Bitcoin continues to approach the 100,000 USD barrier, but the Bitcoin development company MicroStrategy (MSTR) plummeted 16% yesterday, originally due to a short report released by the well-known investment research company Citron Research, and the exchange BitMEX also believes that MicroStrategy is currently crazily overvalued at a 256% premium to its held Bitcoins, which is very unreasonable.
BitMEX calculates the Ponzi mathematics of MicroStrategy
The exchange BitMEX released a report on MicroStrategy (MSTR), believing that its market value exceeds one trillion USD, and that its trading price has a huge premium compared to the value of its held Bitcoins, approximately 256% on a fully diluted basis. This premium is insane, partly because some financial regulators have prohibited people from buying Bitcoin ETFs. These individuals are very eager to access Bitcoin, so despite the premium, they still bought MSTR.
However, even if the price of Bitcoin remains unchanged, there is some justification for the net asset value premium. MicroStrategy previously proposed the "Bitcoin Yield" KPI, and due to MSTR's trading premium, the company could issue new shares and buy more Bitcoins, which would increase the value of each Bitcoin share. If the premium persists, the company can continue to issue new shares until the value of each Bitcoin share equals the current stock price.
MicroStrategy is severely overvalued at 256% premium over Bitcoin
Number of Bitcoins held: 331,200
Bitcoin price: 97,600 USD
Value of Bitcoins held: 32,325,120,000 USD
Fully diluted shares: 242,758,000
Current stock price: 474 USD
Market value: 115,026,023,140 USD
Premium: 256%
Calculating 'Ponzi mathematics' iteratively
BitMEX calculates iteratively how many new shares MicroStrategy needs to issue and at what price to make the value of each Bitcoin share equal to the current 474 USD.
Assumption:
Bitcoin price maintains at 97,600 USD
After fully diluted, MSTR's premium relative to net asset value remains at the level of 256%
MSTR raised all its funds through stock issuance, raising funds in batches of 1 million shares each time
Result:
MSTR needs to issue 157 million shares
MSTR needs to raise 157 billion USD
Stock price is 1,685 USD per share
Market value will be 674 billion USD
MSTR will hold 1.9 million Bitcoins
BitMEX questions such figures as being unreasonable, and this calculation is based on the assumption of a 256% premium on MicroStrategy!
Citron began shorting MicroStrategy
The well-known investment research company Citron Research also expressed its views on MicroStrategy, which was founded by Andrew Left and is known for its in-depth analysis of the stock market and public short reports.
Citron told readers four years ago that MicroStrategy was the ultimate way to invest in Bitcoin and set a target of 700 USD. Today, MSTR has soared to over 5,000 USD (adjusted for stock splits), thanks to the visionary Bitcoin strategy of founder Michael Saylor.
However, as investing in Bitcoin becomes easier, such as investing in Bitcoin ETFs, COIN (exchange Coinbase), and HOOD (exchange Robinhood), MicroStrategy's trading volume has completely detached from Bitcoin's fundamentals. Although Citron remains optimistic about Bitcoin, it has hedged by shorting MSTR.
Note: here refers to going long on Bitcoin while shorting MSTR as a hedging strategy (also known as an arbitrage strategy).
However, Citron stated that it still respects Michael Saylor very much, but even Saylor should know that MSTR is overheated!
MSTR fell 16% yesterday
Although Bitcoin continued to approach 100,000 USD yesterday, MicroStrategy's stock price plummeted 16% after the Citron short report was released, closing at 397.28 USD. However, it is still up 473% year-to-date, outperforming Bitcoin's 134%.
This article states that MicroStrategy's premium over Bitcoin has reached 256%, leading to a 16% drop after being shorted by Citron, first appeared in Chain News ABMedia.
