MicroStrategy Stock Skyrockets Over 400% in 2025: What Investors Must Know About This Bitcoin Proxy

MicroStrategy is set to join the prestigious Nasdaq 100 Index this Monday, marking a significant milestone for the company.

Essential Insights

• MicroStrategy’s shares have surged over 400% in 2024 amid investor enthusiasm for its bitcoin acquisition strategy as the cryptocurrency hits new all-time highs.
• While the stock acts as a proxy for bitcoin, it has significantly outperformed the digital currency but remains highly volatile.
• The company leverages debt and equity issuance to fund its expanding bitcoin holdings.
• Despite bullish analyst sentiment tied to bitcoin’s promising outlook, some investors question the sustainability of MicroStrategy’s extraordinary stock gains.

Once an obscure software company, MicroStrategy (MSTR) has become synonymous with bitcoin investment after its aggressive accumulation of the cryptocurrency.

Since early 2024, the company’s stock has soared over 400%, fueled by bitcoin’s rally past $100,000 amid optimistic expectations that crypto-friendly policies will be enacted by the Trump administration and Congress.

Joining the ranks of tech giants like Nvidia, Apple, and Tesla, MicroStrategy’s inclusion in the Nasdaq 100 means funds tracking the index, such as the Invesco QQQ Trust, must now hold its shares.

Analysts remain optimistic about MicroStrategy’s growth potential, highlighting its leveraged bitcoin acquisition strategy. However, concerns linger about the risks associated with this approach and whether the current stock rally can be maintained.

MicroStrategy’s Stock Outpaces Bitcoin’s Gains

MicroStrategy’s stock price has generally tracked bitcoin’s movements, but thanks to leverage, it has outperformed bitcoin’s approximately 125% gain since the start of the year.

The company began purchasing bitcoin in 2020 when prices hovered near $11,000, a stark contrast to former CEO Michael Saylor’s earlier skepticism about bitcoin’s longevity.

Now serving as chairman, Saylor describes MicroStrategy as a bitcoin treasury operations company. Since 2020, the company has acquired 444,262 BTC—over 2% of the total 21 million bitcoins to ever exist—making it the second-largest corporate bitcoin holder after BlackRock’s iShares Bitcoin Trust.

MicroStrategy tracks its bitcoin investment performance through a metric called bitcoin yield, representing bitcoin ownership per share.

At the end of 2023, the company held 189,150 bitcoins with 207,636 diluted shares outstanding, a ratio of 0.91. By December 23, 2024, bitcoin holdings jumped to 444,262 BTC with 280,828 shares outstanding, raising the ratio to 1.576—a 73.1% year-over-year increase.

According to a recent regulatory filing, this bitcoin yield metric helps investors understand MicroStrategy’s decision to fund bitcoin purchases through issuing additional shares or convertible instruments.

A Leveraged Strategy to Amplify Bitcoin Exposure

MicroStrategy issues equity or zero-coupon convertible debt backed by a portion of its bitcoin reserves to purchase more bitcoin, capitalizing on arbitrage opportunities.

The company announced plans to raise $42 billion over three years using these methods and is aggressively pursuing this target.

When issuing convertible debt, investors may convert debt into MicroStrategy shares at a predetermined price, similar to a call option.

In an interview with CNBC, Saylor explained, “We issue $3 billion in debt backed by $600 million in bitcoin, due in five years with zero interest. We buy $3 billion in bitcoin, capturing $2.4 billion in arbitrage upfront, and over five years, the investment can double or quadruple because bitcoin appreciates faster than the S&P 500.”

Bernstein analysts describe MicroStrategy as a “leveraged play on Bitcoin,” recently boosting their price target from $290 to $600. The stock currently trades near $360.

Bernstein notes that the long maturity of the debt provides a buffer against immediate repayment risks and bitcoin price volatility. Even if shares are issued to satisfy convertible debt, dilution effects are expected to remain limited.

Concerns About a Potential Stock Correction

Despite the enthusiasm, skepticism exists regarding the stock’s sustainability.

For example, Citron Research, a well-known short seller, remains bullish on bitcoin but has opened a short position on MicroStrategy stock, effectively betting on a decline.

Citron commented on social media, “Much respect to @saylor, but $MSTR appears overheated,” noting that trading volumes seem disconnected from bitcoin’s fundamentals.

Galaxy Digital CEO Mike Novogratz recently told CNBC he anticipates sharper corrections in bitcoin-related stocks like MicroStrategy compared to bitcoin itself, largely due to leverage.

Update, December 23, 2024: This article has been updated to include MicroStrategy’s latest bitcoin acquisition.

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