I have been talking about aggressively accumulating Bitcoin at current levels. Now I’m starting to focus on Strategy. The same correlation that marked Bitcoin as a huge opportunity is evident on the MSTR, and in some cases, the valuation is even higher.
This week in a nutshell:
- The RSI has been low only a few times since the Strategy adopted the Bitcoin level.
- The Mayer Multiple for MSTR has just reached a low percentage point.
- The ratio of BTC to MSTR is about to enter the territory that has been leading to MSTR.
- At the previous Bitcoin normal with a 1x price increase, the fair value of MSTR shares exceeded $300.
Discount
The current strategy is about 845,000 BTC Average Price in the $70,000s. This means that, at current Bitcoin prices, they are taking a huge risk on their holdings.
Figure 1: Strategy’s Average BTC Cost Basis and other key metrics.
This has coincided with the NAV dropping even below 1.00x; and MSTR’s market cap is currently about 18% below the USD value of its Bitcoin holdings. In other words, buying MSTR at current prices is equivalent to buying $1 of Bitcoin for $0.82.
Help
The 200-week moving average is often very useful for stocks, especially those that tend to go higher. Strategy’s share price is currently stuck at the same level, which previously showed key areas.
Figure 2: The Strategy’s share price measures the 200-week moving average.
Holding steady and retrieving this level, coupled with Bitcoin showing any upward trend, history sets the stage for MSTR to recover. The level is being tested. Whether it works will be one of the key indicators to watch in the coming weeks.
RSI
Since the Strategy was based on the level of Bitcoin, the RSI of MSTR dropped a little in the past, in the previous years of the Bitcoin market the bears went down, while the share price was young. The current reading is not quite there, but it is getting close, and the trend continues downward.
Figure 3: MSTR’s RSI drops below 25. Historically, such levels have led to price appreciation.
The Mayer Multiple, simply the ratio between the closing price of MSTR and its 200-day moving average, recently registered a reading where 99.2% of all previous values were high. This is a historical underperformance relative to its current range, and it has occurred over the same period as the RSI indicator. Providing two independent indicators, all positive readings are only seen during the most important lows in MSTR history.
MSTR or BTC?
The ratio between the Bitcoin price and the MSTR share price is one of the neat ways to see if the exposure should be in Bitcoin directly or rounded to a higher beta proxy. When the ratio is in the green zone, MSTR has been doing very well. When it is in the red zone, Bitcoin tends to lead.
Figure 4: The BTCUSD/MSTR ratio is close to the green zone, the previous level for MSTR.
This number is about to re-enter the green zone. Previous instances of this were followed by long periods of outperformance of MSTR compared to Bitcoin. This ratio is also making a long-term downtrend, which suggests that the bearish trend towards MSTR is the best for Bitcoin.
Fair Price
At a previous common stock price of about $126,000 and with no additional accumulation, a 1x share price on MSTR would mean a share price of over $300. That’s about 2.5x from current levels to reach the value of Bitcoin’s last peak.
Figure 5: MSTR price targets tracked for different BTC levels and NAV premium scenarios.
If MSTR continues to exceed 900,000 BTC and the NAV price gradually increases to 1.25x or 1.5x, below the 3x+ levels seen previously, the numbers will be very attractive! Interestingly, the reduction of MSTR that drove the collection of bitcoins is growing through STRC instead of issuing ordinary shares, which reduces the topic.
Where are we?
I have been accumulating bitcoin aggressively. Now I am also looking to add MSTR. The combination of very strong readings, 200-week mid-week support, Bitcoin’s current bearishness, and the BTC vs MSTR ratio close to entering the optimal territory make this a no-brainer for a short-term play to increase my BTC balance.
That said, MSTR is an excellent beta game for Bitcoin. If Bitcoin continues to struggle, MSTR will suffer greatly. I am not treating this as a replacement for Bitcoin contact, but as some asymmetric position on the points that show risk reward and good reputation.
For more information, charts, and information on bitcoin prices, visit BitcoinMagazinePro.com.
Write to Bitcoin Magazine Pro on YouTube to learn more about experts!
Disclaimer: This article is for informational purposes only and should not be considered as financial advice. Always do your research before making any financial decisions.
