Traders’ Sentiment Shifts as MicroStrategy’s Bitcoin Bet Loses Steam
Investors in Nasdaq-listed MicroStrategy (MSTR) are no longer aggressively pursuing upside potential, signaling a cautious shift in market sentiment. The 250-day put-call skew for MSTR, which measures the difference in implied volatility between put and call options, has bounced back to zero from -20% in just three weeks, according to data from Market Chameleon.
This shift indicates that call options, typically used to capitalize on potential price increases, are now trading at the same level as put options, which offer protection against price declines. In essence, the sentiment towards MSTR has shifted from extremely bullish to neutral.
The change in sentiment comes as MSTR’s share price has dropped by more than 44% to $289 from its peak of $589 on Nov. 21. In the past two weeks alone, the valuation has decreased by 34%, as reported by TradingView.
Markus Thielen, founder of 10x Research, noted in a client update that with MicroStrategy’s shares declining significantly and other companies adopting bitcoin as a treasury asset on a smaller scale, the momentum generated by this narrative is waning.
MicroStrategy began accumulating bitcoin in 2020 and now holds 446,400 BTC (valued at $42.6 billion), primarily financed through debt sales. As a result, MSTR has been viewed as a leveraged play on BTC, outperforming the cryptocurrency with a 346% gain in 2024.
However, the end-of-year performance was lackluster, with MSTR falling by 25% in December while BTC only experienced a 3% decline, maintaining a relatively stable price above $90,000. This divergence suggests that the appeal of MSTR as a leveraged bet on BTC is diminishing.
Thielen pointed out that the underperformance of MSTR, despite its significant bitcoin holdings, indicates that investors are no longer willing to pay a premium for exposure to BTC through MicroStrategy when they can directly purchase the cryptocurrency at a lower cost.
In conclusion, the changing sentiment towards MSTR reflects a shift in market dynamics as investors reassess the risks and rewards of leveraging bitcoin through the company. As the narrative evolves, traders will continue to monitor the situation closely to gauge the future direction of both MSTR and BTC prices.