Citron Long On Bitcoin, Says MicroStrategy Is Best Investment Route

Bitcoin is a high-flying asset in 2020, up about 155% year-to-date. The world's most-traded digital currency crossed the $18,000 threshold late last week.

The buoyancy places bitcoin within sight of its all-time high of $20,089, which the cryptocurrency hit intraday on Dec. 17, 2017. The market capitalization of bitcoin is at a record high, reflecting increased investor interest in the asset. 

It is against this backdrop that short seller Citron issued a long call on the cryptocurrency Tuesday. 

See also: How to Buy Bitcoin (BTC)

From Short To Long In 3 Years: Citron, which was a very vocal skeptic of bitcoin three years back, has reversed its stance now. The firm said it is now long on the digital currency and sees no better inflation hedge in the market.

Citron is not recommending Bitcoin but as a response to many emails... we must admit Citron Fund is a $Hodler. We own BTC through $MSTR. Read Citron report ONLY if you want Bitcoin exposure. https://t.co/Fn9MwJO3Xn

— Citron Research (@CitronResearch) November 24, 2020

The firm attributed its earlier pessimism to the digital currency spawning what Citron said were low-quality companies that soared on hype, naming Longfin Corp LFIN and Riot Blockchain Inc RIOT as examples. 

Related Link: What The 5 Biggest Cryptocurrencies Of 2017 Are Worth Today

Citron's Bitcoin Exposure Via MicroStrategy: MicroStrategy Incorporated MSTR, a business intelligence company, is the only safe and cost-effective way to get exposure to bitcoin, according to Citron.

The short seller sees physical possession of bitcoin as risky due to the chance of theft. For investing in bitcoin through Grayscale Bitcoin Trust (Btc) GBTC, an investor needs to cough up a premium to the underlying price, Citron said. 

"Today, MSTR owns more bitcoin than any other publicly traded company," the short seller said. 

The company invested $425 million to buy 38,250 bitcoins that have a market value of over $700 million, Citron said. The company is therefore trading at just 2.5 times its sales, the report said. 

Citron sees MicroStrategy's bitcoin treasure chest continuing to grow. Additionally, the company is looking to build a suite of bitcoin data services, Citron said.

"As investors scramble to look for ways to capitalize on bitcoin in the stock market, look no further than MSTR," the report said. 

"At these prices today, investors are getting a best in class software business at a discount and a free call option on owning a growing treasure chest of bitcoins."

Citron has a $700 price target for MicroStrategy shares, representing roughly 220% upside from current levels.

Benzinga's Take: Citron's recommendation of MicroStrategy has to be taken with a pinch of salt, as the firm has a position in the tech company.

Given that bitcoin is not MicroStrategy's main line of business, it is still unclear how much of upside it can offer to the company's long-term valuation.

Investors should also keep in mind the post-2017 meltdown in cryptocurrencies. It has taken about three years for bitcoin to return to its prior peak.

At last check, MicroStrategy shares were rallying by 8.83% to $240.25 and the Grayscale Bitcoin Trust was advancing 6.19% to $23.50. 

Related Link: Cryptocurrency Mining: What It Is, How It Works And Who's Making Money Off It