- MSTR has outperformed and decoupled from BTC.
Since September, it hiked 68%, nearing its ATH.
As a seasoned crypto investor with a keen eye for market trends and a knack for spotting the next big thing, I must admit that MicroStrategy (MSTR) has been quite the intriguing play these days. After all, who would have thought that a business intelligence firm would become such a significant player in the Bitcoin (BTC) space?
MicroStrategy’s stock (MSTR) recently hit a six-month peak at $198, barely missing its all-time high ($200). This surge in value occurred around the time when the company’s founder, Michael Saylor, posted an enigmatic message.
In his recent update on the platform previously known as Twitter, Saylor donned an outfit resembling that of a gladiator, accessorized with a pendant featuring the Bitcoin [BTC] symbol, and carried a sword.
This could be seen as him being ready to openly support and advocate for Bitcoin, even during periods of financial uncertainty and high inflation caused by traditional currencies (fiat).
Saylor is perhaps the most notable BTC bull who’s Uber-bullish on the asset. He believes that BTC is the most superior asset and store of value in human history, given its fixed supply and censorship resistance properties.
His stance has informed the BTC treasury strategy, which he pioneered with MicroStrategy.
The Bitcoin-focused software provider now has nearly $16 billion in BTC (252K coins), with over $1.5B acquired in Q3 2024.
$16B BTC holding triggers MSTR rally
The surge in MicroStrategy’s MSTR stock could be attributed to the company’s substantial Bitcoin holdings, according to CryptoQuant’s observations.
After MicroStrategy started buying Bitcoin on August 11, 2020, the company’s stocks have seen a significant increase of approximately 1,208%. Simultaneously, the value of Bitcoin has also increased by about 445%.
To clarify, Mastercard’s substantial Bitcoin holdings, primarily obtained through the use of convertible notes, have resulted in a strong connection between Mastercard and Bitcoin.
However, the stock’s recent rally marked a complete decoupling from BTC.
Over the past three months, Mastercard’s (MSTR) share price has surged by approximately 68%, rising from around $114 to almost $200. However, during the same timeframe, Bitcoin (BTC) experienced an increase of only 18%. At this moment, Bitcoin is grappling with significant resistance in terms of its support level.
The rally even caught BTC critic Peter Schiff by surprise.
“What’s going on with $MSTR? It spiked 18% over the past three days, with #Bitcoin only up 1%.”
So far this year, Mastercard (MSTR) has experienced a 177% increase in value, whereas Bitcoin (BTC) has only yielded a 38% return. This suggests that Mastercard investors have been reaping greater profits compared to those who invested in Bitcoin.
This also meant that MSTR was trading at a premium relative to BTC.
Although MSTR’s Relative Strength Index (RSI) indicated an overbought status at the current moment, this could potentially make the near-term perspective more complex, particularly as we approach the earnings season.
Some analysts have pondered over the question of why investors might choose MicroStrategy (MSTR) as an indirect method of owning Bitcoin, rather than purchasing it directly. However, according to Jeff Park from Bitwise, MicroStrategy can be seen as a concurrent long and short global carry trade.
As a researcher, I find an interesting investment strategy for Mastercard (MSTR) that involves both long and short positions on global carry. Essentially, leveraging debt at low-interest rates to invest in Bitcoin can be considered a long global carry strategy. However, it’s essential to understand that Bitcoin, as an asset, embodies a short global carry approach. In other words, the cost of holding Bitcoin is higher than the return on investment due to factors like energy consumption and potential market volatility.
To put it simply, carry trade refers to borrowing money using a currency with low interest rates and then investing that money into assets that provide higher returns. In other words, MicroStrategy obtained their Bitcoin reserves by taking out loans.
In addition, Bitcoin (BTC) is regarded as both a risky investment and a protective measure against inflation tied to traditional currencies. Consequently, MicroStrategy’s decision could be interpreted as a wager against rising global inflation—essentially taking a short position on the global carry trade.
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2024-10-09 13:12