Strategy: Saylor Buys The Dip, I Buy The Break-Out

Summary Strategy is breaking out after a 40% drop from its ATH. Bitcoin’s bullish trend, confirmed by technical analysis, supports the investment thesis for MSTR, which has significant Bitcoin holdings. MSTR’s chart shows a strong breakout, with the potential to reach $700 if Bitcoin hits $120k. Despite high volatility and risks like geopolitical tensions and competition, MSTR presents a compelling opportunity for those bullish on Bitcoin. Thesis Summary Strategy ( MSTR ) is down over 40% from its ATH, but after some consolidation, it seems the stock is breaking out. The same can be said about Bitcoin, which has formed a clean bottoming pattern and is now above key resistance. While Saylor has been buying the dip, I’m buying MSTR on the breakout as I think the stock has the potential to more than double from here. Saylor Buys The Dip You can fault Saylor for many things, but his conviction in Bitcoin is not one of them. While markets were tanking, Saylor continued to buy Bitcoin through Strategy, which bought over 6556 Bitcoin between May 14-20. The Bitcoin was purchased at an average price of $84.8K, a level which Bitcoin has now surpassed by some margin. The company’s total Bitcoin holdings now stand at 538,200, with an average price of $67.8 K. We can’t deny, as I’ve discussed before, that with every purchase, Strategy’s risk increases, as this increases the average price. However, the strategy is paying off so far. But can Bitcoin keep rising? Bitcoin Is Looking Bullish The great thing about technical analysis is that it gives us an impartial way of assessing price trends. Bitcoin’s trend is quite unequivocally up. BTC TA (Trendspider) After retracing from its high, Bitcoin began to do what it does ahead of any big move: consolidate. This is exactly what we saw happen, for example, back around August, before the move above $100K. But Bitcoin gave us some pretty clear signs that a bottoming was taking place, as we saw a divergence in the RSI and a bullish cross in the MACD. Bearishness was still warranted until we broke the 200 EMA. This confirms Bitcoin is in a new uptrend, in my opinion, which should take us to new highs. MSTR Breaks Out Strategy’s chart is arguably even more bullish. MSTR TA (Trendspider) While the 200 EMA did briefly break, it acted as significant support. As soon as the RSI entered oversold territory, the stock bottomed. After a double bottom, we now look ready to break out. MSTR is set to open around $355, taking us above the recent high and putting us into the area where the stock ranged for a few months. We’ll encounter some resistance here, but I believe this is a valid breakout and a reason to buy MSTR. MSTR Could Double If we measure the length of this decline and project the 1.618 fib extension, that gets us towards $700. This also makes some sense if we look at the potential Bitcoin price and NAV Premium: MSTR NAV Premium ( Strategy Tracker ) If Bitcoin can reach $120,000, which I’ve had as a target for a while, and we apply a multiplier of 2,53, that puts MSTR at $700. This is higher than today, but within what we’ve seen during peak euphoria in Bitcoin. In terms of the valuation, multiples have contracted since the peak of the bull market, and this is reflected, for example, in the Price/Book ratio, which is ultimately another way of looking at the Premium/NAV. MSTR Valuation (SA) Moving forward, there’s potential for this multiple to expand again, but a lot will hinge on the strategy outlined in the coming quarter. Q1 Outlook With Q1 around the corner (May 1), it’s also important to talk about the coming expectations and what to look for. Key Points Net Loss The company is expected to deliver a net loss in Q1 due to the fact that it has accumulated an unrealized loss on its bitcoin holdings. Strategy has warned of a potential $5.9 billion loss, though the exact number will depend on where Bitcoin is at the time of the release. Fair Value Accounting Starting this quarter, MSTR will be adopting the Financial Accounting Standards Board’s [FASB] fair value accounting standard. This will allow the company to report the value of its Bitcoin holdings at the current market price, rather than the lowest price since the acquisition. Therefore, earnings should be a much better reflection of the true success of the company. Raising Capital and Bitcoin Purchases In Q1 2025, Strategy raised $7.69 billion through share offerings and has used up around $1.92 billion since then. The most important point of the presentation will be to understand what Saylor plans to do in terms of deploying more capital and potentially raising more money. The 1/21 Plan outlined previously aims to raise $42 billion over the next three years. Macro Outlook There’s a lot of bullish currents underpinning Bitcoin’s appeal here, namely the potential for more monetary inflation and stability. In this last sell-off, Bitcoin has held up quite well and is now leading, showing it can act as a hedge while also capturing upside. Bitcoin is proving itself as a valuable asset to hedge against uncertainty and., most importantly, monetary debasement. This continues to be my base case for the coming years and even decades. The current US deficit is unsustainable, and I expect this will be brought down with the help of inflation and evaluation, not unlike the 1970s. US debt/GDP (FRED) Furthermore, let’s not forget we have a very crypto-friendly administration, and there’s a lot of potential for further tailwinds and positive news to take Bitcoin to new levels of adoption and higher prices. Risks Of course, it’s still early to call a bottom, though we have strong evidence. Volatility has been incredibly high in recent weeks, and with good reason. Any number of things could derail Bitcoin’s progress: geopolitical tension escalation, inflation and recession stand out as the three clearest. This would be very bad news for MSTR, especially, as I mentioned above, given that Saylor keeps buying the dip and increasing his average price. On top of that, more and more companies are joining the Bitcoin game. Marathon ( MARA ), for example, is also accumulating Bitcoin now, and this will eventually erode MSTR’s premium. And another exclusive Bitcoin fund , Twenty One, has just opened its doors. This company aims to do pretty much the same as MSTR. On the one hand, it means there is now competition, though on the other, it validates MSTR’s business model. Final Thoughts All in all, I like the set-up here in MSTR given the fact that I am quite bullish on Bitcoin. If Bitcoin can reach $120K, then I think MSTR could double from today’s price. This is no doubt a volatile stock and not for the faint of heart, so make sure you go into this with a clear plan and strategy.

Source: Seeking Alpha