Transcription
MSTR's price is collapsing right now, and the market sentiment has flipped faster than nearly all of us expected. So, in this video, I'm breaking down why MicroStrategy has lost nearly 60% of its value in Bitcoin terms over the past year, what this collapsing MNAV really means, and why the technical indicators are now flashing bare market signals for the first time this cycle.
But don't worry, we'll also explore the massive potential upside if Bitcoin bounces and MSTR's premium recovers. This is going to be the most detailed breakdown of MSTR you'll get in under half an hour. So, let's dive into it.
Today, we're going to go over a huge update on my overall take on MSTR and where I think it could go from here. Now, there are a lot of different viewpoints floating around about why MSTR has underperformed Bitcoin recently. But if we price MSTR in Bitcoin terms over this bull cycle, the picture becomes pretty clear. Since the start of this bull market, even with this extreme recent crash in Bitcoin terms, MSTR has still more than doubled your Bitcoin-denominated wealth. And at its peak, it gave us over a 5x return on your Bitcoin stash. And that's massive.
But here's the harsh reality. Over the past year, MSTR has lost almost 60% in Bitcoin terms. And that's brutal. And what's worse is that it might not even be done yet. So, let's take a closer look at the price performance since last November, which was basically the peak of sentiment both for Bitcoin and for MSTR this cycle. Up until July of this year, MSTR tracked Bitcoin's performance almost perfectly one to one. Then something changed. July became a kind of line in the sand. The extended consolidation and chop in the Bitcoin market shook sentiment hard. And for MSTR, it was even worse. And the performance clearly started to diverge.
Over the past year, Bitcoin dropped around 13% in its US dollar value. But MSTR fell over 30%, which is more than 2.3x worse in terms of underperformance. So why has this happened? Well, firstly, it's not because MicroStrategy hasn't been executing its plan properly. If you look at the Satoshis per share over time, which is effectively their primary measure of MSTR's performance, that number is still increasing quarter over quarter, every single time. So clearly, the underperformance isn't about their core strategy failing. It's got to be something else.
Now, the real issue here comes down to the MNAV, or the market to net asset value premium. And this has compressed dramatically. Back in November last year, at peak sentiment, it was at 3.89x. Now, in November of this year, it's dropped to 1.17x. And that's a huge compression, which completely explains the erosion of all the gains we saw from last year. And what this essentially means is that the stock has underperformed its Bitcoin gains and has eroded its Bitcoin proxy premium that used to drive MSTR's outperformance. In other words, it doesn't really matter what Bitcoin is doing and whether it's rediscovering all-time highs or not, if the MNAV is compressing like this.
But why is the MNAV compressing? Well, there are a couple of schools of thought floating around at the moment. One camp points to the slow adoption of MicroStrategy's preferred share instruments like STRF and STRC, which are designed to generate Bitcoin yield for the company without relying on common stock ATMs or at-the-market offerings. And these instruments are still relatively unproven, and some argue that they're unsustainable. But whether they are or whether that's just total nonsense, it could be putting pressure on the MNAV premium regardless.
Then there's also talk about the broader credit markets combined with a lack of demand from institutional whales that's effectively calling the bluff on MSTR's leverage model. With fewer big players willing to step in and tighter conditions in the credit markets, the pressure on the stock has increased significantly, which in turn is just pushing the MNAV lower and adding to investor skepticism about the premium the market is willing to pay for MSTR's Bitcoin strategy.
And finally, another potential major factor is the market's perception of where we are in the Bitcoin cycle. Because as we know, MSTR stock price is inherently dependent on Bitcoin. Some believe we're approaching the maturity phase of the bull market, or worse, that a bare market is just around the corner or playing out as we speak. So if investors expect Bitcoin's price to drop in the next year, why would they pay a premium for MSTR's Bitcoin exposure? The MNAV, which is essentially the ultimate sentiment indicator for MicroStrategy, reflects this fear of a cycle peak or an impending bare market. And it's been absolutely crushed as a result. And when expectations are weak due to these fears, the MNAV naturally suffers quite dramatically.
But here's the million-dollar question. Is the low MNAV a buying opportunity of a lifetime, as some of the bulls are calling it, or is it a warning sign of a major downturn? Well, let's break it down by looking at the technicals and exploring both the bearish and the bullish scenarios.
Now, in my previous video, I mentioned that the $280 mark was my bullish line in the sand for MSTR. That was the price level where, if broken, I'd have to rethink my short-term bullish thesis on the stock. And we're trading comfortably below that level right now, sitting at around $240 at the time of recording. And right now, there are some very compelling signals suggesting that caution is potentially warranted.
So, let's start with my monthly versus yearly moving average cloud, which is my go-to macro indicator for determining whether an asset is in a bull or a bare market. And this cloud compares the monthly moving average to the yearly moving average. And it gives us a clear visual long-term trend. And right now, the monthly line is rolling over rapidly. And if this price action continues, the cloud will flip red within a few weeks.
Now, we only have one other cycle to compare this to, but the last time this cloud turned red, it confirmed the start of the bare market for MSTR. And the price action that followed was brutal. And from the moment the cloud flipped red to the bare market bottom, MSTR's price dropped over 74%. So, if we applied a similar correction from today's levels at $240, we're talking about a potential bare market bottom at around $62, which is nearly a 4x drop from the current levels we're at now. Now, I'm not saying this is guaranteed to happen, but history suggests that cutting losses when the cloud turns red has been a prudent move, and this is a signal that we certainly can't ignore.
Next, let's dive a little bit deeper with my momentum coalescence indicator. And this is a custom tool that I've developed that fuses multiple momentum sources such as price acceleration, trend persistence, volume pressure, and volatility bias into a single unified score. And the idea is simple. Unlike standalone momentum indicators which can be noisy and give conflicting signals, this one cuts through the clutter by identifying moments when all of these forces align in the same direction. And when the coalescence line swings decisively positive or negative, it's a reliable signal that a powerful macro move is probably around the corner.
And looking at its current readings, all of the underlying factors, as you can see in the table, are trending heavily negative. And the metric's interpretation of the market here is simple: momentum is converging and it's bearish. In fact, this downward spike is the largest we've seen since the start of the previous bare market. And even compared to other dips in this cycle, the size of this downside swing is unprecedented, and it makes it a strong warning sign of potential trouble ahead.
And finally, on the technical front, let's look at my alpha flow indicator, which is another custom tool I've developed to catch these macro trend switches early. And this indicator works by tracking when the price convincingly breaks above or below its volatility-adjusted bands, triggering a clear bull or bear signal right at the precise moment momentum begins to shift. And historically, the alpha flow has been incredibly reliable for calling both bull and bear market trends. And not just for Bitcoin, but also for MSTR. And right now, for the first time in this cycle, it's flashing a bearish signal. And despite all the volatility and multiple dips we've seen in MSTR over the past year, this is the first time that Alpha has genuinely printed a bare market alert. And that is significant because it signals that the market forces are aligning in a way that we haven't seen in this cycle yet. And this isn't just a minor blip of noise. It's a natural technical warning that sentiment could be shifting more broadly, and it's definitely not something we can just brush off either.
So, if we are heading into a bare market with MSTR, what can we expect? Well, the answer heavily depends on two factors: Bitcoin's price action and MSTR's MNAV. Let's start with Bitcoin. And let's just remember the current bull market shapes the following bare market. So, if Bitcoin enters a bare market from here, it's worth noting that we haven't seen a typical blow-off top that usually marks the end of a bull cycle. And historically, those blow-off tops have always been followed by drawdowns of 70% or more from the all-time high. But without that euphoric top, I believe the downside for Bitcoin might be more limited, say to a maximum of a 50% drawdown. And as I mentioned in a previous video, I don't think Bitcoin will ever drop below $50,000 again. And I'll link that video in the description for those of you who want to dive into that reasoning after this video.
So, for the sake of this bearish scenario, let's assume that Bitcoin drops 50% from its all-time high of $126,000, putting it around $63,000. Now, we've got to factor in MSTR's MNAV. During the last bare market, the MNAV compressed below one for quite a period. So if we assume a similar compression in a bearish scenario, say MNAV drops to between 0.7 and 0.8, and plug these numbers into our calculator, we're looking at an MSTR stock price between $95 to $101, assuming that they continue to accumulate more Sats and dilute more shares during that period. And that's a 60% drop in fiat terms from current levels, which is less severe than the 74% correction we modeled earlier using the moving average cloud. But either way, it's clear that if Bitcoin enters a bare market from here, MSTR is almost certainly going to underperform, and potentially by a significant margin.
Now, let's flip the script and explore the bullish case. We always need to consider both sides of the coin because despite the MNAV compression and these bearish technical signals, MSTR's price action is still heavily tied to Bitcoin's. So, if you're a macro Bitcoin bull and believe the bull cycle will extend into 2026, then there's a compelling case for MSTR to rebound and rebound hard.
Now, let's start with my 155-day VWAP and cost bands indicator, which is basically my take on the short-term holder realized price, but for MSTR. And in Bitcoin terms, short-term holders are defined as those holding their coins for less than 155 days. And their realized price is a fantastic way to model local price action and sentiment. And right now, MSTR's 155-day VWAP is sitting at $351. And when we layer in the cost bands, we can see that the stock is currently in what I would call the best buying opportunity zone of the bull cycle. So, if you're bullish on MSTR and believe the Bitcoin bull market will continue into 2026, then this is the kind of risk-reward setup that you could only dream about and is certainly where you'd consider accumulating.
Now, the overstretched cost band targets, which represent the potential upside in a major bullish impulse, are currently ranging between $630 and $770 at the moment. Although these are moving targets, and that is a massive potential upside return from the current price of $240.
Now, let's revisit MNAV, but in a bullish context. Right now, it's compressed to near one, which, as we discussed in a bearish scenario, could drop even further. But if you're a macro bull, you're likely betting on the MNAV expanding back to the historical norm of around two, which is where it's traded at for much of MSTR's history as a Bitcoin proxy. And in a really bullish scenario, like the sentiment peak we saw back in November of last year, the MNAV could climb back to say the 3.8x level. And this isn't totally off the cards because we saw this just less than 12 months ago.
So, crunching some of these numbers, if Bitcoin breaks its all-time high and reaches, say, $130,000, and we model these MNAV scenarios, MSTR's stock price could range from between $550 to $1,500. And that's a 2x to 4x return from current levels, which is why so many bulls are still excited about MSTR, even in the short to medium term. And even with an extremely modest Bitcoin bull market top of $130,000, the range of outcomes for MSTR is absolutely wild. And it all boils down to the MNAV expansion, or let's call it, in its real term, market sentiment.
So, putting my bullish hat on, if MNAV is trading near one like it is right now, the downside risk feels pretty limited, but the upside potential is enormous. And that's the bull case in a nutshell, and it's why so many people are remaining positive. The upside is huge if the macro environment supports it.
Now for my personal take and to show exactly what I'm doing with my own MSTR position, I'm sharing all these details in my Substack newsletter. I've made quite a few adjustments to my portfolio based on this data. And in my newsletter, I walk you through the exact strategy and my current thinking. And you can find the link to that newsletter in the description below, and I highly recommend checking it out if you want to see exactly how I'm navigating this market right now.
So, to wrap things up, the first thing to really keep in mind is how much MSTR has underperformed relative to Bitcoin and how telling the MNAV compression has really been. Even though the company is still steadily accumulating Bitcoin and executing its strategy to a tee, over the past year, it's lost nearly 60% in Bitcoin-denominated terms. And that's a huge drop. And with the MNAV falling from 3.89x all the way down to 1.17x, it really shows how cautious the market is feeling about the stock right now. It's basically the ultimate snapshot of sentiment. Investors are worried about the potential top being in, and they aren't willing to pay the premium they once did for MSTR as a Bitcoin proxy. And that's something we simply can't ignore.
And at the same time, my technical indicators are flashing some serious warning signs for the first time this cycle. The monthly versus yearly moving average cloud is rolling over and almost turning red. The momentum coalescence is at its sharpest negative spike since the start of the last bare market. And the alpha flow just printed a bearish signal for the first time this cycle. So taken together, these indicators suggest that we could be at the start of a much more significant pullback. It's not a guarantee, of course, but the alignment of these signals is a pretty strong cautionary flag that this isn't just a normal dip. It could be the start of the potential bare phase for the stock, at least for the medium-term.
And finally, the data is not all doom and gloom out there. The bullish case, while psychologically hard for most people to think about in downturns like this, is still a very real possibility. And it's always important to balance your view and not be set in stone with just one viewpoint. If Bitcoin continues to rise and the MNAV starts expanding back even towards historical norms, the upside for MSTR is bloody enormous. We could realistically see the stock trade anywhere between $550 to over $1,000 in a mildly bullish scenario, which just shows how asymmetric the risk-reward can be if you're willing to take on the potential downside risk of a 60 to 70% decline. And this is why the upside is so explosive for this stock because the range of outcomes are just tremendous.
So at the end of the day, MSTR is a stock where both caution and opportunity can coexist, and it firmly depends on which camp you fall into and your own investing time horizon. And only you can make that decision. But for those of you curious about what I'm doing with my own position, I've laid it all out in my Substack newsletter, including the portfolio changes I've made based on this data. So, I hope you find this information useful today, and I hope it's helped you put the market into perspective and given you some realistic expectations to both sides of the coin. Ultimately, you've got to make your own strategy fit your own risk appetite and not follow what others do blindly. If you have a 10 to 20-year time horizon, who really cares what happens over the next few months? But if you're a tactical investor that tries to maximize every cycle, there is lots to consider here.
So, drop a comment with your thoughts below. Are you bullish or bearish on MSTR? And what's your take on the MNAV compression? I'd love to hear all your guys' thoughts. But until then, I'll catch you all in the next one.