MicroStrategy Buys More Bitcoin
Where is the Value?
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Alright, let’s get to the days top news where MicroStrategy has bought another 21,550 BTC. We can see that their BTC/MSTR has now risen to 0.177%. We also know that their dollar cost average or DCA has now risen to $60,323. A mere 40% dip by BTC will put their total holdings into an unrealized loss at that point. We aren’t sure how the equity would react when that occurs, we can only point out the level by which that will occur:
As far as Bitcoin’s performance it has been very impressive. +133% this year alone, but MicroStrategy this year has performed very well, up from around $63 to trading $366 today that is a move of over 480%. The hype is real and a lot of the premium has to do with the return on the covered call and convertible bond gamma hedging. As we have stated time and time again, MicroStrategy’s main product is VOLATILITY!
The stock is down nearly 7% today and we suspect this may be a product of some premium compression toward its Bitcoin value. As the chart above shows that for every 1 share of MSTR you have an intrinsic value of 0.177% of a bitcoin. When we look at MSTR it has well outperformed Bitcoin and its outperformed the likes of Netflix and META who are also up big over the last 2 years:
So the big question Magnelibra has upon all this is will the MicroStrategy Gamma game continue to cause it to outperform? Will the FASB rule change assist the stock by creating a massive EPS gain on Feb 4th 2025 their next earnings release? There is a lot to consider, but ultimately the goal of traders and investors is yield vs risk. So the question that all investors and traders need to ask themselves when contemplating one thing vs another, is really very simple,
What is our expected “potential” versus our actual “increased” risk that we are obtaining.
This is really everything in one concise statement. Will Bitcoin go 2x or 3x and does it offer a greater opportunity than say Nvidia, Netflix, Microsoft, META or any other expected outcome of any other investment that exists.
That is how you should be measuring things. It is tough, it is personal because everyone has a different capital base, everyone has a different risk tolerance and everyone has a different time horizon by which they tie themselves too. This is how you should be quantifying things, none of this is easy and there is always risk. There are no free lunches no matter how fantastic an opportunity sounds! The flipside is, you have to do something, doing nothing is not really an option. Why? Because inflation is destroying your value at a rate of 3% a year! This is a lot of inflation if you extrapolate it over time and its what us traders and investors are always up against.
We often here how risk adversity leads many investors from doing anything, they sit in this perceived safety net of risk, however what they do not realize is that they are destroying their opportunity and potential. Their biggest detriment is time and everyday spent in comfortability is a minute, second, or hour wasted in regards to your overall allotment of perceived time. This is why we offer our readers and listeners, the objectivity of understanding, of a mindset that will allow them to breakdown these barriers of risk and reward!
Its all important work, as important as your everyday job, maybe more important, because you have a future to prepare for and responsibilities that require a long time to prepare for. This is why we do what we do, we provide knowledge, information and more importantly, we offer you the right mindset to tackle these complex subjects!
Alright that is it, here are last weeks Friday’s settlements and MEGA8s. The option hedge ate up the recent up move. It happens from time to time but it is expected in the long run. We do not hedge to increase alpha on the fore front, we hedge because we want to minimize draw down in the long run from an overall adverse move! This week we will target the QQQ $525 Calls as the hedge:
As far as the MEGA8 market cap its at new all time highs:
As far as the settlements, we did want to point out the US bond market steepening move post NFP on Friday as the 2s were the performer on the curve indicating the lower rate trajectory is still in place:
Here are the Settlements from Friday:
Last week Bitcoin was the % based winner +6.38% with Nat Gas -10.56% the big loser:
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