MicroStrategy Beats Bitcoin During Recent Rally
MicroStrategy's common stock outperformed Bitcoin during its recent 21% rally, gaining 28.89% over three sessions while BTC rose 21.11%. This is not a result of sentiment or luck but rather arithmetic, according to Phemex.
The mNAV mechanism, which measures the ratio between a company's market capitalization and the value of its cryptocurrency holdings, played a key role in this phenomenon. Strategy Inc., MicroStrategy's parent company, holds 840,447 BTC on its balance sheet, acquired for an aggregate $63.36 billion at an average price of $75,385 per coin.
When the mNAV ratio expanded from 0.65 to 0.70 during the rally, it contributed to MicroStrategy's outperformance. The company's common stock is thinly capitalized, with a significant amount of fixed claims above the equity, which amplifies its price movements.
The same mechanism that drove MicroStrategy's outperformance on the way up also applies in reverse on the way down. When Bitcoin declined 32.97% over the same period, MicroStrategy's stock fell 66.70%, delivering a 2.02 times greater drawdown than the asset it holds.