With the prices of Bitcoin (CRYPTO: BTC) Reaching All-Time Highs, Bitcoin’s Aggressive Accumulation Strategy MicroStrategy (NASDAQ:MSTR) has once again become a focal point in discussions among traders and analysts.
What happened
In a tweet, the industry expert Alex Kolicich addressed the most common misconceptions about MSTR in a recent tweet, explaining that the stock is not a leveraged or synthetic call option on Bitcoin.
Instead, Kolicich pointed out several structural inefficiencies:
- MSTR trades at a 140% premium to the net asset value (NAV) of its Bitcoin holdings.
- Every dollar invested in MSTR shares provides only $0.45 of exposure to Bitcoin, much less than direct ownership of Bitcoin.
Kolicich further explained that MicroStrategy is not leveraged, but rather deleveraged, offering minor exposure to Bitcoin compared to direct investments.
He highlighted alternatives like BITX, which provides 2x leverage without a premium to NAV.
Furthermore, while traditional call options on assets typically offer a leveraged advantage due to their exposure to long-term volatility, MSTR convertible bonds effectively represent a sell-off on volatility, diluting shareholder returns as that Bitcoin prices rise.
You can also read: 5 stocks in focus this Thursday: ACN, MU, NKE, LEN and FDX
Why is it important
The Cryptocurrency trader TheFlowHorse on December 17 in a post on X highlighted the implications of aggressive Bitcoin purchases by Michael Taylornoting that these acquisitions have significantly raised MSTR’s dollar-weighted average price to $61,000.
This figure is approximately 40% lower than the current price of Bitcoin, introducing potential risks if prices fall significantly.
Take a look at Saylor’s recent Bitcoin purchases. The buys up here are so large that he has increased his dollar cost average price by nearly 50%, to 61k.
That level is around 40% away.
We haven’t had a pullback of that magnitude for years, but at some point you have to wonder if in… pic.twitter.com/erhdvrErn2
— HORSE (@TheFlowHorse) December 16, 2024
Analysts warn that while Bitcoin pullbacks have historically been rare, Saylor’s strategy could leave MSTR exposed to potential downside risks, especially with its C-Corp structure subject to double taxation, unlike more efficient ETFs. .
Photo courtesy of Shutterstock
You can also read: Bitcoin, Ethereum and Dogecoin lose strength after the Fed’s stance: What does it mean for 2025?
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