MicroStrategy Stock Surges 20% Amid Rising Bitcoin Prices

MicroStrategy stock surged over 20%, maintaining a 15% gain by midday with Andrew Kang warning of potential short squeeze risks.

During the early hours of trading in the United States on March 4, the share price of MicroStrategy (MSTR) increased by more than 20%. By the middle of the day, it had maintained a gain of more than 15%.

Microstrategy Stock Rises

Bitcoin is a cryptocurrency that the company actively invests in. MicroStrategy began trading on March 4 at $1,200 and achieved an intraday high of $1,339, continuing its upward trend from the previous trading day, when it had closed at $1,079 per share.

Andrew Kang, the co-founder of Mechanism Capital stated that around 20% of MicroStrategy’s publicly available shares, valued at approximately three billion dollars, were locked into short positions.

In other words, according to Kang, investors intended to take advantage of the rising value of the stock in comparison to its net assets on the premise that the share price would fall once more. On X, Kang made this statement.

“I imagine a lot of that float is angry tradfi boomers trying to capture the premium to NAV [net asset value].”

Kang issued a warning as to the possibility that a calculation error could result in a scenario in which “that spread blows out in a mega squeeze,” similar to the short squeeze that GameStop (GME) suffered in January 2021.

Over the course of two weeks, the share price of GameStop increased by 1,500% on January 29, 2021. Within one month, GME went from a high of more than $81 to a low of $13.

Michael Saylor, the founder and chairman of MicroStrategy posted a statement on X on February 26 stating that the company had added 3,000 bitcoins to its holdings between February 15 and February 25 at an average price of $51,813 for $155 million.

The company’s Bitcoin holdings increased to 193,000 Bitcoins acquired at an average price of $31,554 each, totaling $6.1 billion.The value of MicroStrategy’s Bitcoin holdings is estimated to be $12.8 billion at the current price of $66,332 per bitcoin, recorded on March 4.

Analysts who follow the market were already optimistic about MicroStrategy. Investment banker Benchmark rated MicroStrategy as a “buy” in a market analysis published on February 27. The target price for the stock was $990.

In addition, Benchmark predicts that the forthcoming halving of the Bitcoin supply will increase MicroStrategy’s share price. Bitcoin is technically superior to gold, real estate, and the S&P 500, according to Saylor, who stated on February 20 that he would be purchasing Bitcoin for the rest of his life.

MicroStrategy was trading at $1,251, representing an almost 16% increase at the end of the day.