Investors are curious about what’s next for software company MicroStrategy‘s shares after this year’s 343% increase. Known for predicting Bitcoin‘s (BTC) rally of over 160% since the beginning of the year, an analysis by Markus Thielen‘s 10x Research indicates that MicroStrategy’s shares, rising alongside the largest cryptocurrency, are at a point of excessive overvaluation.
Time to Take Profits from MicroStrategy Shares
The latest research from 10x Research reveals that MicroStrategy’s shares are priced 26% above their fair value. This finding is based on the company’s regression model that examines the relationship between MicroStrategy’s shares as the dependent variable and BTC’s spot price as the independent variable.
In its comprehensive analysis, 10x Research notes, “The regression model shows that MicroStrategy’s shares are 26% overpriced, and there is a 20% positive divergence compared to Bitcoin’s current price. It’s time to take profits from MicroStrategy’s shares.”
MicroStrategy, the largest corporate Bitcoin investor, has seen its shares increase approximately sevenfold this year, reaching $673 on December 27th, the highest level in 25 months, making it one of the best-performing crypto-related stocks of 2023. The company, traded on the Nasdaq exchange, started accumulating Bitcoin as a reserve asset three years ago and now holds more than 189,150 BTC. As known, the largest cryptocurrency has risen 160% since the beginning of the year, with a 60% surge in the last quarter alone, particularly under the influence of the spot ETF narrative.
As Bitcoin Rises, So Do MicroStrategy Shares
The overvaluation of MicroStrategy’s shares is clearly visible in the chart prepared by 10x Research. The upward-sloping (green) line drawn from the maximum number of points on a scatter plot indicates the optimal price level for MicroStrategy’s shares, with nearly an equal number of points above and below the line.
The upward slope of the line reflects a positive relationship between Bitcoin and MicroStrategy’s shares. In other words, as BTC’s price increases, so do MicroStrategy’s shares. An R2 (coefficient of determination) of 0.8232 indicates that 80% of the variation in MicroStrategy’s shares can be explained by changes in BTC’s price.
According to 10x Research’s analysis, with MicroStrategy’s shares closing the last trading session at $673, the price of the shares is clearly 20% more expensive based on Bitcoin’s price around $43,000.
