Are you still buying MicroStrategy, which is up 125% per year?

First of all, investors need to keep an eye out for completely new market trends caused by the launch of a new spot Bitcoin ETF in January. The new ETF is great news for Bitcoin, which reached an all-time high of $73,750 in mid-March. Also, since MicroStrategy holds more than 1% of the world's bitcoins, this upward momentum has had a very positive impact on MicroStrategy's stock price.

Until 2024/1, when major institutional investors want to have direct exposure to the Bitcoin price, there aren't many options. So they settled on the idea of a Bitcoin proxy stock, and microstrategy emerged as one of the best options.

The problem, however, is that investors no longer need Bitcoin surrogate shares, which seems to reduce the overall appeal of holding microstrategies. Investors currently have spot bitcoin ETFs that provide 1:1 exposure to bitcoin prices. This is the concern I have about microstrategy right now. If the company is just a company pretending to be a Bitcoin ETF, then I'm not interested anymore. You should buy a Bitcoin ETF. Microstrategies need to provide something more valuable than just holding bitcoins.

That “something else” refers to the company's enterprise software business. This was the main driving force behind the company's market evaluation until the company put all its effort into its Bitcoin strategy in 2020. And it seems that these days it has been forgotten. Investors seem to be eyeing the company's $14 billion bitcoin holdings, and they may be overlooking what is happening elsewhere in the company.

At the 27th annual event MicroStrategy World held in May, the company made an effort to highlight some of its upcoming software products related to artificial intelligence (AI). For example, the company highlighted a new software product that theoretically allows companies to build and train their own AI bots. This is valuable for those who believe in a bright and brilliant future of artificial intelligence. MicroStrategy has been rumored about its involvement in AI since October, so the launch of new AI-related software seems to be a very positive development.

MicroStrategy is also entering the bitcoin-related software product market, which is still in its infancy. The latest product is a Bitcoin-based distributed identity system. Instead of entrusting ID verification to a central authority (enterprise, government agency, etc.), ID verification may be possible using the Bitcoin blockchain. According to MicroStrategy, there are many real-world use cases for this technology. For example, it can be used to authenticate legal documents, protect medical records, check users' social media profiles, etc.

MicroStrategy's work on building enterprise software products is commendable, but we're still uncertain that none of them will become popular.

For example, reactions to new Bitcoin software products have been lukewarm at best. The idea of clogging up the Bitcoin blockchain with huge amounts of personal data was not accepted by Bitcoin purists (who think blockchain should only be used for transactions). Also, those who first saw some of the software code posted online weren't too impressed.

This is important because it suggests that new software strategies based on AI and Bitcoin may not be enough to actually bring about change. And if that were the case, MicroStrategy would struggle to convince investors that the company is more than just a Bitcoin proxy.