Bitcoin (BTCUSD) price has risen 22% over the past month, Coinbase (Coin)

Bitcoin (BTCUSD) price has risen 22% in the past month, Coinbase (Coin)

MicroStrategy (NASDAQ:MSTR) has become synonymous with the financial policy strategy of Bitcoin (BTCUSD) retail investors. The company, originally known for its enterprise software, has turned to focus on Bitcoin in recent years, resulting in investor returns of more than 1,400%.

Now, as Coinbase (NASDAQ:COIN) prepares to join the S&P 500 (SPX) next week, this marks an important milestone in the cryptocurrency industry as the top institutional hub will include cryptocurrency companies for the first time.

HC Wainwright's team is particularly bullish about MicroStrategy's strategy, with a price target of $480.

Why some analysts are bullish on MicroStrategy's strategy

Judging from the MicroStrategy five-year chart, it is clear that long-time Bitcoin followers have benefited a lot from holding the tech company’s shares. MSTR's stock price rose from about $10 five years ago to about $420 today, while recent analyst targets show there is still 15% room for upward from current levels.

Of course, this possibility exists considering MicroStrategy shares have risen 3,200% over the past five years. As we can see from Bitcoin prices, volatility can indeed be a good friend to long-term investors.

By borrowing heavily on the bond market and reinvesting funds in Bitcoin, MicroStrategy's balance sheet is a mixture of dollar-denominated debt and Bitcoin-denominated assets. Investors will benefit from the value of Bitcoin in USD.

Of course, if the long-term trend of Bitcoin price eventually reverses, MicroStrategy's leverage position against Bitcoin price may be detrimental to investors. But for now, it's a pretty stable journey for those who stick to Michael Saylor's belief in the value of Bitcoin as a treasury asset.

What is MicroStrategy's balance sheet?

I think the key to MicroStrategy investors is the company's balance sheet. Analysts at HC Wainwright noted that MicroStrategy has raised more than $25 billion to buy large amounts of bitcoins, and these are now worth nearly $50 billion. This is really awesome.

However, it is reasonable that the company's stock price upward momentum may slow down if the company's debt burden exceeds the psychological threshold that the market is willing to endure.

In my opinion, the company's balance sheet doesn't look tight, and there is a solid argument that MicroStrategy has provided great service to investors seeking liquidity access to leveraged Bitcoin.

That said, I have been cautious about the potential for a sharp decline in Bitcoin prices, which could quickly erode the strength of this balance sheet, especially when Saylor continues to buy Bitcoin at its current price or increase its purchase activity.

What do analysts think about MSTR stocks?

In addition to the aforementioned HC Wainwright analysts, most other analysts are optimistic about MicroStrategy. As shown in the figure below, the consensus "forced buy" rating for MicroStrategy has remained unchanged due to positive predictions about Bitcoin. But as the macro environment becomes increasingly uncertain, the total rating has dropped from 4.91 out of 5 points to 4.62 in the past three months.

I think the consensus is that the $524.17 MicroStrategy target price may be a bit optimistic given a lot of possible downside risks. Saylor and his team did a great job at low prices. But I am not a strategy supporter who thinks "price rise" can always rely on.

As mentioned earlier, if the price of Bitcoin falls by more than 50%, the show may have ended. In my opinion, this is a risky proposition.

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