TLDR
- Michael Saylor remains confident in Strategy’s Bitcoin strategy despite its shrinking premium and recent stock decline.
- Strategy’s stock has fallen around 20% since June while Bitcoin prices have risen about 6%.
- Saylor insists the premium will expand again as leverage and Bitcoin volatility increase in the future.
- Strategy is now valued at 1.46 times the $73 billion in Bitcoin it holds, down from over double its Bitcoin value.
- Many smaller crypto treasury companies face pressure as their market value falls below their Bitcoin holdings.
Michael Saylor remains unfazed by the narrowing premium of his company, Strategy, as its Bitcoin holdings grow. Shares of Strategy, once known as MicroStrategy, have fallen around 20% since June. This decline comes as Bitcoin prices have risen about 6%, reaching new all-time highs. Despite these fluctuations, Saylor insists his company’s crypto strategy remains sound. He says the premium will rise again as leverage and Bitcoin volatility increase.
Premium Contracts, But Saylor Stays Confident
Over the past five years, Saylor has transformed his company into a Bitcoin treasury firm. At one point, Strategy’s stock traded at more than twice the value of its Bitcoin holdings. However, this premium has narrowed significantly.
The company is now valued at 1.46 times the $73 billion in Bitcoin it owns. Despite this contraction, Saylor appears unconcerned. “The premium will expand as our leverage increases,” he stated in a recent Bloomberg interview. He explained that when Bitcoin’s volatility decreases, the premium will naturally contract.
Saylor has long defended his crypto strategy, emphasizing its long-term potential. Strategy now operates as a proxy for holding Bitcoin without directly owning the digital assets. This shift has drawn significant interest, especially since mid-2020. The stock has surged over 2,600%, reflecting investor optimism in the company’s unique approach. Saylor remains confident, believing that the market is still adjusting to the idea of Bitcoin treasury companies.
The Pressure on Crypto Treasury Companies
Strategy is not the only firm navigating the volatility of crypto markets. Many companies with Bitcoin reserves are facing pressure. Nearly one-third of such publicly traded firms now have market values lower than their Bitcoin holdings. Smaller firms are particularly vulnerable. Their lack of liquidity makes it harder to issue new stock, which increases costs and risks. Strategy, however, has positioned itself differently. The company plans to retire all of its convertible notes within four years, shifting to preferred shares, which have no maturity date.
Many smaller competitors lack the size and credit strength to adopt such strategies. These firms face additional pressures in a rapidly changing market. Charles Edwards, founder of Capriole Investments, raised concerns about the future. He warned that a sharp drop in Bitcoin prices could lead to a broader loss of enthusiasm. “What happens when Bitcoin drops 50%?” he asked. He suggested that this could prompt many companies to reevaluate their cryptocurrency treasury models.
Despite the broader industry’s challenges, Saylor believes his approach will weather the storm. His decision to exit convertible notes ahead of potential market downturns aims to reduce risk. Strategy’s strong position could allow it to navigate periods of extreme volatility more effectively than smaller competitors.
The Rise of Spot Bitcoin ETFs and New Competitors
The increasing popularity of spot Bitcoin exchange-traded funds (ETFs) presents a challenge to companies like Strategy. Initially, both Strategy and Bitcoin ETFs benefited from the post-election rally under President Donald Trump. However, the landscape has shifted. ETFs now offer a more straightforward way for investors to gain exposure to Bitcoin without the risks associated with corporate governance. Investors can gain direct exposure to Bitcoin without the challenges that come with holding stock in a Bitcoin-focused company.
Jack Mallers, CEO of Twenty One Capital, acknowledged the crowded space. He pointed out that anyone can launch a Bitcoin treasury company. However, he emphasized that not all firms possess the necessary resources or expertise to weather a downturn.
