Key Takeaways:
Gold bug economist and long-time Bitcoin skeptic Peter Schiff has issued a stark warning against MicroStrategy stocks, calling it the “most overvalued stock” in the MSCI World Index and predicting a major crash for the Bitcoin development company.
In an X post on Tuesday, Schiff wrote that when the stock finally crashes, it will be a “real bloodbath”.
Peter Schiff Calls MSTR the “Most Overvalued Stock” in the MSCI Index, Forecasting Major Crash
MicroStrategy (MSTR) was added to the MSCI World Index in March and has a weightage of 0.039380%. MSCI World Index is a widely watched global stock market that tracks the performance of about 1,500 large and mid-cap companies from 23 countries.
In 2023, the MSCI World Index gained nearly 24%, and so far this year, the index has returned an average of 18.86%. MSTR has surged by 220.64% year-to-date.
Schiff is an outspoken critic of Bitcoin and the cryptocurrency sector in general, and a vocal proponent of gold as a store of value. He has often argued that Bitcoin is a speculative asset that lacks the intrinsic value of traditional assets. His latest comments on MicroStrategy stocks might have stemmed from this viewpoint.
His forecast comes in the wake of a recent suggestion to MicroStrategy founder and chairman Michael Saylor, asking him to purchase the large quantity of Bitcoin that the US government was planning to sell. The US government holds 69,370 BTC, worth approximately $4.83 billion, seized from the dark web marketplace Silk Road, which it plans to liquidate.
Mocking the company’s Bitcoin reserve strategy, Schiff suggested that Saylor should convince MicroStrategy to borrow another $4.3 billion and buy the BTC held in the custody of the US government. Last week, the Supreme Court declined to hear a case challenging the government’s ownership of the seized assets, opening the door for future liquidations.
MicroStrategy has Outperformed Every S&P 500 Index Firm in the Last Four Years
Since 2020, MicroStrategy’s stock has outperformed every other firm in the S&P 500 index. While MSTR has risen by more than 1,540%, the rest of the index only rose 111%. The Bitcoin development company’s market value has grown from $1.5 billion to more than $40 billion in four years. Saylor attributes the company’s success in the market to its Bitcoin adoption approach.
MicroStrategy’s MSTR trades at a 2.5x premium to the price of Bitcoin and continues to advance relative to the price of the flagship cryptocurrency. This has expanded the premium to the value of its holdings to the highest level in more than three years.
The firm calculates its net asset value (NAV) by dividing MSTR’s market capitalization by the value of its Bitcoin stack. Recently, the NAV of MSTR touched a new high of 2.5 times that of its Bitcoin holdings, valued at around $17 billion.
Although MicroStrategy’s Bitcoin strategy playbook has been largely successful, with company stock surging by 1,208% since August while Bitcoin rose by 445%, Schiff has remained critical of Saylor and his approach towards Bitcoin. The economist also slammed the recent trend of companies holding Bitcoin on their balance sheet, arguing that those firms are gambling with shareholders’ funds.
As per TradingView data, the Relative Strength Index (RSI) of MSTR was just above 70, suggesting an overvaluation. Wells Fargo (WFC), which is also part of the MSCI Global Index, has a higher RSI than MSTR at 76.13.
MicroStrategy Plans to Raise $42 Billion Over the Next Three Years to Purchase More Bitcoin
In its Q3 2024 earnings report, MicroStrategy revealed plans to raise $42 billion in fresh capital over the next three years specifically to buy Bitcoin. The new capital-raising initiative, called the 21/21 plan, aims to secure $21 billion through equity offerings and another $21 billion via fixed-income securities between 2025 and 2027.
The capital raising schedule shows a steady increase, with $10 billion planned in 2024 which will include $5 billion in equity and $5 billion in bonds, $14 billion planned for 2026 which will include $7 billion in equity and $7 billion in bonds, and $18 billion for 2027 that will include $9 billion in equity and $9 billion in bonds.
As a way to measure the efficiency of its Bitcoin purchases against new share issuance, MicroStrategy uses a BTC Yield metric. Between 2025 and 2027, for every 100 new shares issued, the company aims to buy enough Bitcoin to maintain a rate of 106-110 BTC per share. However, this year, they have far exceeded this threshold after reaching almost 118 BTC per MSTR share.
At the end of the last quarter, MicroStrategy’s Bitcoin holdings reached a market value of $16 billion, when the apex cryptocurrency was changing hands at $63,463. The tokens were acquired at an average price of $39,266 per BTC, costing $9.904 billion in total.
The firm raised $2.1 billion in Q3 2024 to expand its Bitcoin portfolio by selling 8 million Class A common stock shares worth $1.1 billion, and $1 billion through Convertible Senior Notes, which can be converted into company shares at $183.19 per stock in 2028.
MicroStrategy is the world’s largest corporate holder of Bitcoin, with 252,200 BTC worth well over $17 billion in its reserves.
At the time of writing, MSTR is trading at $244.50 – down 1.14% today. Meanwhile, Bitcoin (BTC) is trading at $69,496 – down 3.8% in the last 24 hours.
Latest news: Bitcoin Price Stands Still Near All-Time High As Retail Interest Yet To Pick Up Steam
