Staying true to its new identity as “the largest corporate holder of Bitcoin,” Strategy (MSTR), formerly known as MicroStrategy, continues to double down on its Bitcoin bets despite recording a $5.91 billion unrealized loss on digital assets in Q1 2025. The company just recently announced a further $556 million in Bitcoin purchases.
After its most recent purchases, the company now owns an astounding 538,200 Bitcoins with an average purchase price of $66,384.56 per Bitcoin and a total cost of $33.139 billion. However, its Bitcoin buying playbook, often involving leveraging debt and raising equity, exudes risk. Moreover, its complete dependence on a speculative currency makes it a gamble. With an earnings announcement on May 1st just around the corner, market conditions and the company’s reliance on Bitcoin price buoyancy cast a shadow.
Hence, I am bearish MSTR despite its recent outperformance and a swooning Wall Street.
Bitcoin Strategy and Holdings
For those unaware, Strategy was originally founded in 1989 and focused on business intelligence and cloud-based services. Today, it provides solutions for business data analysis through advanced analytics, reporting, and data visualizations.
The company began its Bitcoin journey in 2020 after an initial purchase of 21,454 BTC for approximately $250 million. Strategy was a pioneer in integrating Bitcoin into its capital allocation. While some other companies, like Tesla (TSLA) and Block (XYZ), have followed its lead, Strategy has taken it to an extreme. For context, its crypto stash now represents approximately 1.2% of the total 21 million Bitcoins that will ever be mined. This is no small amount. And if its rebranding to Strategy wasn’t enough, last year, it self-identified as a “Bitcoin treasury company.”
Essentially, rather than treating bitcoin as an investment or hedge, Strategy has redefined its entire business purpose around the cryptocurrency. Its bitcoin holdings are now approximately 84x its annual revenue from its original business operations. Subsequently, Strategy is at the whim of Bitcoin’s volatile price. This is a double-edged sword. While Bitcoin has soared over 1,000% in the past five years, its future performance is speculative.
Market Challenges Persist for MSTR
The biggest issue for Bitcoin moving forward is its utility. Governments haven’t exactly welcomed cryptocurrency with open arms. China, for instance, does not recognize digital tokens as legal tender or assets. Meanwhile, in the U.S., Bitcoin proponents were hoping that the Trump administration would adopt a large strategic reserve, increasing its scarcity and price. In March, President Trump established an official government cryptocurrency reserve, but it underwhelmed Bitcoin enthusiasts.
The “Strategic Bitcoin Reserve” won’t involve any direct buying of Bitcoin as previously hoped. Instead, “funds will be stocked with coins forfeited to the federal government as part of criminal or civil proceedings.” The conservative approach does not represent a significant shift in government crypto policy.
Following a 3-month price return of nearly -16%, Strategy recently announced that it “expects to post a $5.9 billion loss in the first quarter of 2025,” with its declining software business doing little to stabilize the company’s exposure to Bitcoin-related volatility.
As Strategy acknowledges, “Bitcoin is a highly volatile asset.” Moreover, this business approach has not been tested before. It is completely uncharted waters for a company that is solely dependent on the performance of a speculative and novel cryptocurrency rather than itself.
What is the Price Target for MSTR?
On Wall Street, MSTR has a Strong Buy consensus rating based on 12 Buy, zero Hold, and one Sell rating over the past three months. MSTR’s average price target of $510.38 implies a 49% upside potential over the coming twelve months.
Recently, analyst Lance Vitanza from TD Cowen rated MSTR a Buy with a price target of $550. He views MSTR as attractive for “investors seeking exposure to Bitcoin without directly affecting its market dynamics.”
On the other hand, Gustavo Gala from Monness maintained a Sell rating on MSTR and lowered its price target from $220 to $175 earlier this month. The analyst cautioned that the company’s ability to raise money through debt is becoming more limited, which means MSTR will have to rely more heavily on issuing new shares to fund its Bitcoin purchases. This would cause “equity dilution at an increasingly disproportionate clip.”
Bitcoin Proxy With a Twist
Despite Wall Street’s largely bullish stance on Strategy, the fundamental risk of the company being all-in on Bitcoin is too much for my risk profile. Strategy has transformed from a slow-growth business intelligence provider to a high-stakes gamble on Bitcoin. However, its recent $5.91 billion unrealized loss in Q1 2025 highlights the volatility inherent in this strategy and the potential for ruin in the event of Bitcoin ever tanking.
With conservative government adoption of Bitcoin, MSTR may be forced to depend more heavily on dilutive equity offerings to fund future Bitcoin purchases. For investors, MSTR essentially functions as a leveraged Bitcoin proxy rather than a traditional technology company, making it only suitable for a select few. Personally, I don’t see the appeal. Most investors would probably be better off maintaining a more balanced and diversified approach to capitalizing on cryptocurrencies.