Shares of MicroStrategy (MSTR -1.85%), the cloud software stock that has converted itself into a Bitcoin (BTC 0.35%) treasury stock, were surging last month, benefiting from all-time high Bitcoin prices and the belief that the Trump administration will adopt crypto-friendly policies.
As a result, the stock finished the month up 59%, according to data from S&P Global Market Intelligence. Microstrategy’s stock tends to trade as a leveraged Bitcoin ETF, which helps explain the stock’s volatility over the month.
Why crypto stocks jumped
Cryptocurrencies and related stocks soared broadly in the wake of the election as President-Elect Trump had given a number of indications that he would embrace policies that were friendlier to cryptocurrency.
Among the policies that the Trump administration is reportedly considering is creating the first-ever White House crypto role, and even discussing a strategic Bitcoin reserve. Trump is also expected to name a new SEC chair to replace Gary Gensler, who was seen as unfriendly to the industry.
Microstrategy stock jumped 13% on Nov. 6 and continued to rally until it peaked on Nov. 21. Then it crashed after short-seller Andrew Left said he was short the stock.
In a post on X, Left argued that the premium to own MicroStrategy, compared with Bitcoin, had become unreasonable. He said he had been bullish on Microstrategy earlier, but now it was much easier to own Bitcoin, through ETFs and other such vehicles. Left argued that Microstrategy’s volume “completely detached from BTC fundamentals,” and said that it was still bullish on Bitcoin, but was short Microstrategy.
The stock fell 17% on Nov. 21, when that report came out, and finished the month slightly lower.
What’s next for Microstrategy
Microstrategy’s stock is likely to remain attached at the hip to Bitcoin, but Left does make a good point. The company now owns 402,100, which are worth $38.7 billion, though Microstrategy’s market cap is now $89.1 billion, more than double the value of its Bitcoin holding.
Some of that premium is deserved, since Microstrategy functions as a more aggressive play on Bitcoin as the company continues to buy the cryptocurrency aggressively, converting more of its balance sheet into Bitcoin.
The Trump bump in Bitcoin may have run its course for now. The recent rally seems to have plateaued at just below $100,000. Still, further support for Bitcoin from the Trump administration could send the cryptocurrency and Microstrategy even higher, though investors should be mindful of the premium in Microstrategy stock.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
