Analysts at the world's largest asset manager BlackRock have warned an "unprecedented" scenario is unfolding that could hit the bitcoin price and crypto market...
A Stanford paper highlights Ripple potential strategic value, criticizing US lawmakers for regulatory delays affecting competitiveness. In a post on… The post Stanford Paper Cites Ripple Potential Strategic Value to US Policymakers first appeared on The Crypto Basic .
In the latest wave of market turbulence, key stocks linked to the crypto industry have taken a significant hit. These crypto stocks reflected the broader downturn in the digital asset market. Leading the decline are shares of MicroStrategy, GameStop, Coinbase, Marathon Digital, and Riot Platforms, all of which experienced notable falls during premarket trading on The post MicroStrategy, GameStop, Coinbase & Bitcoin Miners Stocks Echo Crypto Market Crash appeared first on CoinGape .
MAGA Price Prediction: The cryptocurrency market prolonged the bearish trajectory on Tuesday as the leading digital asset Bitcoin plunged below $65000 support. The persistent selling pressure has triggered extended correction for major altcoins but impacted the meme sector most due to their volatile nature. Amid the downfall, the Donald Trump-related memecoin, MAGA dropped to a The post MAGA Price Prediction: What’s Escalating TRUMP’s 40% Drop appeared first on CoinGape .
U.S. spot bitcoin exchange-traded funds (ETFs) experienced their third consecutive day of outflows on Monday, losing over $145 million. Fidelity’s FBTC continued to lead the outflows with $92 million exiting the fund on June 17. Fidelity’s FBTC and Ark Invest’s ARKB Among Biggest Losers During Monday’s Outflow According to sosovalue.xyz metrics, U.S.-based spot bitcoin ETFs
A man in Taiwan faces charges for using the crypto betting platform Polymarket to wager on the 2024 elections.
Key takeaways There are several reasons why experts believe that XRP’s future performance is promising. For one thing, a strong community of supporters and developers continues to see tremendous potential in Ripple’s technology and products. Despite some short-term price fluctuations and a bear market, many analysts believe XRP has a bright future ahead. Whether it
Bitcoin’s current price action has failed to achieve a new all-time high and is presently undergoing a correction phase. Despite recent setbacks, the ongoing bull market indicates that significant growth potential remains. Analysts point out that underlying support levels could still trigger a rebound in prices. Explore the latest insights into Bitcoin’s price movements, technical
Summary In addition to being an IT play, MicroStrategy has been collecting Bitcoins for almost four years. If monetized, its crypto assets have the potential to confer to it a much higher value than revenues derived from software products. However, assigning a value based on Bitcoin comes with risks, and this is why it is also important to be equipped with an exit strategy. These risks emanate mostly from the miners adjusting to the post-halving landscape while facing high difficulty. Since I last covered MicroStrategy ( MSTR ) in October 2020, it has gained 800%. Two reasons for being bullish were the benefits from digital transformation for its BI (business intelligence) software products and accumulating Bitcoins ( BTC-USD ). The chart below shows that it is up by more than 900% as Michael Sailors' company represented a viable option for investors wanting exposure to the cryptocurrency without needing to open a digital wallet account at one of the crypto exchanges, but things have changed. Data by YCharts Today, there are eleven new spot ETFs approved by the SEC (Securities and Exchange Commission) in January in addition to others dealing with futures, implying competition. Still, based on the value of Bitcoins it has amassed and comparison with other investment vehicles, this thesis aims to show that MicroStrategy is a buying opportunity. However, it is preferable to first wait for the period of volatility to elapse, and, in the spirit of risk aversion, I also elaborate on an exit strategy. First, for a company trading at nearly 46 times trailing sales, it is important to check finances. Decreasing Revenues, Profits and Cash Flow Since 2020, revenue progressed to reach the $510 million mark in 2022 as a result of its BI tools getting traction from the Covid pandemic. However, since then, revenues have come down slightly in a highly competitive analytics marketplace place where there has also been a lot of industry consolidation with Salesforce ( CRM ) acquiring Tableau in 2019. Data by YCharts Moreover, there is also Microsoft ( MSFT ) with PowerBI or SAP SE ( SAP ) with Business Objects, without forgetting Oracle ( ORCL ) taking advantage of its database strength to offer analytics solutions. Still, despite facing such fierce competition from giant players, the company has not suffered from an erosion of its market share, and this is mostly due to analytics being a sticky business, making it difficult for customers to switch. Furthermore, MicroStrategy prioritized a cloud strategy since 2020 to provide more flexibility to customers wishing to opt for subscription models certainly helped. This timely transition away from the complex licensing model to monthly subscriptions was key to its survival as a software play. Looking forward, it has invested in an AI Bot for enterprise analytics, but this does not automatically mean a boost in sales as competitors have also enhanced their products. Moreover, as shown in the charts above, both operating income and cash flow from operations have declined, which reduces the stock's attractiveness for those wanting to invest purely because of the IT. Remains a Valid Investment due to Bitcoins However, the market has shown that MicroStrategy remains a valid investment, even after the issue of new ETFs including popular ones like the iShares Bitcoin Trust ETF ( IBIT ) which has accumulated $20 billion in assets under management about six months after launch and the presence of leveraged ones like the 2x Bitcoin Strategy ETF ( BITX ). Hence, as charted below, the IT company has outperformed them all, and by more than 100%. Data by YCharts Therefore, despite commanding such a high valuation, it seems to be trusted by investors because of crypto. Now as per its first quarter 2024 financial results, it held 214,400 coins which cost $7.54 billion based on a per unit price of $35.18K, but when multiplied with the current price of $65K totals $13.94 billion as per the table below. Table prepared using data from (www.seekingalpha.com) This culminates in a profit of $6.4 billion, enough to repay its debt of $3.62 billion , which was contracted mostly to buy crypto. Now, some will argue that its shares outstanding have increased by around $10 million to $17.7 million as a result of equity offerings again to fund the purchase of crypto. This represents 77% more shares outstanding but in the meantime, far from seeing a stock sell-off as is normally the case for companies seeing little growth and ballooning debt, it appreciated by 800%. Data by YCharts This may explain why, despite a major disconnect between the income level and valuations, investors seem to be willing to pay a premium for the company’s capital allocation strategy over the last four years, in the way it has used its cash flow, debt, and equity sales to boost its crypto assets. Hence, it becomes important to value the company accordingly. Valuing MicroStrategy based on Crypto Considering it sells only half its Bitcoin, it will obtain about $6.97 billion, and dividing by the total shares outstanding of 17.74 million, this comes to a sales per share of $398.83. Further dividing the share price by this figure leads to a price-to-sales ratio of 3.81x, higher than the 3.48x when I covered the stock in 2020, but this was based only on IT sales, whereas now it has over 200K Bitcoins. Table prepared using data from (www.seekingalpha.com) Now, comparing 3.81x with the wider IT sector median of 2.97x would again fail to factor in the value of MicroStrategy's Bitcoin reserves, which, if monetized, could generate a much higher revenue than BI products. Hence, a more suitable comparison would be with Bitcoin miners, which HODL or hold Bitcoins for hard times instead of selling all of their produce. This is illustrated in the table below and even when compared with lower-valued Riot Platforms ( RIOT ) which owns 9,084 Bitcoins (end of May), the company is undervalued by 48%. Applying only a 24% upside due to the risk factors I elaborate upon below, I obtained a target of $1,771 based on the current share price of $1,329. This target is slightly below the peak reached on March 15 before the halving period. Comparing with peers (seekingalpha.com) Switching to risk-off mode, the Bitcoin halving event that occurred on April 19 impacted the profitability of miners, who play an essential role in the Bitcoin ecosystem by devoting the computing power of their mining rigs to validate transactions in the form of new blocks which are then added to the blockchain on which the cryptocurrency is based. The Risks as Miners Adjust, and an Exit Strategy After this event, the reward obtained by miners was reduced in half while mining difficulty increased considerably, implying it takes more time to add a block to the blockchain. This means that except for a few larger miners already invested in equipment to rapidly add additional hash rates (or production capacity), most will obtain lower revenues while at the same time, their operational expenses remain about the same, implying lower profits. At the same time, borrowing costs remain high . In these circumstances, they have to dispose of more of their HODLed coins, as Bitcoin prices remain below $70K, a possibility confirmed by CryptoQuant which says that selling reached a two-month high in the first half of June. This, in turn, creates more supply in the market, pressuring prices while at the same time, demand for Bitcoins from fund managers of the newly launched ETFs has moderated compared to January. Hence, except for IBIT, most funds have seen net outflows or more investors selling shares than buying. Lower demand for Bitcoin could also be due to some investors diversifying away to Ethereum ( ETH-USD ) after the SEC approved ETFs. Furthermore, just like for equities and bonds, another factor that affects the performance of Bitcoin-linked assets is whether interest rates are likely to be cut in the near term. This explains the reasons for the $600 million of outflows from Bitcoin ETFs last week, coinciding with hints by a key U.S. Reserve Bank official that the fight against inflation is not over. Therefore, the pains could continue and for those holding the stock and looking for an exit price, the company should break even at a Bitcoin average cost price of $35.18K , which is about 30K less than what the cryptocurrency is trading currently. However, this does not consider the debt of $3.62 billion, and, after accounting for leverage, I arrive at a higher break-even Bitcoin price of $52K. Table prepared using data from Therefore, for risk-averse investors wondering when it is time to exit, this is a level to monitor as monetary policy remains tight and miners adjust, with some predicting that at the current liquidation level, BTC's price could drop to $62.5K. However, there are two strong positives for the long term. Bullish For the Long term First, the halving went off without a hitch, once again showing the smooth functioning and resilience of Bitcoin as a decentralized blockchain or one that does need supervision by a central authority. Second, there is the demand-supply equation, which favors higher prices. In this case, with halvings occurring approximately every four years, more than 19 million coins have already been put into circulation out of the total of 21 million programmed. This means that less than 10% of supply is left. As for demand, previous halvings were followed by a sharp rise in the price of bitcoin in the following months, such as in 2021 when it surged by more than 350% post the 2020 halving as seen by the spike in MicroStrategy's share price in the introductory chart. However, this price action has not been replicated this time as Bitcoin had already appreciated by 300% from January 2023 to April this year, due mostly to the enthusiasm around the approval of spot ETFs and the impending halving event, with Bitcoin flirting with $74K in mid-March reaching a new record. Now, the price of Bitcoin staying below $70K pressurizes the profitability of miners, causing some of them to stop their activities, a phenomenon referred to as miner capitulation which may be why the hash rate (overall production capacity) has also come down to around 600, from 700 as charted below. Now since the mining process remains a highly competitive one, this in turn reduces mining difficulty which has now descended to 83.72 from its peak of 88 as shown below. Data by YCharts This increases the chances that active see lower production costs, in turn reducing the pressure to sell Bitcoins to finance operations. Thus, with a lower supply, asset prices can eventually stabilize and even rise depending on demand status. Finally, the stock could potentially appreciate by 24% based on its selling just half of its Bitcoin reserves, while investors seem to favor Michael Sailor's strategy over other investment vehicles tracking crypto. However, this thesis is subject to risks, especially a fall in asset prices which would considerably devalue MicroStrategy's assets.
Bitcoin's decreasing volatility in 2024 indicates a more mature and stable market for the leading crypto, opposing the higher volatility periods from 2022. The post Bitcoin reduced volatility points to market growth and institutional influence appeared first on Crypto Briefing .