oinonen_t2025-02-24

The Pro-Cyclical MSTR

[MSTR adds 20,356 bitcoins to its Balance Sheet] Profiled as the de facto leading Bitcoin institution, Strategy (MSTR, formerly MicroStrategy) employs a dollar-cost averaging (DCA) method in its purchases, but has a tendency to cyclically weight its purchase program. The company's balance sheet has now reached 499,096 bitcoins. Aggregated with broader institutional demand, one could argue that bitcoin, at its current spot level, is undervalued. In the current market environment, MSTR's purchase program can be seen as a leading indicator to the underlying asset. [Pro-Cyclicality] MSTR’s bitcoin strategy consists of aggressive acquisitions, often funded through equity sales and debt offerings, especially during periods of heightened market enthusiasm. For instance, in late 2024 and early 2025, the company ramped up purchases as the spot price surged past $100,000, coinciding with a post-election rally and a crypto-friendly political climate in the U.S. This pattern indicates a tendency to buy heavily when bitcoin’s price and market sentiment are strong, which aligns with pro-cyclical behavior. Summary: As long as MSTR's pro-cyclical purchases continue, bitcoin's outlook remains positive. [Institutional Bitcoin] Inspired by MSTR’s success story, other companies are following its modus operandi. The Japanese Metaplanet (3350) began its bitcoin accumulation in April 2024 with an initial purchase worth $6.5 million. By today, the company has grown its balance sheet to 2,100 bitcoin units, worth $198.22 million. Although initially exploring a broader "Web3" or "crypto" pivot, Metaplanet has focused on adopting the full-scale bitcoin standard. This decision was influenced by bitcoin's perceived superiority as a currency and the desire to offer Japanese investors a tax-efficient way to gain bitcoin exposure. Metaplanet's CEO Simon Gerovich has particularly emphasized bitcoin's role as a hedge against yen (JPY) depreciation.