Bitcoin price dropped by $11,500 after reaching $72,000. This was the November 2022 bottom target for some. Now, the loss amount causes panic among investors, especially those new to cryptocurrencies. BTC price drop has many reasons, one being MSTR shares.
MicroStrategy and Crypto Decline
MicroStrategy (MSTR) has been trying to act like a proxy BTC ETF since the previous cycle. Saylor believes his company shares are more profitable than buying BTC. He continuously grows his reserve by indebting his company. However, there’s a problem. Investment firm Kerrisdale Capital is shorting MSTR shares, claiming they trade at an excessively positive premium compared to Bitcoin.
Kerrisdale Capital’s Chief Investment Officer Sahm Adrangi said:
“They own X amount of Bitcoin. The software business is worth a billion, maybe a bit over a billion. It doesn’t add much value to the company. But Saylor keeps buying Bitcoin. If he wants to buy more Bitcoin, he borrows $1 billion and buys another $1 billion worth of Bitcoin. This doesn’t increase the company’s corporate value. For the company’s value to increase, Bitcoin prices need to rise. If they fall, the company’s value falls too. The company should trade at Bitcoin value. Our argument is to short MSTR and long BTC.”
The positive premium for MSTR shares exceeded 200% in March. This short-selling idea could have negative consequences for both MSTR shares and BTC.
MicroStrategy and Bitcoin
The company currently holds $14.6 billion worth of BTC. They repeatedly state they have no plans to sell these for a long time, having spent $8.3 billion to reach this reserve. While people think this is an attractive unrealized gain worth billions, Adrangi disagrees.
“MicroStrategy’s past doesn’t show much evidence of being good at buying low and selling high. After all, Saylor just buys Bitcoin at different times. And you can buy Bitcoin at different times too.”
Zackary Morris, a research analyst at Onramp, said:
“Perhaps fund providers should not start formulating a thesis about MicroStrategy. In my opinion, arguing that something is not tied to reality and then betting on it becoming tied to reality is not a good strategy.”
