With crypto winter clearly having arrived, bulls are now looking for signs that bearish sentiment has become so entrenched that a bottom may form.
A prime example might be a report on Wednesday from Canaccord’s Joseph Vafi, who slashed his price target on Strategy (MSTR) by a massive 61% from $474 to $185.
Vafi upgraded Strategy’s outlook in November (to a level of $474) but maintained a buy rating on the stock, with his new target of $185, about 40% higher than last night’s closing price of $133.
The strategy is currently down 15% year to date, down 62% year over year, and down 72% from its all-time high in November 2024.
Vafi said Bitcoin is in the midst of an “identity crisis” as it still meets the characteristics of a long-term store of value but is increasingly being traded like a risk asset. Such tensions came into focus during the cryptocurrency flash crash in October, when forced liquidations accelerated the sell-off.
He continued that although Bitcoin is often referred to as “digital gold,” it has failed to keep pace with the precious metal’s recent surge. As gold climbs on geopolitical tensions and macro uncertainty, Bitcoin lags, underscoring its continued reliance on liquidity and risk appetite rather than safe-haven demand.
Strategies are developed to deal with volatility, the report said. The company holds more than $44 billion in Bitcoin, as well as about $8 billion in convertible debt, including $1 billion that can be sold back in 2027, which remains in the fund. Even if MSTR’s market capitalization no longer represents a large premium to the value of its BTC holdings, preferred stock dividends can be managed through modest stock issuances.
Vafi went on to say that quarterly results will be released this week, but given that Strategy relies almost entirely on BTC, the quarterly results have become largely irrelevant. Bitcoin’s fourth-quarter sell-off is expected to result in sizable unrealized losses.
Vafi’s new target of $185 assumes a 20% rebound in Bitcoin prices and a recovery of the company’s mNAV to approximately 1.25x.
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