Why Strategy Stock Surged Today
Key Points
Strategy is adding to its already massive crypto holdings.
Regulatory action could fuel further gains.
- 10 stocks we like better than Strategy ›
Shares of Strategy (NASDAQ: MSTR) popped on Monday as the price of Bitcoin (CRYPTO: BTC) climbed above $86,000.
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Bitcoin's rally is driving up the value of Strategy's holdings
Strategy announced today that between Sept. 14 and Sept. 20, it purchased 950 Bitcoin for $75.7 million. That brought the leading cryptocurrency treasury company's holdings to 846,000 Bitcoin, which it bought for a total of $63.8 billion, or $75,416 per coin.
With its cryptocurrency holdings accounting for most of its business value, Strategy's stock price tends to track Bitcoin's price fluctuations, albeit to a greater extent due to the leverage inherent in its business model.
Multiple factors are driving Bitcoin's recent gains
The Clarity Act, which sought to establish a clearer regulatory framework for the crypto industry, failed to pass. You wouldn't think that would be a positive for the crypto market.
Yet the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are working to create rules for digital assets in its place. It appears that these financial watchdogs are attempting to reduce regulatory uncertainty for the crypto industry and investors in the wake of the Clarity Act's failure.
In addition to hopes for regulatory clarity, calls for a Bitcoin bull market are reemerging. Bitwise chief investment officer Matt Hougan, for one, believes "crypto winter" is over.
In its place, Hougan sees a "crypto spring" ushering in the "strongest and longest-running bull market in crypto's history," driven by rising digital transactions and institutional adoption.
Now, as the CIO of a leading digital asset manager, it's fair to say Hougan is talking his book. But Hougan is correct in that greater regulatory certainty could make it easier for professional investors to allocate more capital to the crypto sector. That could help drive Bitcoin's price higher -- and Strategy's stock price along with it.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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