The post Is MSTR Overvalued After All-Time Highs? appeared on BitcoinEthereumNews.com.

After the election, as everyone except for muggles know, the price of BTC rallied to all time highs (ATH) just short of $100,000. At the time of this writing, it’s hovering around $98,000. An interesting question then is: what happened to Michael Saylor’s MicroStrategy (MSTR) during this period? The publicly traded stock, synonymous with its unconventional and risk-on co-founder as well as the price of BTC, also rallied to post-election ATH — as one might expect — exceeding $500. Then last week, it took a precipitous ~22% short selling-inspired hit based off of a report expressing concerns about the company’s valuation. The noise around the stock piqued my interest. I was curious to dig in and see what potential market opportunities might exist, or at least understand the value of owning MSTR vs BTC. This graph is a bit misleading. The main reason MSTR has outsized gains to BTC is that MSTR is highly levered. Very highly levered. It has acquired 386,700 BTC for nearly $22 billion, which represents an unsurprising ~99.5% of its balance sheet. To achieve this, the company has raised $9 billion in debt, some with zero interest. If their BTC holdings are collateralized by this debt, they could face a challenging repayment in a severe BTC downturn. They also raised $4.6 billion in equity for these BTC purchases. With an average BTC price of ~$56,500, appreciation factors heavily into the market cap. The correlation between MSTR and BTC is relatively high, using both Pearson and Spearman correlation coefficients, at about 65% using 12 months of daily closing price data. Remove leverage and the correlation is pretty linear. Generally, follow the price of BTC and the price of MSTR will follow. The correlation is strong, but not so strong for several reasons. MSTR runs a very profitable…

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Filed under: News - @ December 4, 2024 7:29 pm