daily bitcoin
Bitcoin rose 4.5% today, erasing the selling of the past two days. It's a nice move, but it puts us back in the same position we've been in for the past eight months. Wake me up if it breaks the $50,000 to $70,000 range.
Today I'm looking at Microstrategy, one of the easiest companies to value in the world. The reason is that 97% of their assets are invested in Bitcoin.
Nevertheless, it is trading at all-time highs today, up 12%.
Daily MSTR
This means that there is a large discrepancy between the value of the Bitcoin held by the company and the company itself. The stock is trading at 2.5 times the value of its Bitcoin holdings, which is nonsense, and this level is comparable to the February 2021 high when the market was high.
According to CoinDesk, the company's Bitcoin holdings are worth $15.1 billion, and its market cap was $37.14 billion yesterday, before including today's massive rally.
Something is wrong here.
I suspect that funds that may be long Bitcoin and short MSTR are discharging positions.
One company, Kerrisdale Capital, has published its strategy in the past.
None of the commonly cited reasons for MicroStrategy's relative attractiveness justify paying much more than twice the amount for the same coin. MicroStrategy's trading history and basic common sense suggest that, as has been the case in the past, the current inflated premiums will narrow, providing attractive opportunities for pairs trading.
In hindsight, I don't think the company is big enough to move the market that much, but this strategy seems like such a low-hanging fruit that other companies would certainly have been attracted to it. .
If Bitcoin were to break out, I would expect the premium to widen, but today it is only up 4.5%, which is still a long way from $70,000. Perhaps the MSTR market is on the cusp of a breakout?
It's possible, but something is wrong here so be careful. I don't think now is the time to short MSTR as the charts are really breaking out, but at some point the premium to NAV will have to narrow and I don't think that is far away. In the meantime, keep an eye out for how long this squeeze lasts and its potential to become a meme.
