MicroStrategy’s Leverage on Bitcoin Loses Appeal as Market Sentiment Shifts

MicroStrategy (MSTR), which has long been seen as a leveraged play on bitcoin (BTC), has experienced a dramatic shift in investor sentiment, with traders pulling back on their bullish positions as the momentum from bitcoin’s treasury asset narrative fades.

The company’s 250-day put-call skew, a measure of the difference in implied volatility between put options (which indicate a price drop) and call options (which predict a price increase), has surged to zero from a negative 20% in just three weeks, according to Market Chameleon data. This shift reflects a change in sentiment, as call options—once offering large upside potential for investors betting on Bitcoin’s rise—are now trading on par with put options, signaling a loss of the strong bullish bias seen previously.

This shift comes as MicroStrategy’s share price has dropped by over 44%, from a high of $589 on November 21 to its current price of $289, with a 34% decline in the last two weeks alone, according to TradingView.

Markus Thielen, founder of 10x Research, pointed out that the loss of momentum in bitcoin’s role as a treasury asset has begun to weigh on MicroStrategy’s stock. “With MicroStrategy shares now down 44% from their peak and the adoption of bitcoin as a treasury asset strategy by other companies on a smaller scale, the narrative driving the bitcoin tailwind seems to be running out of steam,” Thielen said in a note to clients.

MicroStrategy, which began adding bitcoin to its balance sheet in 2020, has accumulated 446,400 BTC, valued at $42.6 billion. The company has often financed these bitcoin purchases by issuing debt, making it a highly leveraged bet on the price of BTC. As a result, MSTR posted an outstanding 346% gain in 2024, far outperforming bitcoin’s own 121% rise.

However, the final months of 2024 were disappointing for MSTR. The stock fell 25% in December, while bitcoin only saw a 3% decline, remaining relatively steady above $90,000.

This underperformance suggests that investors are becoming less interested in MicroStrategy’s leveraged play on bitcoin. “The stock’s struggle, despite its significant bitcoin holdings, shows that investors are no longer willing to pay an implied price of $200,000 or more per bitcoin through MSTR, when they can purchase the cryptocurrency directly at a much lower price,” Thielen observed.