Thursday links: Treasury companies and dinner without Trump
The post Thursday links: Treasury companies and dinner without Trump appeared on BitcoinEthereumNews.com. This is a segment from The Breakdown newsletter. To read full editions, subscribe. “A chain is no stronger than its weakest link, and life is after all a chain.” — William James The investment case for bitcoin treasury companies can be confusing, so VanEck has done us a service by writing the definitive explainer on the various ways to invest in Strategy (MSTR, STRF, converts). The main vehicle, MSTR, is generally viewed as a leveraged bet on bitcoin, but VanEck details why that’s not exactly correct. Instead, MSTR is a “convexity” bet on the price of bitcoin — because investors are not just exposed to BTC, but to an “increasing BTC position as the price of BTC increases.” I wonder how many MSTR holders realize that’s the bet they’re making. VanEck is unusually brave about putting price targets on crypto assets, but it declined to do so here and it’s easy to see why: MSTR’s value is driven by the “circular relationship between Strategy’s Premium and its ability to finance more BTC purchases.” Circular logic doesn’t work well in valuation models, so that should be a red flag to anyone who thinks valuation matters. MSTR’s raison d’être is to increase its “bitcoin per share” and the primary way it does that is to sell shares above NAV. So MSTR’s value is ultimately a function of the valuation that investors assign it. The result is that MSTR investors are “buying an option on the continued existence of The Premium.” VanEck’s capitalization of “The Premium” seems to reflect how central it is to the Strategy investment case, which Michael Saylor acknowledges. But Saylor believes The Premium can persist — Strategy, he says, is a “crypto reactor that can run for a long, long period of time.” But you can’t model a crypto reactor…
The post Thursday links: Treasury companies and dinner without Trump appeared on BitcoinEthereumNews.com.
This is a segment from The Breakdown newsletter. To read full editions, subscribe. “A chain is no stronger than its weakest link, and life is after all a chain.” — William James The investment case for bitcoin treasury companies can be confusing, so VanEck has done us a service by writing the definitive explainer on the various ways to invest in Strategy (MSTR, STRF, converts). The main vehicle, MSTR, is generally viewed as a leveraged bet on bitcoin, but VanEck details why that’s not exactly correct. Instead, MSTR is a “convexity” bet on the price of bitcoin — because investors are not just exposed to BTC, but to an “increasing BTC position as the price of BTC increases.” I wonder how many MSTR holders realize that’s the bet they’re making. VanEck is unusually brave about putting price targets on crypto assets, but it declined to do so here and it’s easy to see why: MSTR’s value is driven by the “circular relationship between Strategy’s Premium and its ability to finance more BTC purchases.” Circular logic doesn’t work well in valuation models, so that should be a red flag to anyone who thinks valuation matters. MSTR’s raison d’être is to increase its “bitcoin per share” and the primary way it does that is to sell shares above NAV. So MSTR’s value is ultimately a function of the valuation that investors assign it. The result is that MSTR investors are “buying an option on the continued existence of The Premium.” VanEck’s capitalization of “The Premium” seems to reflect how central it is to the Strategy investment case, which Michael Saylor acknowledges. But Saylor believes The Premium can persist — Strategy, he says, is a “crypto reactor that can run for a long, long period of time.” But you can’t model a crypto reactor…
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