Summary Strategy offers compelling upside as a leveraged Bitcoin play, especially with the breakdown of the traditional 4-year halving cycle. MSTR’s NAV premium has compressed, positioning the stock for outsized gains if Bitcoin rallies and the premium expands again. High short interest in MSTR and technical indicators suggest potential for a sharp rebound if sentiment shifts. Risks include tightening credit, regulatory headwinds, and Bitcoin price breakdown, but capital structure flexibility enhances long-term upside. Thesis Summary The Bitcoin ( BTC-USD ) four-year halving cycle has broken down. I highlighted as much in my last Strategy Inc ( MSTR ) update. But Bitcoin itself hasn’t broken, and if the four-year cycle is indeed broken, then this bear market could be over sooner than we think. With this in mind, Strategy ((MSTR)) now looks like a potentially big reward play. Obviously, sentiment is at an all-time low, and most people would think it’s crazy to invest now. But that’s exactly when the big money is made. I’m willing to take another small tab at MSTR at today’s price. The 4-Year Cycle Has Broken For over a decade, Bitcoin’s rhythm was predictable, or so we thought. The 4-year halving cycle played out before, and we thought it would again. We thought the halving would lead to a rally, followed by a blow-off top and then another large drawdown. BTC 4 year cycle (TV) While everyone was expecting a blow-off top in Q4, Bitcoin just kind of fizzled out and peaked in October. Ultimately, as I have also laid out before, Bitcoin trades with liquidity more than anything else. This had lined up well with Bitcoin’s halving before, but it may have just been a coincidence. Do we really think that if COVID had hit in 2021, Bitcoin would have just kept on rallying? BTC vs Software ETF (Bianco Research) Indeed, Bitcoin’s performance is more correlated to tech and specifically software than anything else. But Bitcoin Hasn’t Broken But even if the narrative around the 4-year cycle has broken, I don't think Bitcoin has. Everything that made Bitcoin appealing two years ago continues to be present. Supply is capped. Monetary debasement continues globally. Institutional access has permanently expanded demand. It’s increasingly viewed as collateral, not speculation. Structurally, Bitcoin has more buyers, more liquidity, and more institutional legitimacy than at any point in its history. Why MSTR Is Better Than Bitcoin At This Price With this in mind, Bitcoin is not going to 10x from here. But what might, in my humble opinion, is Strategy. This is still a leveraged, reflexive Bitcoin play, offering capital markets optionality. Here’s why it may outperform Bitcoin from here. The NAV Premium Is No Longer Extreme MSTR Stats (Strategy Website) At peak mania, MSTR traded at very high premiums to its Bitcoin net asset value. But today, the premium has compressed meaningfully relative to prior cycles. When Bitcoin begins to rally, MSTR’s premium will increase and become beneficial again. Equity issuance becomes accretive, allowing them to buy more Bitcoin per dollar raised and creating positive leverage. Short Interest Creates Reflexivity MSTR historically attracts high short interest. MSTR short interest (SA) With over 10% short interest, this could really see a squeeze as Bitcoin begins to rally. Just last week, we saw MSTR rally over 20% in a single day. Sentiment has gotten overly bearish on MSTR, including very high short interest, and when it reverses, it will do so in a big way. Capital Structure Optionality Michael Saylor has turned MSTR into something unique. A Bitcoin accumulation vehicle with corporate debt access. The company can issue convertible equity and keep refinancing debt to keep accumulating Bitcoin. This is why the premium exists, and this is why MSTR will come out of a bear market even stronger. MSTR can actively optimize its balance sheet around Bitcoin volatility. If Bitcoin trends up over time, that leverage compounds equity returns. Technical Analysis Call me crazy, but I like the technical setup here MSTR TA (TrendSpider) $100 has acted as strong support, and it’s mitigating the downside. Meanwhile, RSI is oversold, and the MACD looks like it’s ready to cross over bullishly. Even just a technical bounce into the 200-week EMA would be a great return from today’s price. Risks While I think the R/R is favorable, there are still some significant risks when it comes to Strategy. Finding financing could be an issue, especially if credit conditions tighten and the bear market worsens. What is a positive flywheel that could become a negative feedback loop. Bitcoin also still faces regulatory issues that could cause a setback, and the same applies to the company itself. And, of course, if Bitcoin’s price breaks structurally, then the whole investment case for MSTR collapses. Final Thoughts All in all, if you are a long-term Bitcoin bull, I think getting some exposure, even if small, to Strategy could be a good play at these depressed levels.
