They are trying to stop an attack on their listed instruments.
Recently, MSTR has been under a seller pressure that compressed mNAV from 1.50 to 1.15, and other hybrid instruments that have been heavily sold.
Hopefully, this will demonstrate speculators they have no hope pushing MSTR into a death spiral.
Well, that was recently. A year ago,
it reached over 4 mNAV, with some companies such as Metaplantet or Naka (Nakamoto) having much higher ones. All of them have been compressed. This has not been exclusive to MSTR.
The time has come when I am considering unwinding my position in MSTR. Firstly, because I am now break even if I sell, and secondly, for the following reason.
I am going to propose two possible scenarios, which are not extreme and are plausible.
The first is that in the coming years until the next halving, the price of Bitcoin will rise. It does not need to be much, with an average of 20% per year, Strategy will be able to maintain its business model. This assumption would demonstrate that the cycles as we know them so far have changed.
The second scenario is to assume that the remainder of the cycle will behave like previous cycles, we reached a peak of $125K, which will not be exceeded until after the next halving, with the next couple of years seeing negative returns, as happened between November 2021 and November 2023. This is a plausible scenario, as I said, not at all catastrophic, and quite realistic, just like the first one. Let's say it goes down at an average of negative 20% a year,
How the hell is the business model going to be sustained in this second case?
Saylor has raised STRC's dividend again, which now stands at 10.75%. For starters, it's common knowledge in personal finance that there is a relationship between return and risk. The higher the potential return, the greater the risk. This is not only true in finance, but also in gambling and life in general. Betting on a single number in roulette has a higher potential return than betting on red or black, but also a much greater risk of losing everything.
But aside from that, STRC's dividend is based on Bitcoin appreciating by an average of 30% per year, which would allow them to pay approximately 10% and the other 20% would appreciate the common stock. But if the price of Bitcoin falls, that thesis does not hold up, and even less so if the dividend continues to rise to attract investors. In other words, will there come a time when it offers a 20% dividend on a preferred stock based on an asset that is losing 20% annually?
Since I don't know which of the two scenarios will occur, or even if they could be more extreme on one side or the other, I'm thinking of selling, but I'm going to give myself at least 24 more hours to think about it.
The thing is, right now I don't think we're going to see those crazy mNAVs we saw a year ago ever again. Maybe if things go well, Strategy will return to a 2 mNAV or so, but if we consider the other scenario, it could enter a downward spiral that looks bad.
Another thing that makes me think about this is that MSTR has an average Bitcoin purchase price of $75K. With that, the return it has obtained from Bitcoin at current prices is 25%. I have an S&P 500 investment fund, which I started at the same time that MSTR began buying Bitcoin, which has given me a much higher return than that. The problem with MSTR is that it attracts more capital when the price of Bitcoin is higher, so it buys a lot when the price is high and buys very little or nothing when it falls.
I suppose that I don't really disagree with any of your analysis in any kind of strong way, since I have not been considering investing into MSTR and/or any of its products as compared with my ongoing happiness with the underlying...
So in that sense if I am happy with the underlying, then the only reason to play around with MSTR or any of its products would be to hedge my happiness.
You do seem to be doing the opposite of what a guy should do.. since this seems a better time to buy MSTR and its products.. but yeah, even myself, if I would have had gotten involved in any of their products, maybe all of my exposure added up would ONLY add up to 10% of the size of my bitcoin holdings.. so decisions become easier if we are dealing with smaller parts and perhaps hedging rather than putting a lot of exposure into derivative products rather than the real deal.. Do you have higher than 10% exposure to MSTR and MSTR products as compared with your bitcoin holdings?
[edited out].
There's no need to react negatively, or to be annoyed by the question ser. I'm merely curious on what everyone's thoughts/insights/opinions are in the matter.
I personally believe that nothing will happen. Chad Saylor will continue to be like Bitcoin, a Honey Badger surviving the bear cycles and prosper during bull cycles. He will continue to keep buying like Bitcoin will continue chugging along producing block after block.
I don't have any problem with my already existing response.
Right now, you seem to be changing your tune, and saying that you did not really mean what you said. I already responded to what I read the first time, which made it sound like you have it all figured out, and yeah, maybe you don't know how to frame your questions in such a way that you don't come off as a troll.
You are now trying to suggest that you don't believe in such negative scenario as you had earlier posed, yet you had wanted to pose such a negative scenario anyhow and ask: "what if?"
