Overview of Market Sentiment
Traders are refraining from pursuing gains in MicroStrategy (MSTR), indicating a transition to a more cautious market sentiment. MSTR's 250-day put-call skew—which compares the implied volatility of puts (sell options) to calls (buy options)—has reverted to zero from a previous -20% in the span of three weeks, according to Market Chameleon.
This shift implies that call options now operate on equal footing with puts, moving away from the high premiums seen earlier. The sentiment has transitioned from extremely bullish to neutral.
Market Dynamics
Contributing to this change is MSTR's share price, which has plunged over 44% to $289 from a record high of $589 noted on November 21. This demonstrates a decline in valuation, which has dropped by 34% within just the past two weeks, as reported by TradingView.
“With MicroStrategy shares down 44% from their peak and other firms adopting Bitcoin as a treasury asset strategy at much smaller scales, the Bitcoin tailwind from this narrative seems to be losing momentum,” Markus Thielen, founder of 10x Research, stated.
Markus Thielen comment translates to: “With MicroStrategy shares down 44% from their peak and other firms adopting Bitcoin as a treasury asset strategy at much smaller scales, the Bitcoin tailwind generated by this narrative appears to be losing steam.”
Since 2020, MicroStrategy has been acquiring Bitcoin for its balance sheet, amassing 446,400 BTC valued at approximately $42.6 billion, primarily financed through debt issuances. Consequently, MSTR is viewed as a leveraged investment in Bitcoin.
Despite MSTR achieving a 346% gain in 2024—substantially surpassing Bitcoin's 121% increase—the last quarter of 2024 was disappointing. MSTR's shares fell by 25% in December, contrasting with Bitcoin's mild 3% drop, demonstrating resilience above $90,000.
This suggests a diminishing appeal for MSTR as a leveraged bet on Bitcoin.
“The stock's underperformance, despite substantial Bitcoin acquisitions, indicates that investors are reluctant to pay an implied Bitcoin price of $200,000 (or more) through MicroStrategy when it can be bought directly at a significantly lower rate,” Thielen noted.
Concluding Thoughts
The evolving landscape suggests that traders are increasingly wary of overextending in positions tied to MicroStrategy as Bitcoin's narrative shifts.
