Experts are raising concerns about MicroStrategy‘s MSTR increasingly leveraged Bitcoin BTC/USD strategy, as its Net Asset Value (NAV) premium narrows and the pace of its Bitcoin acquisitions slows.
Analysts tell Benzinga the market is maturing beyond reliance on singular entities like MicroStrategy, and the company must now demonstrate strategic value beyond simply holding Bitcoin.
This shift marks a critical juncture as the cryptocurrency market seeks sustainable growth independent of individual players.
A Protos story highlights that in the past month, MSTR declined 12% while Bitcoin rose 3%.
This discrepancy has raised questions about the sustainability of MicroStrategy’s approach, particularly as its software business becomes increasingly negligible and the company has become almost entirely a Bitcoin proxy.
Despite the company holding $45 billion in Bitcoin, its $88 billion market cap is supported by a 93% premium, which has been steadily decreasing since Nov. 20.
MicroStrategy’s NAV Premium Decline Signals Market Maturation
Experts point to several reasons for the narrowing NAV premium, a key metric reflecting the market’s valuation of MSTR relative to its Bitcoin holdings.
Azeem Khan, co-founder of Morph, states the shrinking premium is primarily due to “dilution—MicroStrategy issuing more shares to buy Bitcoin spreads value thinner, making each share less appealing” and a “cooling market” after initial excitement over its Bitcoin-centric strategy.
Todd Ruoff, CEO of Autonomys, argues the narrowing is a sign of “market maturation” indicating a need for MSTR to show “strategic value beyond its BTC holdings,” such as “technology, treasury management, or new innovations.”
Rich Rines, an initial contributor to Core, also attributes the drop to “heightened Bitcoin volatility” and “increased short-term risk pricing,” while noting that “alternative leveraged Bitcoin plays are now emerging.”
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Are MicroStrategy’s Slowing Bitcoin Buys A Problem?
The slowing pace of MicroStrategy’s Bitcoin purchases has also drawn attention.
Khan criticizes the strategy, calling it a “house of cards” as the company relies on a feedback loop where rising BTC prices enable further debt or share issuance for more BTC purchases.
Ruoff sees it as a “more disciplined approach” amid a challenging economic environment, suggesting the need to evaluate MSTR as “a company managing both crypto assets and operational risks.”
Peter Chung, Head of Research at Presto Labs, notes that reduced purchases may be a misnomer, pointing out that, “MSTR was unexpectedly front-loading a lot of its 3yr buying plan.”
Rines connects the reduced purchasing directly with the shrinking NAV premium, explaining, “The premium essentially funds their ability to acquire more BTC, so when it’s compressed, their buying capacity slows.”
What Does This Mean For MicroStrategy’s Future?
Experts are divided in their short and medium-term assessments of MicroStrategy’s prospects.
Khan expects short-term gains due to the “bullish” crypto market, but he fears a medium-term “bear market triggered by an event forcing MSTR to liquidate its Bitcoin holdings.”
He warns of the concentration of Bitcoin in a single entity, which creates a “single point of failure for Bitcoin” and is not in line with Bitcoin’s core values.
Ruoff stresses volatility and earnings scrutiny in the short term, but in the medium term, believes “MSTR will likely need to redefine its narrative.”
Chung notes the quiet period before the 4Q24 earnings release may impact sentiment. Rines predicts continued volatility tied to Bitcoin’s performance, while also noting that “the NAV premium will likely face continued compression.”
MicroStrategy’s Effect On The Bitcoin Bull Market
Crucially, all experts agree that Bitcoin’s future is not reliant on MicroStrategy’s actions.
“Bitcoin performed exceptionally well before Michael Saylor started buying and will continue to thrive without it,” Khan said.
Ruoff added that Bitcoin’s maturity as a global asset has reduced reliance on single entities.
“The decoupling of MSTR from BTC’s performance is a healthy sign,” he noted.
Rines highlighted the role of innovations like Bitcoin staking and DeFi in sustaining market growth.
“Even if MicroStrategy slows its purchases, demand from other institutions and advancements in Bitcoin DeFi will ensure continued adoption,” he said.
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