What to know:
- MSTR’s record call skew disappears in a sign of renewed cautious sentiment.
- The share price is now down 44% from the record high.
- BTC‘s bullish treasury asset narrative, a major tailwind in 2024, is losing momentum, according to one observer.
As a seasoned analyst with over two decades of market experience under my belt, I’ve seen bull markets turn bearish and bear markets transform into bullish ones more times than I can count. The recent shift in sentiment towards Nasdaq-listed MicroStrategy (MSTR) is no exception.
The disappearance of MSTR’s record call skew is a clear sign that traders are adopting a more cautious approach, moving away from the aggressive bullishness that characterized the market just a few weeks ago. The 44% decline in MSTR’s share price since its record high is a stark reminder that no investment is without risk, even one as seemingly invincible as MicroStrategy’s bitcoin play.
The narrative around BTC as a treasury asset has certainly been a tailwind for MSTR in 2021, but it appears to be losing momentum as we head into the new year. With other companies adopting bitcoin at a much smaller scale, the bitcoin-fueled rocket ship that was MicroStrategy may be slowing down.
However, I wouldn’t bet against this company just yet. After all, they’ve got more bitcoins than Elon Musk and Jack Dorsey combined! But if you ask me, they should consider diversifying their portfolio a bit more. Who knows, maybe they could invest in some actual rockets instead!
Joke: They say MicroStrategy is a leveraged bet on Bitcoin. Well, it looks like they’re not just betting on Bitcoin, they’re all-in at the Bitcoin casino!
Investors seem to be less enthusiastic about pursuing gains with MicroStrategy (MSTR), a Bitcoin (BTC) focused company listed on the Nasdaq, suggesting a more cautious attitude emerging within the market.
The gap in estimated volatility between MSTR’s put (selling options) and call (buying options) options, as displayed by the 250-day put-call skew on Market Chameleon’s data tracking site, has rapidly reversed from a 20% deficit to zero over a three-week period.
Translation: Currently, call options (used for potentially profitable increases in the underlying asset) and put options (offering protection against decreases) are priced equally, unlike the significantly higher cost of calls compared to puts as seen about three weeks back.
In other words, the sentiment has flipped to neutral from uber-bullish.
The price of MSTR shares has dropped significantly, decreasing by approximately 44% from its peak of $589 on November 21st, down to $289 currently. Over just the past fortnight, the valuation has fallen by a further 34%, as per data from TradingView.
According to Markus Thielen, founder of 10x Research, the momentum behind Bitcoin, as suggested by the growing number of companies adopting it as a treasury asset strategy, seems to be slowing down, since MicroStrategy shares have dropped by 44% from their highest point and other companies are implementing this strategy on a relatively smaller scale.
In 2020, MicroStrategy started acquiring bitcoin for its assets, amassing approximately 446,400 BTC (worth around $42.6 billion) since then. Frequently, they financed these acquisitions through debt issuance, making MSTR a company heavily invested in Bitcoin. As we moved into 2024, this strategic decision positioned MSTR as a significantly leveraged wager on Bitcoin. By the end of 2024, MSTR saw a staggering 346% increase, far outperforming Bitcoin’s growth of 121% that year.
Contrarily, the year-end events were underwhelming. Despite MicroStrategy (MSTR) dropping by 25% in December, Bitcoin (BTC) decreased by just 3%. Remarkably, it maintained its position above $90,000, showing resilience.
Its a sign MSTR’s appeal as a leveraged bet on BTC is weakening.
Thielen pointed out that although MicroStrategy has made significant purchases of bitcoin, the stock’s poor performance suggests investors are no longer valuing each bitcoin at $200,000 or more through this company. Instead, they can buy it directly at a lower cost.
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2025-01-02 09:56