How Strategy's 0.52 Bitcoin Correlation Drives Risk Asset Surge: Report

Strategy's (NASDAQ:MSTR) stock premium, with a 0.52 correlation and 1.77 beta to Bitcoin's (CRYPTO: BTC) price, positions it as a key leveraged proxy for risk asset investors, according to a VanEck report.

What Happened: The report highlights MSTR's strategy of issuing equity and debt to amass Bitcoin, currently holding 2.7% of the cryptocurrency's total supply, valued at $61 billion.

"MSTR's common equity currently trades at a premium (+112%) to the combined value of its BTC NAV and Strategy's underlying software business," the report states, attributing this premium to expectations of future Bitcoin accumulation, regulatory advantages, and speculative trading.

This premium drives 96.5% of MSTR's returns and 87.5% of its volatility, with the stock's 30-day volatility at 113%, compared to Bitcoin's 55%.

MSTR's capital structure, including convertible bonds and preferred shares (NASDAQ:STRK) and (NASDAQ:STRF), introduces complexity and risk.

The company has raised $28.7 billion since August 2024 to grow its Bitcoin holdings from 226,000 to 555,450 BTC.

Its $84 billion capital plan through 2027 aims to further increase Bitcoin per share, termed "Bitcoin Yield," targeting 25% for 2025.

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"The result is that MSTR stock offers accelerating exposure to BTC that advances in tandem with BTC price appreciation," VanEck notes, likening MSTR's dynamics to a call option on Bitcoin.

However, MSTR's strategy faces challenges. Buying Bitcoin at market highs results in a higher cost basis ($67,458) compared to randomized strategies, potentially reducing efficiency.

A Bitcoin price drop could shrink the premium, disrupt financing, and widen credit spreads on bonds, currently at 500-1,250 basis points.

"If Bitcoin's value declined, the Premium would also likely fall," the report warns, estimating a 1.77x beta impact.

Regulatory shifts or competing Bitcoin treasury strategies could also erode MSTR's edge, as could a decline in its software business cash flow.

What’s Next: Despite these risks, MSTR remains a unique vehicle for investors restricted from direct Bitcoin ownership due to regulatory or custody issues, offering leveraged exposure through public markets.

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