Bearish Bets on Strategy Look Alluring, Says 10X Research as MSTR Diverges From Bitcoin’s Bull Run
MicroStrategy (MSTR), a Nasdaq-listed company holding a substantial Bitcoin (BTC) treasury, is experiencing a divergence between its share price and BTC’s upward trend, prompting 10x Research to recommend a bearish options strategy. Markus Thielen, leading the research, suggests a bear put spread on MSTR stock. This involves buying a $370 put option and simultaneously selling a $300 put option, both expiring June 27th.
This strategy profits maximally if MSTR’s price falls to $300 or below by the expiration date. The maximum loss is limited to the initial cost of the strategy, which was $13.89 at the time of the recommendation. This trade capitalizes on the growing disconnect between Bitcoin’s strength and MicroStrategy’s weakening momentum. While BTC recently hit record highs exceeding $110,000, MSTR’s price stalled around $440, significantly below its all-time high of $543 reached in November 2021.
Thielen highlights that this divergence mirrors a similar pattern observed before BTC’s November 2021 peak. He argues that this divergence signals waning enthusiasm among traditional finance (TradFi) investors, despite retail investors continuing to chase the dream of higher BTC prices. Thielen contends that the “middleman” (MicroStrategy in this context) is running out of premium, causing the “engine” (the bullish momentum) to stall.
MicroStrategy holds 576,230 BTC, the largest amount among publicly listed companies, accumulated since August 2020 through debt financing. It has served as a favored instrument for institutions seeking BTC exposure without directly owning the cryptocurrency. The recent price divergence raises concerns about the sustainability of the BTC bull run, though past performance doesn’t guarantee future results.
The bear put spread on MSTR offers a potential hedge against a possible weakening in BTC’s price, making it an attractive strategy for investors concerned about a potential market downturn. While the trade is bearish on MSTR, it can also serve as a hedge for those holding a long Bitcoin position. The recommendation reflects a cautious outlook on the current market dynamics, emphasizing the importance of considering the divergence between BTC’s performance and MicroStrategy’s stock price.
