MicroStrategy (MSTR), the software intelligence firm famously bullish on Bitcoin, has seen its stock skyrocket over 515% since the launch of spot Bitcoin ETFs in January 2024. This remarkable surge outpaces even the impressive 128% gain of the iShares Bitcoin Trust (IBIT).
But this success story has a twist. Around the time IBIT options debuted in November 2023, MSTR’s multiple to net asset value (mNAV) hit a cycle peak, aligning with Bitcoin’s price flirting with $100,000 and MSTR stock reaching an all-time high of $540.
The Leverage Play
MSTR has long offered investors a unique proposition: leveraged exposure to Bitcoin’s volatility through an equity vehicle. This allowed traders to use MSTR both as a Bitcoin proxy and for options strategies. This differentiated it from IBIT, which only provided direct spot Bitcoin exposure.
A Shift in the Landscape
IBIT options debuting in November 2023 offered a new alternative for Bitcoin exposure. With over $2 billion in trading volume on day one, it was a strong entrance. However, since then, MSTR has dramatically outperformed IBIT, despite a 40% drop from its peak and a compression of its mNAV to 1.55 from 3.141.
The Volatility Factor
One key factor driving MSTR’s outperformance could be Bitcoin’s implied volatility, which currently sits below 40, a relatively subdued level. Implied volatility represents the market’s expectations of future price swings. When it is low, traders are less inclined to pursue leveraged or option-based strategies.
The Bitcoin Connection
MSTR’s stock price seems intrinsically linked to Bitcoin’s volatility. For leveraged products like MSTR to regain their former momentum, Bitcoin’s volatility will likely need to climb higher. This reinforces the strong correlation between MSTR’s performance and the dynamics of the Bitcoin market.
What does the future hold for MicroStrategy and its connection to Bitcoin? Share your thoughts in the comments below.
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