This Is Why MicroStrategy Moves So Much More Than Bitcoin
MicroStrategy Incorporated (MSTR) now owns 331,200 Bitcoin, roughly valued at $31 billion as of November 20th, 2024.
MicroStrategy (MSTR) often moves more than Bitcoin due to a few key reasons:
- Leverage: MicroStrategy has taken on significant debt to purchase Bitcoin. This leverage amplifies both gains and losses. When Bitcoin's price rises, MSTR's gains are magnified, and when Bitcoin falls, its losses are also greater.
- Liquidity: MSTR has a smaller market capitalization and lower trading volume than Bitcoin. This lower liquidity means that larger buy or sell orders can have a more significant impact on the price of MSTR compared to the impact on Bitcoin's price.
- Investor Sentiment: MSTR is seen as a proxy for Bitcoin, but it also carries its own company-specific risks. Shifts in investor sentiment towards MicroStrategy's business strategy, financial health, or the overall market can lead to larger price swings in MSTR than in Bitcoin.
- Short Selling: MSTR may be subject to more short selling than Bitcoin. Short sellers borrow shares and immediately sell them, hoping to buy them back later at a lower price. Increased short selling pressure can contribute to larger downward moves in MSTR's price.
In essence, MicroStrategy's leveraged Bitcoin holdings, lower liquidity, and unique risk profile make it more volatile than Bitcoin itself. This higher volatility can be attractive to some investors seeking greater potential returns, but it also comes with increased risk.
