The Strategy stock price continues to plunge this month and has now fallen to the lowest level since April this year. It has moved into a deep bear market after falling by 35 percent from its highest level this year.
This article explores why the MSTR stock price has decoupled from Bitcoin and whether the 183% yielding Yieldmax MSTR Option Income Strategy ETF (MSTY) is a better alternative.
Why the MSTR stock price is crashing
The Strategy stock price has plunged in the past few months as it decoupled itself from Bitcoin. In addition to falling by 3t% from the year-to-date high, it has dived by 45% from its all-time high in November last year.
There are a few reasons why the MSTR, stock price is crashing this year. First, some investors have started to question the Bitcoin treasury strategy and its implications. One of those investors was Jim Chanos, a famous short-seller who placed a short position on the company a few months ago.
The main concern is on the valuation of these companies and why they deserve a premium. The logic behind this is that, ideally, a company like Strategy should be valued based on the Bitcoin assets it has on its balance sheet.
In the current case, the company’s market cap and enterprise value are $69 billion and $100 billion against its Bitcoin holdings of $69 billion. The gap between these valuation metrics and the Bitcoin holdings is hard to explain.
The other concern is that the industry has become highly saturated, with the number of companies with Bitcoin in their balance sheet soaring. These companies now hold over 1 million coins, a figure that continues to grow.
Further, Strategy’s mNAV figure has plunged in the past few months, moving from 3.1 in November last year to 1.227 today. A falling NAV multiple is risky for the company because it has an impact on how it funds its Bitcoin purchases.
Historically, Strategy resisted selling shares when the NAV multiple was below 2.5 until Michael Saylor removed the rule in August. The company is now funding its purchases by selling shares, which is diluting its shareholders.
Replying to @saylor
Strategy today announced an update to its MSTR Equity ATM Guidance to provide greater flexibility in executing our capital markets strategy.
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MSTR stock price crash accelerated this week as Bitcoin plunged below the important support level at $110,000 amid concerns about the Federal Reserve interest rate cuts.
Is MSTY ETF any better?
Investors concerned about the falling MSTR stock price may consider the MSTY ETF, which offers an exposure to the company and pays a whopping 183% dividend return.
MSTY achieves this by using a strategy known as a covered call. On this, it holds an exposure to the MicroStrategy stock through derivatives. By doing that, it benefits whenever the stock price rises.
The company then sells call options on the MSTR stock, generating an options premium, which it then distributes to investors as a monthly dividend.
MSTY has a dividend yield of about 183%, much higher than other covered call ETFs because MSTRs stock volatility.
However, while this distribution rate is huge, a look at its total return shows that it is not all that better than that of MSTR stock. Data shows that the MSTR stock price’s total return this year is 3.83% compared with MSTY’s 2.22%.
The same performance has happened in the last 30 days as the MSTY’s total return was minus 16% compared to MSTR’s minus 12.3%. As such, history shows the MSTR stock is a better investment than the MSTY despite its high dividend.
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