Author: Faith Yakubu

MicroStrategy (NASDAQ:MSTR), valued at $25 billion by market cap, specializes in enterprise analytics and mobility software solutions. Despite its software-focused core, the company has made significant investments in Bitcoin (BTCUSD) over the past four years under the guidance of Executive Chairman Michael Saylor.

Saylor initiated MicroStrategy’s Bitcoin investment journey in 2020 with a purchase of $250 million worth of Bitcoin, citing its potential as a store of value with long-term capital appreciation prospects. Currently, MicroStrategy holds 214,246 BTC, valued at over $14 billion, linking its stock price closely to Bitcoin’s performance.

MicroStrategy Funds BTC Via Debt And Equity

While MicroStrategy’s core software business has shown modest revenue growth, its operating income remains comparatively low. To finance its substantial Bitcoin investments, the company has raised debt, increasing its net debt to $2.1 billion in 2023 from $531 million in 2020. Additionally, MicroStrategy has issued equity, nearly doubling its outstanding share count since August 2020, thus diluting shareholder wealth.

Will BTC Prices Move Higher?

Bitcoin has witnessed a remarkable rally, soaring approximately 300% since the beginning of 2023. The recent pullback from its all-time high of $73,000 raises questions about its future trajectory. Factors such as the launch of spot Bitcoin ETFs and the upcoming “halving” event, which historically has driven price surges, contribute to market sentiment.

What Is The Target Price For MSTR Stock?

Analysts unanimously rate MSTR stock as a “strong buy,” with a mean price target of $1,733.35, suggesting a 17.2% upside potential. Despite anticipated volatility, investing in MSTR could be favorable for those anticipating BTC price appreciation in the next 18 months.

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The United Kingdom is gearing up to introduce fresh legislation on crypto staking and stablecoins by July this year, as announced by Economic Secretary Bim Afolami during the Innovate Finance Global Summit in London on Monday.

UK Stablecoin And Crypto Staking Legislation 

Afolami stated that they are currently working diligently to finalize the legislation required to implement their regulatory regime. Once enacted, various crypto asset activities, such as operating an exchange and holding customers’ assets, will fall under regulatory oversight for the first time.

The forthcoming legislation follows the UK government’s unveiling of plans for revised stablecoin regulation in October 2023. The aim is to reduce the risk of customer harm and address the conduct, prudential, and financial stability risks associated with stablecoins.

However, the current Conservative-led government faces an upcoming election later this year, potentially impacting its long-term financial regulation plans in the crypto sector. The UK’s Labour Party maintains a solid lead over the reigning conservative party, with April 2024 polls showing a 65% disapproval rating of Prime Minister Rishi Sunak, a staunch cryptocurrency supporter.

The UK government has demonstrated agility in introducing several policies on the crypto industry in recent years, including passing the Financial Services and Markets Bill (FMSB) in June 2023. According to a statement by the UK’s Payment Service Regulator (PSR), the act makes “absolutely clear that a payment system handling stablecoins can be subject to regulation by the PSR.”

In March, the Financial Conduct Authority (FCA) unveiled plans to combat market abuse in the cryptocurrency sector by enhancing market monitoring capabilities and developing advanced analytics systems.

The UK government’s latest digital asset-related regulation coincides with efforts by US lawmakers to push for similar stablecoin legislation. Representatives Maxine Waters (D-CA) and Patrick McHenry (R-NC) are leading legislative endeavors stateside, potentially attaching stablecoin concerns to a larger, unrelated bill to secure bipartisan support.

Uncertainty looms over whether they can successfully pass legislation before the November US presidential election.

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Bitcoin has demonstrated remarkable resilience compared to the broader digital assets market, maintaining a dominance metric of 55.3%, marking its highest level since April 2021. In a recent note, Matteo Greco, a research analyst at Fineqia International, highlighted that Bitcoin’s market cap dominance has reached a three-year peak, defying recent sell-offs and market fluctuations. Greco also pointed out the sustained robustness in trading volumes.

BTC Spot ETFs recorded a significant weekly trading volume of approximately $16.2 billion, with an average daily volume of around $3.2 billion. Since its inception, the cumulative trading volume stands at approximately $212 billion, with an average daily volume of roughly $3.3 billion.

Bitcoin Ends the Week in Red

Bitcoin closed the week at around $65,650, experiencing a 5.3% decline from the previous week’s closing value of around $69,350. The week was marked by notable volatility, particularly during the weekend, following a period of relative stability from Monday to Thursday. BTC experienced a downturn on Friday, falling to a low of $65,100. The negative trend persisted into Saturday, reaching a weekly low of approximately $60,650 before rebounding and concluding the week around $65,650.

The decline in prices over the weekend was attributed to geopolitical tensions in the Middle East. However, market sentiment improved following an announcement of a temporary halt in hostilities among the involved nations. Additionally, the upcoming halving, scheduled for the night between April 19th and 20th, has garnered attention. Historically, previous halving events have been followed by 9-12 months of upward trends, albeit triggering short-term “sell the news” reactions before and after the event.

The short-term bearish sentiment is further reflected in the net outflow of $85 million from Bitcoin Spot ETFs during the week. Investors are exercising caution and engaging in profit-taking following the strong uptrend witnessed in Q4 2023 and Q1 2024.

US Inflation Data Surpasses Expectations

On the macroeconomic front, recent US inflation data exceeded expectations, prompting a revision in market participants’ rate cut projections for 2024. At first, projections suggested a decrease of at least 75 basis points in interest rates, equating to three 25-basis-point cuts. However, the latest data has shifted projections to anticipate 25/50 basis points cuts during the year, with the first cut expected in Q3 and a potential second cut towards year-end.

Greco highlighted the potential for a prolonged period of stricter monetary policy due to persistently high inflation levels exceeding central banks’ targets. He further suggested that this scenario could exacerbate short-term difficulties for risk-on assets, prompting investors to adjust their portfolios based on revised mid-term expectations influenced by current financial indicators.

Over the past week, digital asset investment products saw a slight decrease in funds, with outflows totaling $126 million. Bitcoin saw outflows amounting to $110 million, yet it managed to maintain positive inflows of $555 million month-to-date. Short-bitcoin, which had been witnessing outflows for the past three weeks, observed minor inflows of $1.7 million, likely taking advantage of the recent price weakness.

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Cryptocurrencies experienced a significant downturn, with bitcoin (BTC) plummeting to below $66,000 and altcoins witnessing declines ranging from 10% to 15% on what proved to be a challenging day for risk assets.

Ryze Labs, in a report, warned investors to brace for continued market weakness beyond the current decline, attributing it partly to the ongoing tax season.

During the U.S. trading session, digital assets succumbed to risk-off sentiment prevalent in traditional markets, exacerbated by heightened geopolitical tensions. Bitcoin, which had flirted with the $71,000 mark earlier in the day, saw a rapid descent to $66,000 before rebounding slightly to $66,700, marking a more than 5% decrease over 24 hours.

Ether (ETH), the second-largest cryptocurrency by market cap, mirrored bitcoin’s decline, plunging as much as 12% to $3,100 before a modest recovery trimmed the losses to 8%.

The broader crypto market was hit harder, with the CoinDesk 20 Index (CD20) witnessing a nearly 10% drop. Altcoins like Cardano’s ADA, Avalanche’s AVAX, bitcoin cash (BCH), filecoin (FIL), and aptos (APT) suffered losses ranging from 15% to 20%.

The market turbulence triggered the largest leverage washout in a month, with approximately $850 million of leveraged derivatives trading positions across all digital assets liquidated, according to CoinGlass data. Long positions, amounting to $770 million, were particularly affected, as investors betting on rising prices found themselves caught off guard by the sudden downturn.

The dip in crypto prices coincided with a decline in stock markets amid escalating geopolitical tensions in the Middle East. U.S. authorities’ warnings of a potential significant attack by Iran on Israel contributed to a risk-off atmosphere, prompting investors to seek refuge in traditional safe-haven assets such as Treasury bonds and the U.S. dollar index (DXY).

Meanwhile, digital asset investment firm Ryze Labs cautioned of short-term market softness due to the upcoming tax season but maintained a positive long-term outlook. It anticipates relief for the asset class as policymakers may adjust monetary policy to facilitate U.S. government debt rollovers.

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Hong Kong is on the brink of approving Bitcoin and Ether Exchange-Traded Funds (ETFs) as soon as Monday, according to sources familiar with the matter. This development represents a significant advancement for the cryptocurrency sector within the region.

Harvest Fund Management, in conjunction with Bosera Asset Management and HashKey Capital, is poised to receive approval for its spot Bitcoin and Ether ETF applications. By the end of April, these ETFs are anticipated to secure the green light from the Securities and Futures Commission (SFC). Furthermore, the SFC is reportedly collaborating with Hong Kong Exchanges & Clearing Ltd to finalize the approval process.

Although the precise timeline remains uncertain, sources indicate that initial approvals, which may encompass Hong Kong Bitcoin ETFs, could materialize as early as Monday.

Regulators in the region have already given the green light for the launch of crypto-based ETFs. Notably, CSOP Ether Futures, Samsung Bitcoin Futures, and CSOP Bitcoin Futures collectively boast an estimated value of $170 million.

Bitcoin ETFs have demonstrated robust inflows since their launch, contributing to a resurgence in the cryptocurrency markets. By mid-April, the total assets under management for the 11 ETFs are projected to soar to a record $73 billion, with $59 billion raised to date. The net flows into Blackrock’s iShares Bitcoin Trust have surpassed $15 billion in just three months.

As of the beginning of this week, Harvest was anticipated to secure approval to launch a spot Bitcoin ETF in the city. Both Harvest and China Asset Management received approval from the SFC to offer virtual asset fund management services on April 9.

Regulators are actively working towards enabling investors to purchase spot ETFs. Julia Leung, deputy chief executive director of intermediaries for the SFC, affirmed that the regulator is “actively seeking to establish a regime to approve ETFs that provide investor guarantees for mainstream virtual assets.”

Despite encountering setbacks such as the emergence of JPEX, an unlicensed crypto exchange implicated in an alleged $1.6 million fraud, Hong Kong remains steadfast in its ambitions to support crypto entrepreneurs and restore its reputation as a global business center.

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