MicroStrategy’s Previously Bullish Stance Weakens with Growing Market Caution.

MicroStrategy’s Bitcoin Bet Loses Luster as Market Sentiment Turns Neutral

MicroStrategy (MSTR), which has been considered a leveraged play on bitcoin (BTC), has seen a significant shift in market sentiment, with traders no longer chasing its upside potential. This change marks a turning point as the bitcoin-driven momentum, particularly from its use as a treasury asset, begins to wane.

The company’s 250-day put-call skew, a gauge of the implied volatility difference between put options (bets on price declines) and call options (bets on price increases), has climbed back to zero from a negative 20% in just three weeks, according to data from Market Chameleon. This swing suggests that call options—once purchased for asymmetric gains from anticipated bitcoin rallies—are now priced in line with puts, indicating that the market has moved from an ultra-bullish to a neutral stance.

The shift in sentiment comes alongside a dramatic 44% decline in MicroStrategy’s stock, which has fallen from its peak of $589 on November 21 to $289, with its valuation dropping by 34% in the past two weeks alone, according to TradingView.

Markus Thielen, founder of 10x Research, explained that the weakening narrative surrounding bitcoin as a treasury asset is impacting MicroStrategy’s performance. “With MicroStrategy shares down 44% from their peak and other companies adopting bitcoin as a smaller-scale treasury strategy, the boost from this bitcoin-driven narrative seems to be losing strength,” Thielen wrote in a client note.

Since 2020, MicroStrategy has steadily added bitcoin to its balance sheet, accumulating 446,400 BTC worth $42.6 billion, often funding these purchases through debt. As a result, the company has been viewed as a leveraged play on bitcoin, with MSTR soaring 346% in 2024—far outpacing bitcoin’s 121% rise.

However, the latter part of 2024 saw disappointing results. While MSTR dropped 25% in December, bitcoin held relatively steady, falling just 3% and remaining above $90,000.

This disparity points to a decrease in demand for MicroStrategy’s leveraged exposure to bitcoin. “The stock’s underperformance despite its large bitcoin holdings suggests investors are no longer willing to pay an implied price of $200,000 or more per bitcoin through MSTR, when they can buy the asset directly at a lower cost,” Thielen noted.