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I’ve been outspoken about aggressively acquiring Bitcoin at current price points. Now, I’m beginning to seriously consider Strategy as well. The same confluence of factors that indicated Bitcoin as a significant acquisition opportunity is now evident with MSTR, and in some instances, the indicators are even more pronounced.
This week’s highlights:
- The Relative Strength Index (RSI) has only shown lower values on a few occasions since Strategy embraced a Bitcoin standard.
- MSTR’s Mayer Multiple has just reached its lower percentile ranges.
- The BTC versus MSTR ratio is nearing a zone that has historically preceded prolonged outperformance by MSTR.
- At the prior all-time high for Bitcoin, with a net asset value premium of 1x, the intrinsic value of MSTR shares would surpass $300.
Discount
Strategy currently possesses approximately 845,000 BTC, with an average cost basis in the mid-$70,000s. This implies that, at present Bitcoin valuations, they are facing a substantial unrealized loss on their holdings.
Figure 1: Strategy’s Average BTC Cost Basis and other key metrics.
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This has coincided with the net asset value (NAV) dropping even further below 1.00x; MSTR’s market capitalization is currently approximately 18% less than the U.S. dollar value of its Bitcoin reserves. Put another way, acquiring MSTR at current valuations is akin to purchasing $1 worth of Bitcoin for $0.82.
Support
The 200-week moving average typically serves as significant support for assets, particularly those with a tendency to trend upward. Strategy’s stock price is presently resting at this level, which has historically marked substantial accumulation zones.
Figure 2: Strategy’s share price is testing the 200-week moving average.
A consistent hold and recapture of this level, coupled with any upward momentum in Bitcoin, historically creates conditions for a substantial MSTR recovery. The level is currently being challenged. Its resilience will be a key indicator to monitor in the coming weeks.
RSI
Since Strategy adopted a Bitcoin standard, the RSI for MSTR has only experienced lower readings on a few prior occasions, specifically during previous Bitcoin bear market cycle troughs when the share price was in the low double digits. The current reading is not yet at those lows, but it is approaching them, and the trend continues to move downwards.
Figure 3: MSTR’s RSI has fallen below 25. Historically, such levels have indicated upcoming price appreciation.
The Mayer Multiple, which is simply the ratio of MSTR’s closing price to its 200-day moving average, recently registered a value higher than only 0.8% of all prior data points. This signifies a historically extreme level of underperformance relative to its own moving average, occurring concurrently with the RSI signal. This presents two independent momentum indicators flashing readings typically observed only at the most significant cycle lows in MSTR’s history.
MSTR Or BTC?
Comparing Bitcoin’s price to MSTR’s share price offers a straightforward method to determine whether direct Bitcoin exposure or a rotation to the higher-beta proxy is more advantageous. When the ratio is within the upper green zone, MSTR has historically tended to outperform. Conversely, when it resides in the lower red zone, Bitcoin typically leads.
Figure 4: The BTCUSD/MSTR ratio is approaching the green zone, a level that has historically preceded significant outperformance by MSTR.
The ratio is currently nearing entry into that green zone once more. Previous occurrences of this pattern were followed by extended periods of notable MSTR outperformance compared to Bitcoin. Furthermore, the ratio is exhibiting lower highs in the long-term trend, suggesting a general shift toward MSTR becoming increasingly favorable relative to direct Bitcoin investment.
Fair Value
At the previous peak valuation of approximately $126,000 and without accounting for further accumulation, a 1x net asset value premium for MSTR would indicate a share price exceeding $300. This represents roughly a 2.5x increase from current levels, solely to reach the fair value at Bitcoin’s last high.
Figure 5: MSTR price targets modeled across varying BTC holdings and NAV premium scenarios.
Should MSTR continue its accumulation towards the 900,000 BTC mark and the NAV premium modestly increase towards 1.25x or 1.5x—well below the 3x+ levels observed in the preceding cycle—the figures become quite attractive! Importantly, the dilution previously undertaken by MSTR to fund Bitcoin acquisitions is increasingly being financed through STRC rather than common share issuance, mitigating that specific obstacle.
Current Standing
I’ve been aggressively acquiring Bitcoin. I am now also looking to increase my MSTR holdings. The confluence of extreme momentum readings, support at the 200-week moving average, an implied discount relative to the underlying Bitcoin reserves, and the BTC versus MSTR ratio nearing historically favorable territory makes this appear to be a clear-cut short-term strategy to expand my personal Bitcoin holdings.
Nonetheless, MSTR functions as a high-beta Bitcoin investment. If Bitcoin continues to face headwinds, MSTR will likely experience greater challenges. I am not considering this a substitute for Bitcoin exposure, but rather as an supplementary asymmetric position at a juncture where the available data suggests a historically favorable risk-reward profile.
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Disclaimer: This content is for informational purposes only and should not be construed as financial advice. Always conduct your own thorough research prior to making any investment decisions.
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