Key Points
- Investors have been using MicroStrategy Inc as a proxy bet in Bitcoin, resulting in a significant premium over Bitcoin price gains.
- Steno Research predicts that the current 300% premium that MicroStrategy enjoys over Bitcoin is unsustainable.
For many years, investors have been leveraging MicroStrategy Inc (NASDAQ: MSTR) as a proxy bet on Bitcoin. This strategy has resulted in the MSTR share experiencing a significant premium over Bitcoin price gains.
According to a recent report by Steno Research, the substantial 300% premium that MSTR holds over Bitcoin is unsustainable. The MicroStrategy stock surged to its highest levels ever last week, increasing its year-to-date gains to over 242%. In contrast, Bitcoin has seen more than 50% gains.
Changes in Market Dynamics
MicroStrategy investors and shareholders have enjoyed a significant premium. However, they should proceed with caution. Steno Research analyst Mads Eberhardt suggests that confidence is reinforced by the diminishing impact of MicroStrategy’s recent stock split.
The launch of options on spot Bitcoin exchange-traded funds (ETFs) in the US is likely to decrease investors’ incentives to hold MicroStrategy stock over these ETFs. The report also noted that as regulators become more accepting of Bitcoin investment products, investors might prefer holding Bitcoin directly rather than MicroStrategy stock. This regulatory trend is expected to continue if Donald Trump is re-elected.
The report also pointed out that MicroStrategy’s valuation is “diverging significantly from a straightforward calculation of its asset and business fundamentals”. Bitcoin is expected to perform well this quarter and into 2025, indicating that “even greater buying demand would be needed to maintain MicroStrategy’s current premium,” as per the note. The report further emphasized that MicroStrategy’s current premium is unsustainable, as it remained below 200% for most of the 2021 crypto bull market.
MicroStrategy’s Performance
MicroStrategy executive Chairman Michael Saylor recently shared that his company’s stock has outperformed tech giants Amazon Inc (NASDAQ: AMZN) and Alphabet Inc (NASDAQ: GOOGL) in terms of trading volumes. In the final trading session of the week, MicroStrategy reported an impressive $5.8 billion in trading volume, surpassing Amazon and Alphabet, which saw volumes of $5.5 billion and $2.4 billion, respectively.
MicroStrategy is primarily known as the largest corporate holder of Bitcoin. Its ability to outperform some of the “Magnificent 7” in daily trading volume is notable, especially considering its market cap is just $47.48 billion.
