Could Investing $40,000 in MicroStrategy Make You a Millionaire?

Have you ever wondered if investing in MicroStrategy could make you a millionaire? A $40,000 investment in its stock five years ago would now be worth over a million dollars. However, mimicking this remarkable performance is likely to be challenging in the future.

MicroStrategy, a seasoned player in data analytics, has been outperforming the market in recent years. In the summer of 2020, the company shifted almost all of its cash into Bitcoin and has continued to enhance this investment. Today, MicroStrategy resembles more of a Bitcoin-focused institution rather than just a software company.

This embrace of Bitcoin has proven highly beneficial for MicroStrategy investors. If you had put $40,000 into this stock five years ago, you would now have approximately $1.08 million at your disposal. This impressive return significantly surpasses the performance of the S&P 500 index and greatly outperformed Bitcoin during the same period.

However, that was the past. The question now is: Can a $40,000 investment in MicroStrategy lead to millionaire status again by the end of 2024? Let's explore this idea further.

It’s Not Easy to Repeat an Outstanding Five-Year Performance

MicroStrategy is unlikely to replicate its extraordinary five-year growth for a second time. Yes, a CAGR (Compound Annual Growth Rate) of 93.5% was achieved previously, but achieving a similar annual growth rate is highly improbable. Doubling your investment every year for another five years is not only impressive but nearly impossible.

This goal also appears ambitious from another angle. Starting from a market cap of $92.1 billion, MicroStrategy would need to reach a staggering $2.3 trillion to experience another 25-fold increase. Only five stocks in history have ever reached such a milestone, and only a few more are expected to approach it in the next five years.

Moreover, for MicroStrategy to embark on this trillion-dollar mission, it requires a significant surge in Bitcoin's market value. Currently, Bitcoin's total market value stands at about $2 trillion, having recently reached $100,000 per coin. MicroStrategy holds around 2% of all Bitcoin ever mined. Managing to build a trillion-dollar Bitcoin reserve would necessitate a significant rise in Bitcoin prices in conjunction with MicroStrategy's continued purchases.

MicroStrategy's Long-Term Potential for Patient Investors

While I don’t believe that MicroStrategy will replicate its previous five years in the next five, the outlook changes if you consider a longer investment horizon. For instance, it seems plausible that MicroStrategy could maintain a steadier annual growth rate of around 14%. At this rate, your initial investment could yield approximately $1.06 million by the end of 2049. This growth would still outpace the historical averages of the S&P 500.

It's important to note a few strategies that could enhance your returns over the years:

• Investing more than just the initial $40,000 into MicroStrategy would be the most direct approach, although it would alter the purity of your original investment.
• MicroStrategy has plans to raise additional funds through stock sales and debt, aiming to generate $42 billion over the next three years to further acquire Bitcoin. This approach is risky; if another cryptocurrency downturn occurs, it could pose a significant threat to the business. However, this strategy may also enhance MicroStrategy's Bitcoin holdings.
• The company might also pivot to focus less on software and adopt a more asset-management style approach, which could entice investors with dividends, albeit minor, while still investing most profits into Bitcoin.

Risks and Rewards of Leveraged Bitcoin Purchases

The second point about aggressive Bitcoin acquisition is critical. While management's bold strategy can increase business risk, it also boosts growth potential in an ideal scenario. Holding MicroStrategy shares can be likened to investing in a leveraged exchange-traded fund (ETF) aiming to amplify cryptocurrency gains — and losses.

This type of investment is speculative, particularly during periods when share prices are at or near record highs. It might be wise to consider purchasing shares after a market correction for a more favorable price.

Consider Other Millionaire-Making Opportunities

Ultimately, patience and time spent with consistent long-term performers can often yield better results than trying to chase high-flying stocks. If you anticipate waiting 25 years to reach your financial goals with MicroStrategy stock, you may be better off investing in a more stable stock or exchange-traded fund (ETF).

Additionally, if you share MicroStrategy Chairman Michael Saylor's belief that owning Bitcoin is a practical money management strategy, it may be worth considering investing directly in Bitcoin rather than taking on the financing risks associated with MicroStrategy.

This article does not constitute financial advice.

MicroStrategy, Bitcoin, Investment