Today, I (Chris Lowe) will show you what I mean by bitcoin stocks… why they’re surging… and how you can profit.
But first, an important update on the GameStop saga.
As regular readers will recall, GameStop (GME) is a struggling brick-and-mortar video game retailer. It became the target of an internet flash mob that bid up its share price as much as 2,464% since the start of the year.
The folks bidding up GME wanted to bring down hedge funds that were betting its shares would fall. This resulted in heavy losses for several hedge funds that had placed bearish bets on the stock.
Now, I’m happy to see some hedge fund managers getting bloody noses from regular investors. They’ll have a lot more respect for the “little guy” in the future.
But I warned you on Monday that this flash mob would leave a lot of well-meaning folks nursing painful losses. As I wrote…
Everything we do here at Legacy Research is about leveling the playing field between everyday investors and Wall Street elites.
But this is too dangerous a game to be playing with your hard-earned savings. And a lot of people are going to end up with black holes where their brokerage accounts used to be.
GameStop has plunged 55% since I wrote those words. It’s now down 80% since the peak it set last Thursday.
Sure, the GameStop posse hurt a few Wall Street bigwigs. But there are better ways to stick it to the man.
As I’ve been spreading the word on here at the Cut, bitcoin threatens to disrupt Wall Street’s entire business model… and all of global finance.
So today, I’m lifting the lid on a bitcoin play you may not have considered. It doesn’t involve buying bitcoin… or other cryptos… directly. Instead, it’s something you can buy through your regular broker.
If you’d like to get exposure to bitcoin without dealing with an exchange and a digital wallet… pay close attention to this opportunity. It could be a perfect fit for you.
Take MicroStrategy (MSTR).
It’s a tech company. The technology it builds – business analytics software – has no direct connection with bitcoin or the blockchain tech it’s built on.
What makes MicroStrategy special is it’s the first publicly traded U.S. corporation to hold bitcoin as a cash reserve on its balance sheet.
The company’s CEO is a guy called Michael Saylor. And last August, he announced that MicroStrategy was converting $250 million of its cash reserves to bitcoin.
Since then, Saylor has converted another $895 million of his company’s cash reserves into the cryptocurrency.
That’s a total investment of $1.1 billion in bitcoin. That’s more than two-thirds of the company’s cash reserves.
I recommend you search for the many videos and podcast interviews with him on this subject. (I’ve included some links at the end of today’s issue.)
But in a nutshell, Saylor views U.S. dollar cash as a “melting ice cube.” What he means by that is it’s going to lose buying power due to inflation.
So to protect the buying power of MicroStrategy’s cash reserves… and maximize value for his shareholders… he prefers what he calls “digital gold” – bitcoin.
Here’s Saylor with more on his move into bitcoin…
Bitcoin […] is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. […]
Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it. We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fueled the rise of so many category killers in the modern era.
Here at Legacy Research, we’ve been beating this drum going all the way back to 2016.
That’s when colleague Teeka Tiwari first added bitcoin to the model portfolios at our Palm Beach Letter and Palm Beach Confidential advisories.
One bitcoin was changing hands for $428 at the time. Today, each bitcoin will set you back $36,630. So readers who took Teeka’s advice from the start are up 8,458% so far on their investments.
If you’re a regular reader, you’ll know that’s Teeka’s investment case. Since he first recommended bitcoin, he’s been saying the crypto would soar as it goes from fringe to mainstream financial asset.
Nick heads up our extreme-value advisory, Crisis Investing.
There, he looks for opportunities to scoop up investments at bargain prices in brand-new markets… or markets in crisis.
At the start of 2018, Nick recommended his readers buy bitcoin. And last August – when bitcoin was trading at $11,500 – he recommended they also buy MicroStrategy shares.
Here’s how he explained it…
If the price of bitcoin rises just 13.6% from [MicroStrategy’s] purchase price to $13,237, the unrealized gain would be equal to the profit the company generated from its regular operations for all of 2019.
If the bitcoin price rises to $20,000, MicroStrategy will be sitting on an unrealized gain of $179 million, or more than five times last year’s profits.
I think a bitcoin price of $20,000 could quickly happen. It’s likely to go up much higher than that. That’s why I think MicroStrategy’s decision to buy bitcoin – which was unrelated to the company’s primary operations – could end up being the most profitable move in its history.
His prediction was spot-on. Bitcoin did go “much higher” than $20,000. As I said, the cryptocurrency trades at $36,630 at this writing.
Fast-forward a year, and if MicroStrategy swapped its bitcoin reserves back into dollars now, it would get $2.6 billion… versus its $1.1 billion outlay.
That’s an unrealized profit of $1.5 billion… or roughly 26 times the company’s 2020 operating profits.
See for yourself…
Since Nick recommended MSTR just six months ago, his paid-up readers have had the chance to make a gain of 438%.
And Nick sees much larger gains ahead. It’s down to all the digital money-“printing” governments are engaged in. Nick…
Governments are destroying their currencies at breakneck speed. Following the coronavirus hysteria, they’ve thrown out the last semblance of fiscal and monetary sanity.
Earlier this year, in a matter of days, central banks created more currency units out of thin air than they have for most of their existence. It’s so extreme, it’s caused publicly traded firms such as MicroStrategy to choose bitcoin as an alternative to U.S. dollars as a store of value on their balance sheets.
The higher the bitcoin price, the more incentive other CEOs and CFOs (chief financial officers) will have to diversify their cash reserves into bitcoin.
The more bitcoin these corporations buy… the higher the bitcoin price will go. This will push up these corporations’ share prices… and encourage other corporations to follow suit.
This will push up the price of bitcoin even further… and so on.
It’s something Nick predicted last August (Crisis Investing subscribers can catch up in full here) after Saylor made his move into bitcoin…
I think the adoption of bitcoin by corporate America is just getting started.
MicroStrategy was the first company to adopt bitcoin as its primary cash reserve, but it certainly won’t be the last.
I’d bet many other companies are considering or already have accumulated bitcoin like MicroStrategy, but just haven’t announced it yet. It’s likely companies are debating how much of their cash holdings they should allocate to bitcoin.
That was another good call.
Since MicroStrategy led the charge into bitcoin last August, six other companies have invested more than $217 million collectively in bitcoin.
And Saylor has made it his mission to get as many other corporations involved as he can.
Today featured presentations from the MicroStrategy board on its bitcoin strategy, as well as accounting, legal, tax, and auditing considerations.
Tomorrow will include presentations from top crypto exchanges and fund managers – including Coinbase, Binance, and Grayscale.
And representatives from 1,400 companies are joining Saylor to learn the blueprint for taking advantage of bitcoin in their own reserves.
The investment case… as we’ve been spreading the word on for years… is watertight.
Expect to see more companies plug their balance sheets into bitcoin as a result.
I’ll have more for you tomorrow on why Nick believes it’s urgent you get ahead of this corporate rush into bitcoin… and how to play it.
And if you’re interested in hearing more from Saylor about why he prefers bitcoin to decaying U.S. dollar cash, here are some links to get you started:
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“Bitcoin in the Boardroom” – What Bitcoin Did
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Interview with Michael Saylor – SALT Talks
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“Michael Saylor on Buying Bitcoin With His Balance Sheet” – The Pomp Podcast
Enjoy… and make sure to tune in again tomorrow for more on this subject from me and the Legacy team.
Regards,
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Chris Lowe
February 3, 2021
Bray, Ireland