Citi expects strong potential for the strategy, but remains cautious about bitcoin volatility
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Bitcoin-focused Strategy — formerly known as MicroStrategy — earned a “Buy” rating from Citi, with analysts highlighting the stock’s significant upside potential. At the same time, the bank warned that the company’s heavy reliance on bitcoins could expose investors to significant price fluctuations.
In short
- Citi analysts assign a “Buy” rating strategy and predict strong upside potential if bitcoin reaches the bank’s projected $181,000 level.
- The price of strategic stocks could benefit from Bitcoin’s momentum, but remains vulnerable to sharp price corrections.
- The company holds over $77 billion in bitcoins, cementing its position as the world’s largest corporate holder of BTC.
- Analysts warn that MSTR’s valuation is heavily dependent on Bitcoin’s performance, adding to both gains and losses.
Strategy shares could rise as Bitcoin approaches Citi’s $181,000 forecast
In a note published on Tuesday, Citi analysts said shares of Nasdaq-listed Strategy ( MSTR ) could continue to rise if bitcoin reaches $181,000 in the next 12 months, in line with the bank’s latest price forecast for the cryptocurrency.
The stock closed at $301.91, up 1.7% on the day, according to Yahoo Finance — still below its 2024 high of $473.83. Meanwhile, bitcoin was trading at $111,490, down more than 11% from its all-time high of $126,080, according to CoinGecko data.
Citi said MSTR’s net asset value (NAV) premium could remain in the 25% to 35% range, reflecting its historical bitcoin return multiple of 2.5x-3.5x. However, this prediction depends on maintaining positive momentum for the cryptocurrency.
Additionally, the report highlighted that the Strategy’s performance is closely related to Bitcoin price movements and general investor sentiment towards the digital asset market.
Citi warns of high risk in Strategy’s bitcoin stock
Citi warned that Strategy shares remain very risky because of its leveraged exposure to bitcoin. Analysts noted that the company’s valuation depends almost entirely on the cryptocurrency’s performance. As a result, any prolonged decline in the price of Bitcoin could result in amplified losses for MSTR investors.
The stock poses significant risks due to its position as a leveraged proxy for Bitcoin. Its value is almost 100% tied to the sometimes-volatile cryptocurrency, meaning a slight drop in the price of Bitcoin could result in amplified losses for MSTR shareholders.
Citi analysts
The strategy began accumulating bitcoins in August 2020 to seek higher returns amid global economic uncertainty during the COVID-19 pandemic. The company has since become the largest corporate holder of BTC and is positioning itself as a proxy investment vehicle for investors who want exposure to the leading cryptocurrency without directly owning it.
Strategy’s BTC reserves exceed $77 billion, cementing its leading position in the sector
Earlier this month, the strategy reached $77.4 billion in BTC reserves and currently holds 640,418 bitcoins. Its co-founder and chairman, Michael Saylor, remains one of bitcoin’s strongest corporate supporters, often describing it as an excellent store of value for businesses and investors alike.
Here are other companies with notable BTC reserves:
- MARA Holdings, Inc. (MARA) holds approximately 53,250 BTC, making it the largest institutional holder of Bitcoin in the United States.
- The Nasdaq XXI-listed company owns 43,514 BTC.
- Metaplanet Inc. (MTPLF) is in fourth place with 30,823 BTC – often called the MicroStrategy of Japan for its aggressive accumulation strategy.
- Bitcoin Standard Treasury Company (CEPO) manages 30,021 BTC.
- Bullish (BLSH) holds 24,300 BTC and integrates Bitcoin into its broader digital financial operations.
- Riot Platforms, Inc. (RIOT) holds 19,287 BTC and remains one of the largest North American Bitcoin mining companies.
- Trump Media & Technology Group Corp. owns 15,000 BTC.
While several companies have followed the Strategy, analysts warn that this concentrated exposure to digital assets may not be suitable for all business models. Citi’s latest note highlights that the rewards of BTC-related strategies can be significant – but so can the risks when market volatility returns.
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James Godstime is a crypto journalist and market analyst with over three years of experience in crypto, Web3 and finance. Simplifies complex and technical ideas to engage the reader. Outside of work, he likes football and tennis, which he is passionate about.
DISCLAIMER OF LIABILITY
The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.