According to analyst Carmelo Alemán from CryptoQuant, the market is undervaluing MicroStrategy’s (MSTR) stock because the company’s substantial Bitcoin holdings, totaling 649,870 BTC, indicate a market value 78% higher than its current trading price.

Alemán supports his claim with on-chain metrics and CryptoQuant’s MSTR price bands, which reflect a historical undervaluation for the stock. In his report dated December 1, he noted that the average acquisition cost for Bitcoin was $74,432; hence, the company is enjoying about a 22% unrealized profit.

Analyst Identifies a Unique Undervaluation Condition for MSTR

In his assessment, Alemán suggests that the discrepancy between the Bitcoin reserves and the MSTR stock price indicates a roughly 78% discount compared to the implied value from the BTC treasury.

CryptoQuant’s price bands evaluate MSTR’s current market position against a theoretical fair value derived from its Bitcoin holdings. The upper band typically signifies a premium trading period, while the lower band suggests times of substantial discounts often preceding recoveries.

Alemán highlighted that MSTR’s stock has recently tested this lower band, a clear signal of mispricing that has historically led to sustained recoveries once market sentiment improved.

Meanwhile, MicroStrategy’s Bitcoin acquisition activities continue unabated, with their latest transaction being a significant purchase worth over $830 million at approximately $100,000 per BTC, following earlier rumors of divestment that were disproven by both Saylor and analysts.

Recent Stock Performance and ETF Transformation

As of December 1, MSTR’s closing price stood at about $177, which is considerably lower than its 52-week peak of around $457, amidst broader declines in Bitcoin-related stocks and its recent exclusion from the S&P 500 index on November 25. Additional changes in MSCI index values could potentially incite further selling among companies steeped in crypto investments.

Institutional capital has transitioned from leveraging Bitcoin proxy stocks like MicroStrategy to engaging in spot Bitcoin ETFs, significantly reducing the premium that MSTR typically had over Bitcoin. For the first time in five years, the market value of MicroStrategy dipped below that of its Bitcoin holdings.

Some analysts, including Matt Hougan from Bitwise, suggest that companies with substantial cryptocurrency reserves rightfully trade at a low discount due to operational overheads and risks.

MicroStrategy has sought to alleviate the concerns of bondholders by asserting that its BTC reserves adequately cover its debt obligations nearly sixfold at Bitcoin prices around $74,000, demonstrating sound financial management amid market fluctuations.