MicroStrategy stock spikes over 20% as BTC price continues skyward

Short-sellers may be generating some of the gain, but MicroStrategy’s fundamentals are strong.

The share price of MicroStrategy (MSTR) rose over 20% on March 4 in the early hours of trading in the United States. By midday, it retained a gain of over 15%. MicroStrategy is an active investor in Bitcoin (BTC). 

After closing at $1,079 on March 3, MSTR opened at $1,200 on March 4 and reached an intraday high of $1,339.

According to Mechanism Capital co-founder Andrew Kang, about 20% of the publicly available shares in MicroStrategy, worth around $3 billion, were locked into short positions. Kang said on X:

“I imagine a lot of that float is angry tradfi boomers trying to capture the premium to NAV [net asset value].”

In other words, according to Kang, investors wanted to take advantage of the stock’s rising value compared to its net assets, on the assumption that the share price would fall again.

Kang warned that miscalculation could lead to a situation where “that spread blows out in a mega squeeze,” such as the short squeeze GameStop (GME) experienced in January 2021. On Jan. 29, 2021, GM price rose 1,500% over two weeks. After hitting a high of over $81, GME fell to $13 within a month.

MicroStrategy added 3,000 BTC to its holdings between Feb. 15 and 25 at an average price of $51,813 for a total of $155 million, founder and chairman Michael Saylor stated on X on Feb. 26. That brought the company’s BTC holdings to 193,000 BTC purchased at an average price of $31,554 for a total price of $6.1 billion.

At a BTC price of $66,332 recorded on March 4, MicroStrategy’s BTC holdings are worth $12.8 billion.

Related: AI, ETFs will power a decade-long ‘gold rush’ for Bitcoin — Michael Saylor

Market watchers were already bullish on MicroStrategy. In a Feb. 27 market report, investment banker Benchmark called MicroStrategy a “buy” with a target price of $990. Benchmark also predicted that the upcoming BTC halving will boost MicroStrategy’s share price as well.

On Feb. 20, Saylor said he would be buying Bitcoin forever, saying it is technically superior to gold, real estate and the S&P 500.

MicroStrategy was selling at $1,251 at the time of writing, up almost 16% in the day.

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