What’s Flying Higher Than Bitcoin? The Software Company Buying Up Bitcoin

Bitcoin prices have surged about 40% since Election Day. MicroStrategy has climbed even faster.

The software company turned itself into a bitcoin buying machine in 2020 and now holds some $37 billion worth of tokens. For many individual investors, the stock is a more popular bitcoin play than the cryptocurrency itself and they are willing to pay up for it.

With a $91 billion market value, MicroStrategy is trading at more than twice the value of its underlying bitcoin. The shares have soared more than sixfold this year and 77% since Nov. 5, with traders betting that the digital-assets industry will flourish under President-elect Donald Trump . Bitcoin prices are hovering just below $95,000, after trading near $100,000 last week.

“MicroStrategy found a way to outperform bitcoin,” Michael Saylor , the company’s founder and executive chairman, said in an interview. “The way that we outperform bitcoin, in essence, is we just lever up bitcoin.”

And Saylor says he is just getting started. He unveiled an audacious plan just days before the election to hire investment banks to raise $42 billion in capital over three years through stock and bond offerings to buy more tokens. His company had $4.3 billion in convertible debt outstanding as of Oct. 29.

MicroStrategy’s mix of bitcoin maximalism and Wall Street-style financial engineering has paid off for its investors, but skeptics question whether it is sustainable.

Saylor’s heavy use of leverage, or borrowed money, to buy bitcoin backfired during the 2022 crypto-market meltdown when the collapse of Sam Bankman-Fried ’s FTX dragged bitcoin prices below $16,000. Quarter after quarter, MicroStrategy incurred mounting losses tied to bitcoin and Saylor stepped down as CEO, a position he had held since 1989.

“This stock has become detached from reality,” said Andrew Left, a prominent short seller and founder of Citron Research.

Left describes himself as bullish on bitcoin itself and praised MicroStrategy in 2020 when it first began amassing bitcoin. But in a Thursday post on X , Left said he had taken out a bet against MicroStrategy, which caused its stock to tumble.

Some analysts warn MicroStrategy’s stunning run-up is part of a broader investor euphoria for speculative assets and will inevitably collapse. David Trainer, founder of research firm New Constructs, said MicroStrategy is a bad business by conventional metrics—for instance, it has posted a net loss for the past three quarters.

Michael Saylor’s heavy use of borrowed money to buy bitcoin backfired during the 2022 crypto-market meltdown. Photo: Alyssa Schukar for WSJ

“It’s symptomatic of a market that has become obsessed with believing in get-rich-quick schemes,” Trainer said. “If you like bitcoin, go buy bitcoin. But don’t invest in a company that’s losing money and also buying bitcoin, because then you’ve sort of doubled your risk.”

Some traders say a key part of the stock’s appeal is its volatility, which can help amplify their gains over a short period.

Garrett Shirey , a barber in Florence, Ala., bought one share of MicroStrategy at $436.53 in his retirement account Tuesday afternoon and sold it at $472.40 Wednesday morning, notching a quick profit.

Restricted from purchasing bitcoin in his Roth IRA account, the 39-year-old crypto enthusiast has had to settle for bitcoin proxies like MicroStrategy stock and bitcoin exchange-traded funds. He holds some shares of the Bitwise Bitcoin ETF .

“I don’t think bitcoin went up 8% in the last 24 hours, but MicroStrategy did,” said Shirey, who has been investing in cryptocurrencies since the pandemic.

Saylor said he came up with the bitcoin strategy in 2020 when Covid-19 forced lockdowns and the Federal Reserve cut interest rates to zero. MicroStrategy was competing with tech giants such as Microsoft and falling behind. The company was under pressure to return cash to shareholders through stock buybacks and dividends.

“It was either a fast death or a slow death, or take a risk, do something out of the box,” he said.

Saylor has often boasted about MicroStrategy’s volatility. “When you embrace volatility, then you’re outperforming the S&P,” he said during last month’s earnings call.

MicroStrategy’s volatility has helped it find ready buyers for its repeated issuances of convertible bonds—debt that can eventually be converted into shares, if the stock price rises to a specified level. Such bonds are often purchased by hedge funds that protect themselves against a collapse in the stock’s price by going short, or placing a bet that the stock will fall. Such funds generally don’t focus on whether the company is a good long-term investment, and instead seek to profit from the volatility of its stock.

MicroStrategy is an attractive trade for convertible-bond arbitragers, said Vadim Iosilevich, a veteran hedge-fund trader in New York.

“We can definitely agree that the volatility will be there,” he said.

Some investors are turning to ETFs that seek to amplify the return of MicroStrategy shares using borrowed money or derivative contracts. One such fund, the Defiance Daily Target 2x Long MSTR ETF aims to double the daily return of the stock and has attracted $1.8 billion in assets since it launched in August. Other funds allow traders to make inverse bets.

Chase Furey , a 25-year-old trader in Newport Beach, Calif., said he started buying bitcoin-related stocks including Coinbase Global, MicroStrategy and BlackRock’s bitcoin ETF in October. Hoping to turbocharge the gains, he moved all of his investments, worth about $112,000, into the Defiance ETF instead and has grown his portfolio to about $400,000.

The Harvard graduate, who studied economics in college, convinced his parents to let him manage $700,000 of their retirement assets. He said he came up with a “less dangerous and smarter” plan for them, investing 27% of their portfolio in the Defiance ETF and the rest in MicroStrategy shares. The money has more than doubled to $1.8 million, he said.

“I think bitcoin could hit $400,000 and I think MicroStrategy could possibly 10x from where it is now by the end of next year, so that’s kind of my game plan with that,” he said.

Even some bitcoin bulls have expressed unease about the risks investors face by betting on MicroStrategy. Mike Novogratz , the billionaire CEO of crypto-trading firm Galaxy Digital , warned in an interview on CNBC Thursday that bitcoin could fall 20% after peaking at $100,000—in part because of leveraged bets on MicroStrategy available through some exchange-traded funds.

“The crypto community is levered to the gills right now, so there will be a correction,” Novogratz said.

President Donald Trump’s imposition of tariffs on trading partners have moved analysts to reduce forecasts for U.S. companies. Many stocks look vulnerable to declines, while some seem relatively immune.

Since the start of the year, analysts’ expectations for aggregate first-quarter sales of S&P 500 component companies have dropped about 0.4%, according to FactSet. The hundreds of billions of dollars worth of imports from China, Mexico, and Canada the Trump administration is placing tariffs on, including metals and basic materials for retail and food sellers, will raise costs for U.S. companies. That will force them to lift prices, reducing the number of goods and services they’ll sell to consumers and businesses.

This outlook has pressured first-quarter earnings estimates by 3.8%. Companies will cut back on marketing and perhaps labour, but many have substantial fixed expenses that can’t easily be reduced, such as depreciation and interest to lenders. Profit margins will drop in the face of lower revenue, thus weighing on profit estimates. The estimates dropped mildly in January, and then picked up steam in February, just after the initial tariff announcements.

“We are starting to see the first instances of analysts cutting numbers on tariff impacts,” writes Citi strategist Scott Chronert.

The reductions aren’t concentrated in one sector; they’re widespread, a concrete indication that the downward revisions are partly related to tariffs, which affect many sectors. The percentage of all analyst earnings-estimate revisions in March for S&P 500 companies that have been downward this year has been 60.1%, according to Citi, worse than the historical average of 53.5% for March.

The consumer-discretionary sector has seen just over 62% of March revisions to be lower, almost 10 percentage points worse than the historical average. The aggregate first-quarter earnings expectation for all consumer-discretionary companies in the S&P 500 has dropped 11% since the start of the year.

That could hurt the stocks going forward, even though the Consumer Discretionary Select Sector SPDR exchange-traded fund has already dropped 11% for the year. The declines have been led by Tesla and Amazon.com , which account for trillions of dollars of market value and comprise a large portion of the fund. The average name in the fund is down about 4% this year, so there could easily be more downside.

That’s especially true because another slew of downward earnings revisions look likely. Analysts have barely changed their full-year 2025 sales projections for the consumer-discretionary sector, and have lowered full-year earnings by only 2%, even though they’ve more dramatically reduced first-quarter forecasts. The current expectation calls for a sharp increase in quarterly sales and earnings from the first quarter through the rest of the year, but that’s unrealistic, assuming tariffs remain in place for the rest of the year.

“The relative estimate achievability of the consumer discretionary earnings are below average,” Trivariate Research’s Adam Parker wrote in a report.

That makes these stocks look still too expensive—and vulnerable to declines. The consumer-discretionary ETF trades at 21.2 times expected earnings for this year, but if those expectations tumble as much as they have for the first quarter, then the fund’s current price/earnings multiple looks closer to 25 times. That’s too high, given that it’s where the multiple was before markets began reflecting ongoing risk to earnings from tariffs and any continued economic consequences. So, another drop in earnings estimates would drag these consumer stocks down even further.

Industrials are in a similar position. Many of them make equipment and machines that would become more costly to import. The sector has seen about two thirds of March earnings revisions move downward, about 13 percentage points worse that the historical average. Analysts have lowered first-quarter-earnings estimates by 6%, but only 3% for the full year, suggesting that more tariff-related downward revisions are likely for the rest of the year.

That would weigh on the stocks. The Industrial Select Sector SPDR ETF is about flat for the year but would look more expensive than it is today if earnings estimates drop more. The stocks face a high probability of downside from here.

The stocks to own are the “defensive” ones, those that are unlikely to see much tariff-related earnings impact, namely healthcare. Demand for drugs and insurance is much sturdier versus less essential goods and services when consumers have less money to spend. The Health Care Select Sector SPDR ETF has produced a 6% gain this year.

That’s supported by earnings trends that are just fine. First-quarter earnings estimates have even ticked slightly higher this year. These stocks should remain relatively strong as long as analysts continue to forecast stable, albeit mild, sales and earnings growth for the coming few years.

“This leads us to recommend healthcare and disfavour consumer discretionary,” Parker writes.

What’s Flying Higher Than Bitcoin? The Software Company Buying Up Bitcoin

MicroStrategy shares are a more popular bitcoin play than the cryptocurrency itself for many individual investors