The Intersection of Strategy's Valuation Cycle and IBIT Options Launch

Key Information:

MSTR reached a cycle mNAV peak of 3.141 on Nov 20, coinciding with IBIT options’ first-day trading volume of $2B.
Since then, MSTR has dropped 40% but is still up 515% since the ETF launches, in contrast to IBIT’s 128% gain.
Bitcoin’s implied volatility remains below 40, indicating that leverage products may continue to be subdued until this volatility increases.

Analysis

On November 19, when BlackRock’s iShares Bitcoin Trust (IBIT) options launched, trading volumes surged, surpassing $2 billion on the first day. Around this time, Strategy’s (MSTR) multiple to net asset value (mNAV) peaked at 3.141, aligning with bitcoin nearing a price of $100,000 and MSTR’s stock hitting an all-time high of $540.

Since that peak, MSTR has fallen 40%, compressing its mNAV to 1.55. Initially, Strategy held 331,200 BTC, which is an increase of roughly 305,000 BTC from previous holdings. This gives investors a unique entry into bitcoin’s volatility through MSTR, differentiating it from IBIT, which is limited to direct bitcoin exposure but offers leverage instruments as well.

Even with IBIT’s strong debut, MSTR has significantly outperformed since the launch of bitcoin ETFs in January 2024, showing a growth rate of more than 515%, compared to IBIT’s 128%.

Currently, with bitcoin’s implied volatility below 40, traders may hesitate to pursue unconventional strategies until the volatility picks up again.