Reflections on Those MSTR Bitcoin ‘Earnings’

MSTR earnings got here out May 1. My morning media stops final Thursday (right here and right here) requested for a preview. We do not discuss shares, so I deliberate to zoom out and hit themes. While making ready, I needed to suppress the eye-roll reflexes that MSTR triggers.

MSTR, in fact, is the ticker image for MicroStrategy, or Strategy, as the corporate is now recognized. Strategy, fronted by Michael Saylor, pioneered the “bitcoin treasury” mannequin that’s now been copied by Metaplanet and dozens of different firms. Strategy plans to lift $84 billion, in line with its most up-to-date announcement, throughout fairness and glued earnings devices.

Here are three questions:

1. Earnings?
MSTR “earnings” and “price targets” are… Well, they do not actually imply the identical factor, particularly as soon as the impact of ASC 2023-08 is backed out. It’s simply the worth of bitcoin and financing, plain and easy. Wall Street analysts and pundits ought to get that proper.

2. Strategy?
You cannot simply say, “Strategy.” You need to say, “Strategy; you know, it used to be Microstrategy.” Like Prince, Puff Daddy, Kanye West and Twitter. NB: of us say “strategy” (small “s”) lots already.

3. Don’t be a hater?
MSTR helps a market cap of $107b with bitcoin holdings of $53b and laser-eyed goodwill. No lifeboat, no parachute, no obvious Plan B. If it fails, the bitcoin market might take the blame.

Those eye-rollers (and a few obsequious media protection) however, we will agree that:

– The capital raises are really superior. The pressure is robust on this one.

– MSTR is up 36% on the 12 months, in comparison with lower than 5% for bitcoin. Who am I to throw stones?

– MSTR cleverly makes use of inventory value volatility as a function, not a bug, for 1) issuing mouth-watering converts, 2) attracting listed choices quantity, and three) company “yield” methods. (Just please cease calling option-selling a “yield strategy.” And I stated “strategy” once more. Small “s”.)

– The preferreds (STRK and STRF) hit the mark with some of us who like preferreds. Some of my preferreds pals are smitten.

MSTR created a motion

Strategy (large “S”) has not solely created a motion, however a class. Levered MSTR ETFs (together with this new one which pays “income”) serve the marketplace for whom MSTR’s 70 vol is boring. Grayscale introduced an ETF that tracks 30 firms that maintain a minimum of 100 bitcoin.

Last, however not least, Cantor Equity Partners, a SPAC, is merging to kind Twenty One Capital, which can maintain $3 billion of bitcoin. Mention this development in a room filled with pundits and so they’ll yell “Gamestop!” in unison. It’s enjoyable.

This is all tremendous. Adding bitcoin to the treasury of non-crypto firms* is an fascinating development. (And that doesn’t embody crypto-native firms, like CoinDesk’s guardian firm, Bullish.)

But it is solely bitcoin in the mean time.

US (bitcoin) exceptionalism

Despite the loosening of U.S. regulatory zip-ties on digital belongings and the latest flurry of ETF filings, bitcoin nonetheless dominates the dialog (it nonetheless accounts for about two-thirds of the full cryptocurrency market).

Again, that is tremendous if we’re speaking a few store-of-value asset contributing to a company treasury in any other case allotted to money and treasuries. However, the rising variety of flavors of bitcoin exposure–leverage, yield, optionality, protection–are taking the place of schooling about what different blockchain belongings hope to ship, and why you will need to spend extra time fascinated by the asset class.

Until just lately, that was fruitless for a lot of buyers and advisors, since brokerage- or futures- account implementation was not out there. (Of course, it has been for ETH, however you want greater than ETH to consider the “digital asset class.” Lack of enthusiasm for ETH funding automobiles, we imagine, has struggled partly because of this.)

If 2024 was bitcoin’s “coming out” 12 months, we hope that 2025 provides buyers and merchants alternatives to suppose deeper and extra broadly, and to implement accordingly. If not, the U.S. crypto investing narrative will begin to sound like a “bitcoin maxi,” and that seems like leaving cash on the desk.