Microstrategy’s Stock Poised to Benefit from Bitcoin Halving, Berenberg Predicts

Berenberg Capital has revealed its bullish case for Michael Saylor‘s Microstrategy ahead of the upcoming Bitcoin (BTC) halving event. 

In a recent research note, the investment firm said the Bitcoin halving, scheduled for April 26, 2024, serves as the primary driving force behind the firm’s positive outlook. 

Berenberg currently holds a price target of $430 for the Virginia-based software company, a notable increase from its current price of $407.71 per share. 

Bitcoin halving occurs approximately every four years and is ingrained in the Bitcoin protocol. 

It refers to the reduction in the rate at which new bitcoins are created and awarded to miners for validating transactions. The halving mechanism is designed to control inflation and limit the supply of bitcoins in circulation.

Halving events have significant implications for the supply and demand dynamics of Bitcoin, which can ultimately impact its price. 

The reduction in new coin issuance creates a scarcity effect. With fewer BTC tokens entering the market, the available supply decreases. 

If the demand for Bitcoin remains stable or increases, the reduced supply can lead to upward price pressure.

Microstrategy Expected to Rally Alongside Bitcoin

Given the strong correlation between Microstrategy’s stock price and the price of Bitcoin at approximately 90%, Berenberg suggests that Microstrategy’s stock is likely to rally alongside Bitcoin.

Since the start of the year, Microstrategy’s stock has soared by over 181%, according to TradingView. This bullish trend continued on Monday, witnessing a 7% increase and ending the day at $407.71.

“If the historical pattern established by the first three bitcoin halvings continues to play out with the fourth halving, then the pre-halving rally would begin about four months from now,” the firm wrote. 

“If a rally were to occur after the fourth halving, and if it were as long-lived as the rallies that occurred after the past couple of halvings, then it would continue until around October 2025.”

This is not the first time analysts at Berenberg have endorsed Microstrategy due to its massive exposure to Bitcoin.

Back in May, Mark Palmer, an equity research analyst at Berenberg Capital Markets, claimed MicroStrategy is a safer bet compared to Coinbase due to the exchange’s regulatory issues. 

“Given the heightened uncertainty that Coinbase faces, we believe investors would be much better served investing in shares of MicroStrategy,” the analyst wrote. 

As reported, the Litecoin (LTC) blockchain’s halving, which is poised to go through in another 21 days, has already positively impacted the price of LTC.

Over the past month, the price of Litecoin has risen by 22%, while its 12-month performance shows an impressive 81% increase. 

This performance has bolstered the confidence of Bitcoin investors who believe that the upcoming halvening event for Bitcoin will have a similarly positive impact on the price of the leading cryptocurrency. 

Notably, Bitcoin hit a 52-week high last month after BlackRock, the world’s largest asset manager, filed an application to create a spot Bitcoin ETF.