Analyst who predicted BTC rally says MicroStrategy shares are overvalued by 26%

Investors are wondering what's next for shares in business intelligence company MicroStrategy after surging 343% this year, and they may want to look at what 10x Research, led by Markus Thelen, who has predicted a BTC rally this year, says.

According to 10x's latest research note, MSTR shares appear to be overvalued by 26%. The conclusion is based on the company's regression model, examining the relationship between the dependent variable, MSTR, and the independent variable, the spot price of Bitcoin.

“As the regression model shows, MicroStrategy is overvalued by +26% and has a downside of 20% based on current Bitcoin prices. It is time to take profits,” 10x said.

Shares of Bitcoin owner MSTR have more than quadrupled this year, hitting a 25-month high of $673 on Wednesday to become one of the best-performing cryptocurrency-related stocks of 2023. The Nasdaq-listed company owns 189,150 Bitcoin as of Writing this report, I started accumulating cryptocurrency as a reserve asset three years ago. Bitcoin, the leading cryptocurrency by market cap, has gained 160% this year, with prices rising 60% in this quarter alone, mainly due to the listing of spot ETFs.

The performance of cryptocurrency-related stocks like MSTR and shares in Coinbase compared to Bitcoin is often touted as a proxy for institutional interest in digital assets. These listed instruments allow market participants to gain exposure to digital assets without having to own them.

The graph shows the upward-slanting line (green) of best fit, which is drawn through the maximum number of points on the scatter plot, ensuring that there are approximately equal numbers of points above and below the line.

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The sloping nature of the line shows a positive relationship between Bitcoin and MSTR. In other words, as the price of BTC rises, the market capitalization of MSTR rises. An R² (R-squared or coefficient of determination) of 0.8232 indicates that 80% of the variance in MSTR can be explained by the BTC price.

The analysis shows that at Thursday's closing price of $673, the MSTR is overvalued by 20% compared to Bitcoin's market price of around $43,000.

According to 10x, many cryptocurrency-related stocks are trading near fair value based on the price of Bitcoin.

“We suggest taking profits and cutting long positions. HIVE, HUT and GALAXY still offer some value here, but significant money has been made on those stocks,” 10x said.

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