Does that mean Ripple is a buy? We don’t think so. These developments are good but we don’t think it makes the token stand out from the underlying tech. The Ripple network, RippleNet, can function independently from the Ripple token. The ability to move other financial assets bank to bank on the network is a key feature of the tech and not the token. While the popularity of the coin and the backing of the “Ripple Army” cannot be denied, retail buying and selling on exchanges will not push XRP to overtake the marketcap of BTC. It could overtake the ETH marketcap, which it has done in the past. But we think that too remains unlikely.
We don’t think so. While the strategy benefits existing shareholders by increasing the company’s bitcoin holdings per share, there are limits to how long it can remain effective. Bitcoin is one of the scarcest assets on the planet. As MicroStrategy continues buying in large quantities, it will require enormous capital inflows to maintain the pace. The company, while profitable, does not generate enough cash flow to fund continuous bitcoin accumulation at this scale. This leaves only equity and debt financing, both of which have drawbacks. Equity raises by issuing new shares dilutes existing shareholders, reducing their ownership percentage. And debt issuance isn’t a better long-term solution. MicroStrategy primarily uses convertible notes, meaning future debt conversions will lead to dilution as well. At some point, the cost of raising capital will outweigh the benefits of acquiring more bitcoin.
As we mentioned, MSTR trades at 1.76x the value of its underlying bitcoin. This means the stock could theoretically fall by 43% (1/1.76) before it aligns with its net bitcoin holdings. If the company isn’t actively reinvesting capital to grow its core business, why should MSTR trade at a premium to bitcoin? The only way this valuation makes sense is if Saylor can monetize the company’s bitcoin holdings—perhaps through a bitcoin-backed lending business. But that remains speculative at best.
For us, owning bitcoin directly remains the best option. While MicroStrategy has been an effective bitcoin proxy in the past, its reliance on debt and dilution to fuel continued accumulation has a shelf life. At some point, the market will recognize these limits, and the stock’s premium will compress. Until then, MSTR remains an interesting—but increasingly risky—way to gain bitcoin exposure.
However, despite the speed and efficiency of these AI-driven markets, the question of whether they are an improvement over humans is debatable. First, AI bots don’t evaluate projects based on strong fundamentals, a dedicated team, or long-term viability. Instead, they chase short-term trends, reacting instantly to newly launched assets. This happens at a speed humans cannot compete with. In fact simply listing new crypto assets is something humans struggle with as Brian Armstrong pointed out in a recent tweet. Many retail investors attempt to deploy AI bots for trading, hoping to compete. But anything publicly available will not consistently generate profits. Why? Because large firms like Citadel develop and deploy their own proprietary AI bots—not only to trade these events but also to analyze and outmaneuver retail bots. The result? Retail traders lose while institutions profit.
The best way to navigate this AI-dominated market is through a long-term fundamental investment strategy, with a primary focus on bitcoin and a small allocation to utility-driven projects that facilitate AI activity.
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