Bitcoin (BTCUSD) has lost more than 50% of its value in just a few months and is getting the attention of analysts again, albeit for all the wrong reasons. Richard Farr, who is chief market strategist and partner at Pivotus Partners, recently lowered his price target on the cryptocurrency to zero. His reasons: Bitcoin fails as a medium of exchange due to its environmental impact and faces many obstacles to institutional adoption.
“No serious central bank would own anything where Michael Saylor controls the float.”
This isn’t the first time someone has expressed their feelings of vulnerability over Bitcoin. In the recent past, Michael Burry has also criticized this, strategy (MSTR), formerly known as microstrategy, speculative bets on cryptocurrency. Michael Seiler’s company has been buying Bitcoin for some time and is currently in the red on its investment. Bury warned that another 10% crash could spell trouble for MSTR, but Friday’s strong finish suggests investors are still very interested in the stock.
The strategy is a company involved in the purchase of bitcoins through the issuance of equity and proceeds from debt financing. Through its stock, investors can gain exposure to cryptocurrency. It is headed by Michael Sellers and headquartered in Tysons Corner, Virginia.
While Bitcoin has lost half its value in just over six months, MSTR has fared much worse. The stock is down more than 70% from its 52-week high, a steep decline that hasn’t pleased investors one bit.
Strategy has total debt of $8.2 billion and approximately $2.3 billion in cash. The company uses this cash to buy more bitcoins, and when it runs out of money, it raises more cash through market offerings or convertible notes. It also maintains a small software business, but the market judges purely on its Bitcoin ventures. The company’s prospects are similar to Bitcoin’s, which is not very positive if recent analyst sentiment is anything to go by. Richard Farr’s price target of $0 doesn’t help either.
One could argue that the strategy lost about 80%, while Bitcoin only lost 50%. However, the added risk of the stock market justifies this difference and does not necessarily make stocks a better buy than Bitcoin.
