With crypto winter clearly set in, bulls are now left looking for signs that bearishness has become so embedded that a bottom may form.
An example is a note from Canaccord’s Joseph Vafi on Wednesday, cutting his price target on Strategy (MSTR) by a whopping 61% to $185 from $474.
Vafi, who raised his view on strategy as recently as November (to the $474 level), still maintains a buy rating on the stock, and his new $185 target suggests about 40% upside from last night’s close of $133.
The strategy is now down 15% year-to-date, 62% year-to-date and 72% from its November 2024 high.
Bitcoin, Vafi said, is in the midst of an “identity crisis,” still fitting the profile of a long-term store of value but increasingly trading as a risk asset. That tension came into focus during October’s crypto flash crash, when foreclosures accelerated the selloff.
Although bitcoin is often cast as “digital gold,” it has failed to keep pace with the recent surge in precious metals, he continued. As gold has rallied on geopolitical tensions and macro uncertainty, bitcoin has lagged, underscoring its continued reliance on liquidity and risk appetite over secure demand.
The strategy is built to weather volatility, the report states. The company holds more than $44 billion in bitcoin against about $8 billion in convertible debt, including a $1 billion tranche putable in 2027 that remains in the money. Preferred dividends can be handled through modest equity issuance, even with MSTR’s market cap no longer at a premium to the value of its BTC holdings.
Quarterly results are coming this week, but they’ve become largely irrelevant given Strategy’s almost complete reliance on BTC, Vafi continued. A significant unrealized loss associated with bitcoin sales is expected in the fourth quarter.
Vafi’s new $185 target assumes a 20% rise in bitcoin prices and a recovery in the company’s mNAV to around 1.25x.
Read more: ETF enjoying carnage in bitcoin-holding strategy hits record high
