For the first time in its history, MicroStrategy (MSTR) is witnessing a separation of its stock price from Bitcoin's performance.
These changes occur amid the growth of Bitcoin (BTC) agent games, with MicroStrategy, now Strategy, being the largest holder of the leading digital currency.
Separation of MicroStrategy's premium from Bitcoin
This separation raises questions about the sustainability of Michael Saylor's financial model. Additional concerns include whether new entrants to the digital treasury (DAT) market undermine the company's unique role as Wall Street's gateway to Bitcoin.
Later, MicroStrategy relies on a simple reflexive mechanism to buy Bitcoin in large quantities. When its stock trades at a premium to net asset value (mNAV), it can issue shares, raise cash, and buy BTC cumulatively.
This financial chemistry has been the cornerstone of Saylor's strategy since 2020.
However, according to researcher Joseph Ayoub, the emergence of multiple DATs weakens that feedback loop.
Ayoub wrote, "For the first time in its history, it seems that the discount closely tied to Bitcoin's price has decoupled... perhaps as a result of the launch of other DATs in the market... I don't see this premium returning significantly again."
If true, this would be a critical turning point as MicroStrategy's ability to finance new Bitcoin purchases through equity issuance may be permanently damaged.
DATs are equity companies that sell shares to buy digital assets. Since 2020, the digital treasury model has grown from about $10 billion in NAV to over $100 billion.
In comparison, Bitcoin exchange-traded funds (ETFs) now represent around $150 billion. DATs attract investors because they offer stock exposure to digital assets, often at substantial premiums.
He describes them as modern closed-end funds. Unlike ETFs, most DATs cannot redeem shares for the underlying assets. This leaves the valuation tied to market sentiment rather than direct redemption mechanisms.
This dynamic recalls the Grayscale Bitcoin Trust (GBTC), which traded at massive premiums before collapsing to a 50% discount during the bear market in 2022.
Nick Carter of Castle Island Ventures notes the historical parallels. Citing a post from Be Water, he compared today's DAT boom to the investment trust craze of the 1920s, pointing to many similarities.
Risks are increasing for Saylor's MicroStrategy.
The decline in the premium comes as Saylor faces increasing scrutiny over MicroStrategy's concentrated exposure to Bitcoin. As BeInCrypto previously reported, some investors see the recent update as exacerbating Bitcoin's volatility. This exposes shareholders to risks more akin to leveraged ETFs than a traditional software company.
If MSTR continues to trade at a discount, several consequences may follow. Shareholder lawsuits may demand refunds closer to NAV.
Regulators may reclassify MicroStrategy as an investment company by invoking precedents like Tonopah Mining in the '40s and the GBTC case in 2021. Such a move would impose stricter rules or force structural changes.
In this context, Ayoub warns that equity-funded Bitcoin treasuries have a saturation point.
Ayoub wrote, "Once there is enough supply to absorb the artificial and immature demand for DAT, the collapse will begin... that's not too far off in the future."
Data on Bitcoin treasuries shows that MicroStrategy owns nearly 630,000 BTC with manageable debt levels.
However, the decoupling of its premium may indicate that its previous virtuous cycle is unraveling.
If so, the company that turned its Bitcoin corporate strategy into financial chemistry may face its toughest test yet from the erosion of its unique advantage rather than a bear market.
