Stock of Bitcoin's Biggest Public Holder Is Overvalued by 26%, Analyst Who Predicted BTC Rally Says

Early investors in MSTR can consider taking profit as shares appear overvalued and could fall by 20%, according to 10x Research.

AccessTimeIconDec 28, 2023 at 6:59 a.m. UTC
Updated Dec 28, 2023 at 12:49 p.m. UTC

Investors wondering what's next for shares in business intelligence firm MicroStrategy following this year's 343% surge may want to look at what 10x Research, led by Markus Thielen, who predicted this year's BTC rally, is saying.

Per 10x's latest research note, MSTR's shares appear overvalued by 26%. The conclusion is based on the firm's regression model, studying the relationship between the dependent variable, MSTR, and the independent variable, BTC's spot price.

"As the regression model shows, MicroStrategy is +26% overvalued and has a 20% downside based on the current Bitcoin prices. It is time to take profit," 10x said.

Shares in bitcoin-holder MSTR have more than quadrupled this year, reaching a 25-month high of $673 on Wednesday to become one of the best-performing crypto-related stocks of 2023. The Nasdaq-listed firm holds 189,150 BTC as of writing, having begun accumulating the cryptocurrency as a reserve asset three years ago. Bitcoin, the leading cryptocurrency by market value, has gained 160% this year, with prices surging 60% this quarter alone, mainly on the back of the spot ETF narrative.

The performance of crypto-related stocks like MSTR and shares in Coinbase relative to bitcoin is often touted as a proxy for institutional interest in digital assets. These listed instruments allow market participants to gain exposure to digital assets without having to own them.

The upward sloping line shows positive linear relationship between the two assets. (10x Research)
The upward sloping line shows positive linear relationship between the two assets. (10x Research) (10x Research)

The chart shows the upward-sloping (green) line of best fit drawn through a maximum number of points on a scatter plot, ensuring almost an equal number of points above and below the line.

The upward-sloping nature of the line shows a positive relationship between bitcoin and MSTR. In other words, as the price of BTC goes up, MSTR's market value rises. The R² (R-squared or the coefficient of determination) of 0.8232 indicates that 80% of the variation in MSTR can be explained by BTC's price.

The analysis shows that at Thursday's closing price of $673, MSTR is overvalued by 20% relative to bitcoin's going market rate of around $43,000.

According to 10x, several crypto-related stocks are trading at close to fair value based on bitcoin's price.

"We suggest taking profit and cutting long positions. HIVE, HUT, and GALAXY still offer some value here, but the BIG money has been made in those stocks," 10x said.


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.