Citibank analyst Tyler Radke downgrades MicroStrategy (NASDAQ: MSTR) stock to $ 250 on Bitcoin investment.
MicroStrategy started investing in bitcoin in August 2020 and during this time formed a position worth $ 771 million for an investment of $ 475 million. The company added the last $ 50 million last week, when bitcoin was already trading above $ 19,000. In addition, it intends to issue convertible bonds, with the help of which he expects to attract another $ 400 million to invest in bitcoin.
MSTR shares are now trading at $ 297.42, down 11.5% over the past 24 hours. At the time of writing this publication, the decline continues. MSTR has grown by almost 150% since the first investment in Bitcoin. Citibank’s forecast assumes a 25% decrease in MSTR.
As Radke explained in a conversation with Bloomberg, he sees “progressive risks” in the strategy chosen by MicroStrategy for placing reserve assets in cryptocurrency.
“We view the recent rally in stocks as overheated and see progressive risks in the story that unfolds after the announcement of a $ 400 million convertible bond to buy even more bitcoins,” he said..
A forward-thinking and courageous act
MicroStrategy CEO Michael Saylor, who predicted the imminent decline of bitcoin in 2013, has become a popular figure in the cryptocurrency space in recent months and has repeatedly made bullish statements about his company’s investment. Just today, Sailor spoke with Binance CEO Changpeng Zhao during a live broadcast, once again substantiating the choice of a cryptocurrency for investing the surplus capital of MicroStrategy.
Sailor said the market crash in March this year was a turning point in MicroStrategy’s strategy. He argues that the liquidity crisis amid the coronavirus pandemic has exposed the negative side of investing in traditional financial assets. By April, he decided to dive deeper into cryptocurrency by reading The Bitcoin Standard by economist Saifiddin Ammus, listening to “more podcasts than anyone else should,” and having studied many articles, reviews and forums..
The head of the company said that the decision to buy hundreds of millions of dollars worth of bitcoins was relatively easy for them when they realized the main advantages of cryptocurrency over the traditional financial system. Investors who did the same earlier this year were “forward-thinking and courageous,” he said. Sailor says other high net worth individuals and managers are contacting him to gain valuable experience in buying cryptocurrency. He refused to disclose the names, but said that such investors are increasingly interested in Bitcoin..
What Citibank thinks about digital currencies
Citibank itself is betting on the development of digital currencies, but not decentralized ones, but government ones. The head of the financial conglomerate Citigroup, whose main element is Citibank, Michael Corbat announced at a Bloomberg event on Friday that they are partnering with various central banks to create digital versions of their national currencies..
“We are working with authorities around the world on creation and commercialization,” he said, calling digital currencies an “inevitable” vector for the development of the monetary system..
Citi spokeswoman Daniel Romero-Apsilos emphasized that they are “actively involved” in consultations with central banks on CBDC.
“As a significant practitioner in the payments market with links to more than 200 clearing systems, Citi shares its experience-based knowledge of choosing digital currency models,” she said..
Korbat acknowledged that cryptocurrencies will not lose their relevance even after the release of national digital currencies. “Some of these currencies will continue to be alternatives that people will enjoy depending on their own conditions,” he said..
In November, Citibank published a report in which analyst Tom Fitzpatrick expressed the view that today’s bitcoin market resembles the gold market in the 1970s, and allowed the cryptocurrency trajectory of the precious metal to repeat itself at that time..
Bitcoin is down 2% this Tuesday and is trading at $ 18,850.
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