Somthing is going on with bitcoin and Microstrategy

Bitcoin is up 4.5% today as it erases the past two days of selling. It’s a nice move but it brings things back to how they were over the past eight months. Wake me up when it breaks the $50-70k range.

What catches my attention today is Microstrategy, one of the easiest companies in the world to value. The reason is that 97% of its assets are invested in Bitcoin.

Despite this, it is trading at an all-time high today and up 12%.

This represents a significant disconnect between the value of a company’s Bitcoin holdings and the company itself. The shares are trading at 2.5 times the value of their Bitcoin holdings, which is illogical and in line with the highs recorded in February 2021 — a time when markets were euphoric.

According to CoinDesk, Bitcoin holdings are worth $15.1 billion, and its market capitalization reached $37.14 billion yesterday before including today’s massive rally.

Something is wrong here.

I suspect a fund that could be long Bitcoin and short MSTR is unwinding the position.

One company, Kerrisdale Capital has advertiser That strategy in the past:

None of the reasons typically given for MicroStrategy’s relative attractiveness justify paying more than double for the same currency. MicroStrategy’s trading history and basic common sense indicate that the current inflated premium will deflate, as it has on previous occasions, providing a compelling pair trade opportunity.

Now I doubt the company will be big enough to move the market that far, but the strategy seems like low-hanging fruit that others are sure to have attracted as well.

If Bitcoin were to break out, I would expect this premium to expand but it is only up 4.5% today and is still far from $70k. Maybe the MSTR market is ahead?

It’s possible but there’s something here that caught my attention. I don’t think it’s the right time to short MSTR now because this chart is already booming but at some point the NAV premium has to narrow and I don’t think that’s too far off. In the meantime, watch how far this pressure will extend and potentially become a meme.