Have We Gone Overboard with Cryptocurrency Trading? Citibank Lowers MicroStrategy Stock Rating Due to "Excessive Focus" on Bitcoin

According to a report from the U.S. financial media platform Seeking Alpha, Citigroup has downgraded the stock rating of Nasdaq-listed company MicroStrategy due to its "disproportionate focus" on Bitcoin.

MicroStrategy Stock Rating Downgraded

Citigroup analyst Tyler Radke pointed out that after MicroStrategy announced the sale of $400 million of 2025 convertible senior notes to qualified institutional buyers to purchase more Bitcoin, the company's stock (MSTR) was downgraded to "sell." Radke admitted that MicroStrategy's return on investment in Bitcoin is impressive, but CEO Michael Saylor's "excessive focus" on Bitcoin poses significant risks for investors.

"Since August 2020, MSTR's return on investment in Bitcoin has reached $250 million, which translates to an increase of $26 per share or 20%, while this investment return is impressive, it is not enough to support its 172% increase in stock value. At the current stock price, we believe the market is overly optimistic about the company's core business and the valuation of Bitcoin."

The Best Way for Indirect Bitcoin Investment

Since the company first announced its Bitcoin trades in August, MicroStrategy's stock price has been rising as many investors view purchasing MSTR stocks as an indirect investment in Bitcoin due to the company's large cryptocurrency reserves. Leading U.S. short-selling firm Citron Research issued a long-term buy recommendation on MSTR in November with a target price of $700 (current price $289.45), stating:

"There is no better way to trade Bitcoin in the stock market right now."

At the time of writing, the price of Bitcoin is around $18,284, with a 4.5% decrease in the past 24 hours. Meanwhile, MSTR's performance diverged from the overall U.S. stock market after yesterday's opening, dropping nearly 14% in the past 24 hours.