Stock Volatility Declines to Unprecedented Lows, Potentially Hurting Share Value

Key Points

MicroStrategy’s (MSTR) 10-day realized volatility has reached a record low since the company’s first bitcoin acquisition in 2020, while implied volatility has plunged to 48.33%, close to historical lows.
Last week, the firm made its smallest bitcoin purchase since March, acquiring only 245 BTC as market dynamics shift towards rapidly emerging public bitcoin-adopting firms.

Detailed Overview

Currently, MicroStrategy (MSTR) is observing its lowest 10-day realized volatility since starting its bitcoin acquisitions in 2020, according to Jeff Park, the Head of Alpha Strategies at Bitwise Asset Management. Realized volatility measures an asset’s actual price movement over a defined timeframe, highlighting how fluctuated the price has truly been, in contrast to future volatility expectations.

MSTR’s implied volatility presently stands at 48.33 percent, marking one of the lowest levels recorded in recent years. A high implied volatility historically indicated a turbulent stock behavior, but as it declines, interest might sway towards other assets projecting greater price movements. Notably, MSTR’s implied volatility surged to 225% in November 2024, amidst a dramatic rise in bitcoin following Donald Trump’s presidential election victory when bitcoin values exceeded $95,000.

With MSTR’s share price currently at $367, the firm holds 592,345 BTC but recorded its smallest weekly purchase in recent history. This reduced acquisition pace suggests a possible market saturation as other companies adopt bitcoin financial strategies increasingly. Moreover, investments appear to migrate from MSTR towards smaller firms with robust performance and trading volume.

This recent trend raises questions about whether MSTR, with reduced volatility, might be losing its appeal to traders and investors who typically seek both upside and downside volatility for maximized returns. In response to evolving market conditions, MicroStrategy is exploring alternative financing strategies, including market-based offerings associated with their perpetual preferred stock, STRK and STRF.