MicroStrategy has been consistently buying Bitcoins and now holds a massive stack of 446,400 BTC worth more than $42B as of the current price.
Despite its entry into the Nasdaq-100 index last month, traders aren’t chasing MicroStrategy Inc (NASDAQ: MSTR) anymore signaling waning bullish sentiment for the proxy Bitcoin bet. MSTR stock has already corrected 40% from its all-time high of $473 in November 2024 while ending the year under $300 levels.
As per the recent data from Market Chameleon, the 250-day put-call skew for MSTR, a measure of the implied volatility difference between put options (used for downside protection) and call options (used for upside gains), has jumped from -20% to zero in the last three weeks.
This shows that the MSTR call options which previously traded at a significant premium due to bullish sentiment, are now at par with the put options. The change reflects a sentiment shift from highly bullish to neutral among traders. In a note to clients, Markus Thielen, the founder of the 10x Research platform noted:
“With MicroStrategy shares now down 44% from their peak and other companies adopting bitcoin as a treasury asset strategy at a much smaller scale, the bitcoin tailwind generated by this narrative appears to be losing steam”.
Over the last four years, MicroStrategy has been consistently buying Bitcoins and now holds a massive stack of 446,400 BTC worth more than $42 billion as of the current price. The company has often financed its BTC purchases through debt sales and equity dilution. Thus, it makes the MSTR stock a leveraged bet on Bitcoin, which ended 2024 with 346% gains against Bitcoin’s 122% surge last year.
However, against Bitcoin’s 3% drop in December last month, the MicroStrategy stock showed greater weakness dropping by 25%. “The stock’s underperformance, despite substantial bitcoin acquisitions, indicates that investors are no longer willing to pay an implied price of $200,000 (or more) per bitcoin through MicroStrategy when it can be purchased directly at a much lower cost,” Thielen noted.
Last week, MicroStrategy executive chairman Michael Saylor called for a shareholders meeting proposing an equity dilution plan of increasing the total number of floating MSTR stocks from 330 million to a massive 10 billion.
The goal here is clear to raise more funds and buy more Bitcoins. However, this proposal has raised concerns among investors who believe that equity dilution could further push the stock price downward.
Critics contend that the move risks diluting existing shareholders, potentially decreasing the value of their shares. However, if shareholders reject the proposal, the company could lose its ability to leverage Bitcoin purchases, jeopardizing its core strategy. This situation places the firm in a challenging “lose-lose” scenario.
In the pre-market trading on Thursday, the MicroStrategy stock is trading 6.2% up regaining the $300 level once again.
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
