchange wallets to their personal wallets when they intend to HODL, indicating a potential decrease in sell pressure.”

The BofA strategists mentioned that the report’s methodology included data from major Bitcoin exchanges, including Binance, Coinbase, Coincheck, FTX, Gemini, Kraken and others.

“The blockchain’s transparency gives us insight into the digital asset ecosystem that’s not available in traditional financial markets,” the analysts stated.

The new report comes amid the rising risks of the global economic recession, driving more demand for the inflation hedge. Bitcoin has lost about 70% of its market value amid the massive crypto winter of 2022, triggering more skepticism over its status as an inflation hedge.

Zuckerberg’s $100B metaverse gamble is ‘super-sized and terrifying,’ shareholder says

In an open letter, Altimeter Capital’s CEO and founder recommended the tech giant cut its Metaverse investments from $10-15 billion a year to $5 billion.

A shareholder’s open letter to Meta CEO Mark Zuckerberg has labeled the tech giant’s investment into the Metaverse as “super-sized and terrifying.”

The shareholder has urged the company to scale down its investment in the Metaverse and its related technology arm amid a significant fall in its stock price over the last 18 months.

The open letter was published on Oct. 24 and was directed at Zuckerberg and the board of directors. It was authored by Brad Gerstner, CEO and founder of technology investment firm Altimeter Capital, which owns roughly a 0.11% share in Meta, according to Hedge Follow.

Gerstner said that Meta’s foray into the Metaverse, while important, should not command as much investment from the company as it currently does.

He said the company has announced investments of $10 billion to $15 billion per year into its Metaverse project, including AR/ VR tech and Horizon World, but “may take 10 years to yield results,” explaining:

“An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards.”

Rather, he has urged the company to focus more on artificial intelligence (AI) and less on the Metaverse, as it “has the potential to drive more economic productivity than the internet itself.”

“While most companies will struggle to monetize AI, we believe Meta is incredibly well positioned to leverage AI to make all of its existing products better,” he added.

Gestner’s comments come on the same day the Bank of America downgraded Meta from a “buy” to “neutral” valuation, partly due to its Metaverse investments likely to remain an “overhang” on the stock because of the “lack of progress” and “new competition from Apple.”

Gerstner added that over the last 18 months, Meta’s stock has fallen 55% compared to an average of 19% for its “big-tech peers,” which he suggests “mirrors the lost confidence in the company, not just the bad mood of the market.”

Gerstner isn’t the only person to think the future of the Metaverse is a relatively “uncertain” one either.

On Jul. 30, Ethereum co-founder Vitalik Buterin said that while “the Metaverse will happen,” corporate attempts such as those by Facebook will “misfire” because “it’s far too early to know what people actually want.”

The share price for Meta Platforms Inc (META) has plummeted 60.53% over the last year to $129.72 at the time of writing – a far greater fall in the current bear market than the likes of Apple, Amazon and Google.

Meta is set to report its third-quarter 2022 results on Oct. 26.

Zuckerberg’s $100B metaverse gamble is ‘super-sized and terrifying’ — Shareholder

In an open letter, Altimeter Capital’s CEO and founder recommended the tech giant cut its metaverse investments from $10 billion–$15 billion a year to $5 billion.

A shareholder’s open letter to Meta CEO Mark Zuckerberg has labeled the tech giant’s investment into the Metaverse as “super-sized and terrifying.”

The shareholder has urged the company to scale down its investment in the metaverse and its related technology arm amid a significant fall in its stock price over the last 18 months.

Gerstner said that Meta’s foray into the metaverse, while important, should not command as much investment from the company as it currently does.

“An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards.”

Rather, he has urged the company to focus more on artificial intelligence (AI) and less on the metaverse, as it “has the potential to drive more economic productivity than the internet itself.”

“While most companies will struggle to monetize AI, we believe Meta is incredibly well positioned to leverage AI to make all of its existing products better,” he added.

Gerstner’s comments come on the same day the Bank of America downgraded Meta from a “buy” to “neutral” valuation, partly due to its Metaverse investments likely to remain an “overhang” on the stock because of the “lack of progress” and “new competition from Apple.”

Gerstner isn’t the only person to think the future of the metaverse is a relatively “uncertain” one either.

On July 30, Ethereum co-founder Vitalik Buterin said that while “the Metaverse will happen,” corporate attempts such as those by Facebook will “misfire” because “it’s far too early to know what people actually want.”

The share price for Meta Platforms Inc has plummeted 60.53% over the last year to $129.72 at the time of writing — a far greater fall in the current bear market than the likes of Apple, Amazon and Google.

Meta is set to report its third-quarter 2022 results on Oct. 26.

Rep. Warren Davidson: Stablecoin bill has ‘outside chance’ of finalizing this year

Earlier this week, new draft legislation on stablecoins came to light aimed at “endogenously collateralized stablecoins.”

There is a small chance the U.S. House of Representatives could pass the bill to regulate stablecoins by year-end, though it’s more likely it will pass in the first quarter of 2023, says U.S. Congressman Warren Davidson.

According to a Thursday report from Kitco, Davidson made the remarks at the Annual Fintech Policy Forum on Sept. 22, where he suggested:

“There’s an outside chance we find a way to get to consensus on a stablecoin bill this year.”

The “stablecoin bill” seemingly refers to draft legislation aimed at “endogenously collateralized stablecoins” which came to light this week — and would place a two-year ban on new algorithmic stablecoins such as TerraUSD Classic (USTC).

However, Davidson went on to say that while “there’s a chance we get to yes on stablecoins this year,” it’s something that can be achieved by the first quarter of 2023.

“If we don’t, it’s something that I think we can get to with a Republican majority in Q1 next year,” he said.

Davidson is widely seen as crypto-friendly and has previously introduced the “Keep Your Coins” bill which aimed to protect self-custodied crypto wallets from U.S. government control.

A number of bills aimed at regulating stablecoins have been introduced in the U.S., such as the one that was introduced on Feb. 15 this year by U.S. Rep. Josh Gottheimer.

The Director of the Consumer Financial Protection Bureau (CFPB), Rohit Chopra, also reportedly spoke at the event and believes that stablecoins have the potential for widespread adoption, noting:

A stablecoin, riding the rails of a dominant payments system or a mobile OS, I think that could create ubiquity very quickly.

Chopra added that if stablecoins do see this kind of rapid adoption, they could have a serious impact on global financial stability.

The CFPB director also suggested that Washington may be neglecting other areas of fintech development due to its intense focus on crypto in recent months.

The forum was attended by financial giants such as Bank of America, Visa and Mastercard and was reportedly aimed at fostering discussion between executives and policymakers as to how they can work together to ensure developing technologies help businesses, consumers and the economy.

The current draft bill for stablecoins is being negotiated between House Financial Services Committee Chair Maxine Waters and the committee’s top Republican, Rep. Patrick McHenry.

Stablecoin bill has ‘outside chance’ of finalizing this year — Rep. Warren Davidson

Earlier this week, new draft legislation on stablecoins came to light aimed at “endogenously collateralized stablecoins.”

There is a small chance that the United States House of Representatives could pass the bill to regulate stablecoins by year-end, though it’s more likely it will pass in the first quarter of 2023, says U.S. Congressman Warren Davidson.

According to a Thursday report from Kitco, Davidson made the remarks at the Annual Fintech Policy Forum on Thursday, where he suggested:

“There’s an outside chance we find a way to get to consensus on a stablecoin bill this year.”

The “stablecoin bill” seemingly refers to draft legislation aimed at “endogenously collateralized stablecoins,” which came to light this week — and would place a two-year ban on new algorithmic stablecoins such as TerraUSD Classic (USTC).

However, Davidson went on to say that while “there’s a chance we get to yes on stablecoins this year,” it’s something that can be achieved by the first quarter of 2023.

“If we don’t, it’s something that I think we can get to with a Republican majority in Q1 next year,” he said.

Davidson is widely seen as crypto-friendly and has previously introduced the Keep Your Coins bill, which aimed to protect self-custodied crypto wallets from U.S. government control.

A number of bills aimed at regulating stablecoins have been introduced in the U.S., such as the one that was introduced on Feb. 15 this year by U.S. Rep. Josh Gottheimer.

The director of the Consumer Financial Protection Bureau (CFPB), Rohit Chopra, also reportedly spoke at the event and believes that stablecoins have the potential for widespread adoption, noting:

“A stablecoin, riding the rails of a dominant payments system or a mobile OS, I think that could create ubiquity very quickly.”

Chopra added that if stablecoins do see this kind of rapid adoption, they could have a serious impact on global financial stability.

The CFPB director also suggested that Washington may be neglecting other areas of fintech development due to its intense focus on crypto in recent months.

The current draft bill for stablecoins is being negotiated between House Financial Services Committee Chair Maxine Waters and the committee’s top Republican, Rep. Patrick McHenry.