Now that crypto winter has clearly arrived, bulls are now left searching for signs that the downtrend has become so entrenched that a bottom could form.
A case in point could be a note from Canaccord’s Joseph Vafi on Wednesday cutting his price target on Strategy (MSTR) by a whopping 61% to $185 from $474.
Vafi, which raised its outlook on strategy in November (to that $474 level), still maintains a Buy rating on the stock, and its new target of $185 suggests an upside of around 40% from last night’s close of $133.
The strategy is now down 15% year-to-date, 62% year-over-year, and 72% from its all-time high in November 2024.
Bitcoin, Vafi said, is in the midst of an “identity crisis,” still fitting the profile of a long-term store of value but increasingly being traded as a risk asset. That tension was highlighted during the cryptocurrency flash crash in October, when forced liquidations accelerated sales.
Although often considered “digital gold,” Bitcoin has failed to keep pace with the recent rise in precious metals, he continued. As gold has risen due to geopolitical tensions and macroeconomic uncertainty, bitcoin has lagged, underscoring its continued reliance on liquidity and risk appetite rather than safe haven demand.
The strategy is designed to weather volatility, according to the report. The company holds more than $44 billion in bitcoin against about $8 billion in convertible debt, including a $1 billion tranche with a put option in 2027 that remains in the money. Preferred dividends can be managed through a modest share issuance, even though MSTR’s market capitalization no longer commands a very high premium to the value of its BTC holdings.
Quarterly results are coming this week, but have become largely irrelevant given Strategy’s near-total dependence on BTC, Vafi continued. A sizable unrealized loss is expected linked to the bitcoin sell-off in the fourth quarter.
Vafi’s new target of $185 assumes a 20% rally in bitcoin prices and a recovery of the company’s mNAV to approximately 1.25x.
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