Gladiator is Not Ballistic Enough (about MSTR)!
Gladiator gets a ton of flack for continually bull-posting about MSTR on X. But as you’ll see, his simple model is not too bad. In fact, Gladiator might not be ballistic enough about MSTR!
Breaking Down Gladiator’s Model
I haven’t seen it written up formally, but Gladiator’s basic premise is that ‘every time BTC doubles, MSTR 4x’s’.
The simplest way to model this belief about MSTR is with a power law (MSTR=k⋅BTC2). With an R2 of 0.95, Gladiator’s model aligns pretty well with the data. MSTR quadrupling every time BTC doubles is a pretty good rule of thumb!
Taking Gladiator’s Model to the Next Level
We can optimise the coefficients and use a second-order polynomial to increase accuracy and get an even better fit.
· With this optimisation, optimised power law regression's (red line) R2 jumps to 0.962.
· The second-order polynomial regression's (blue line) R2 is even more accurate and bullish.
Why Gladiator is Not Ballistic Enough
For comparison, the chart below shows my favourite, the Ballistic Acceleration Model, a second-order polynormal regression in the log-log space.
Comparing the performance metrics for each regression, we see that the Ballistic Acceleration Model (a second-order polynomial in the log-log space) is a significantly better fit to the current MSTR data than the other models.
Transforming the data to the log-log scale is super helpful when the data changes over multiple orders of magnitude. The chart below shows all three optimised models in the log-log space.
· The first thing to notice is that the log-log polynomial (green line) matches the data much better in the bottom left of the chart.
· The simple polynomial (blue line) has a crazy kick-up, and the power law (red line) completely misses the data.
· The other thing to note in the top right of the chart is that when we extend all models to BTC = $150k, the more accurate Ballistic Acceleration Model is even more bullish!
· Overall, the ballistic model does a much better job of capturing the impact of MicroStrategy’s exponentially growing Bitcoin stack, which causes it to accelerate ahead of BTC!
Of course, the ballistic model, like all models, is subject to uncertainty. We can't predict its accuracy, only that it will be wrong in some direction.
BTC at $1m in 2025: Bold Prediction or Wishful Thinking?
So, while the ballistic model is even more bullish than Gladiator's, I’m sceptical of Gladiator’s belief that BSTC will hit $1m in 2025, which would require an unprecedented CAGR of 1000% p.a.!
I am more confident in the power law regression when predicting BTC's long-term trajectory.
My BTC model shows that IF the BTC cycles repeat, we could hit $265k at the 99th percentile quantile.
But that’s a BIG IF! There is no guarantee that the halving cycles will repeat like last time.
There are many targets out there, but the ones filled with the most hopium seem to get the most clicks and shares.
Sure, there is much bullish excitement around a Strategic Bitcoin Reserve, nation-state adoption, and TradFi porting more funds to BTC after 20 January.
If everyone starts HOLDing their Bitcoin and never wants to cash it, there could be a Bitcoin supply shock in a year or two.
There could also be an increase in global liquidity if the US lowers interest rates and prints money to fund the rebuilding of California and refinances the debt to finance the Ukraine war.
However, I’m also conscious that previous BTC bull runs have aligned with spikes in global liquidity (M2), which hasn’t moved much since after COVID-19.
The new US Department of Government Efficiency will look for every opportunity to cut government expenditures to avoid increasing US debt. So, I’m not banking on imminent hyperinflation to drive up the price of BTC.
There’s even still a possibility that the Republicans plan to celebrate the inauguration by dumping the $18b worth of BTC seized from the Silk Road.
It’s fun to dream of what could happen if Bitcoin rips, but it's crucial to maintain a balanced approach to investing. Too much optimism could lead to overleveraging and significant losses. Fear and greed are natural, but it’s ideal to be stoic and prepare for any possibility.
This doesn’t mean you should switch from BTC back to equities. As shown in the chart below, the S&P is also substantially extended above the levels supported by the currently available money in the system (i.e. global liquidity/M2).
We’re certainly living in ‘interesting times’ on the macroeconomic stage.
MSTR’s Path Forward: A Volatile Journey
While it’s impossible to predict Bitcoin's short-term direction, the good news is that MSTR profits from its moves in both directions. Volatility is vitality.
Our model suggests that MSTR seems poised to pull out of its recent pullback since 21 November. If the Bitcoin cycle repeats or the US launches a Strategic Bitcoin Reserve, we’re set for an exciting start to 2025.
What’s Your Call?
One thing’s for sure: the future will be a wild ride.
What are your thoughts?
Are Gladiator’s predictions too tame? Is the ballistic model too bold? Or do you have a game-changing take of your own?
Drop your thoughts in the comments!