I have been vocal about accumulating Bitcoin aggressively at current levels. Now I’m starting to look seriously at strategy as well. The same type of confluence that pointed to Bitcoin as a major accumulation opportunity is showing up on the MSTR, and in some cases, the readings are even more extreme.
A quick overview of this week:
- The RSI has only been lower on a few occasions since the strategy adopted the Bitcoin standard.
- The Mayer multiplier for MSTR has just reached the lower percentiles.
- The BTC to MSTR ratio is about to enter a zone that has historically preceded MSTR’s continued outperformance.
- At Bitcoin’s previous all-time high with a 1x NAV premium, the fair value of MSTR shares would be more than $300.
discount
The strategy currently has approximately 845,000 BTC with Average cost basis In the mid-$70,000s. This means, at current Bitcoin prices, they are taking a massive loss on their holdings.
Figure 1: Average BTC cost basis for the strategy and other key metrics.
This coincided with the NAV falling below 1.00x; MSTR’s market capitalization is currently approximately 18% less than the US dollar value of its Bitcoin holdings. In other words, buying MSTR at current prices is equivalent to buying one dollar of Bitcoin for $0.82.
supports
The 200-week moving average usually represents notable support for assets, especially those that are typically trending to the upside. The strategy’s share price is currently at this level, the same level that previously identified significant accumulation areas.
Figure 2: The strategy’s stock price tests the 200-week moving average.
The continued holding and recovery of this level, combined with Bitcoin showing no upward momentum, historically creates the conditions for an effective MSTR recovery. The level is tested. Whether it continues or not will be one of the key signals to watch over the coming weeks.
RSI
Since the strategy adopted the Bitcoin benchmark, MSTR’s RSI has only been lower on a handful of previous occasions, both during the lows of the previous Bitcoin market cycle, when the stock price was at its lowest levels. The current reading is not quite at that depth, but it is approaching it, and the trend continues to be downward.
Figure 3: MSTR Relative Strength Index drops below 25. Historically, these levels have preceded price rises.
The Mayer multiple, which is simply the ratio between the MSTR’s closing price and its 200-day moving average, recorded a reading where 99.2% of all previous data points were higher. This is a historical extreme level of underperformance relative to its moving average, and it occurred broadly at the same time as the RSI signal appeared. Given two independent momentum indicators, both flash readings were only seen at the most important cycle lows in MSTR history.
MSTR or BTC?
The ratio between Bitcoin’s price and MSTR’s stock price is one of the cleaner ways to gauge whether exposure should be in Bitcoin directly or rotated toward a proxy with a higher beta. When the ratio is in the upper green region, MSTR has historically been positioned to outperform. When it is in the red bottom zone, Bitcoin tends to lead.
Figure 4: The BTCUSD/MSTR ratio is close to the green zone, a level that preceded MSTR’s continued outperformance.
The percentage is currently close to entering that green zone again. Previous cases have been followed by long periods of significant outperformance of MSTR compared to Bitcoin. The ratio is also making lower highs in the longer-term trend, suggesting that the overall trajectory is shifting toward the MSTR becoming increasingly favorable compared to direct exposure to Bitcoin.
Fair value
At the previous all-time high of around $126,000 and without additional accretion, a 1x NAV premium over MSTR would mean a stock price of over $300. That’s roughly 2.5 times current levels just to reach the fair value at Bitcoin’s recent peak.
Figure 5: MSTR price targets modeled across different BTC holdings and NAV premium scenarios.
If MSTR continues to build towards the 900,000 BTC range and the NAV premium moves modestly towards 1.25x or 1.5x, well below the 3x+ levels seen in the previous cycle, the numbers will become very attractive! Importantly, the MSTR easing that led to Bitcoin accumulation is increasingly being funded through STRC rather than common equity issuance, reducing those particular headwinds.
Where are we?
You have accumulated Bitcoin aggressively. Now I’m also looking to add more MSTR. The combination of extreme momentum readings, 200-week moving average support, implied discounting of underlying Bitcoin holdings, and a BTC to MSTR ratio that is close to entering historically favorable territory, makes this seem like a no-brainer for a short-term play to increase my BTC pool.
However, MSTR is a high beta Bitcoin play. If Bitcoin continues to struggle, MSTR will suffer even more. I do not treat this as a replacement for exposure to Bitcoin, but as an additional asymmetric position at a point where the data suggests that the risk reward is historically favourable.
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Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always do your own research before making any investment decisions.
