MicroStrategy & Bitcoin in 2025: The Next Big Move

MicroStrategy & Bitcoin in 2025: The Next Big Move

2024 was the year I fell down the Bitcoin rabbit hole. 

I’d previously dismissed it as volatile and speculative after the FTX collapse. But after watching RFK Jr.’s speech at the Nashville Bitcoin Conference, it all made sense. 

I understood that Bitcoin was not just another cryptocurrency but the inevitable future of capital preservation. It would make money fair by providing fundamental property rights to the poorest people whose money is melting faster than most. This would make it impossible to wage needless wars with unlimited borrowed money, driving up the cost of living and stealing from future generations.

After reading The Bitcoin Standard and The Fiat Standard, I realised that my savings from my engineering career were not growing; they were melting as the banking system created more money.  The more I studied, the more I realised it was inevitable. 

In this article, I want to summarise what I’ve learned from analysing Bitcoin's momentum (and, subsequently, MSTR) and highlight where we’re headed in 2025.  

I thought Bitcoin was the future, but it’s volatile.  Sure, Bitcoin has gone up a lot over the last 15 years, but would it continue, and how could I navigate those nasty drawdowns? 

After a few weeks of digging into Bitcoin, I stumbled across Giovani Santostasi and Stephen Perrenod, two PhD astrophysicists, talking about the Bitcoin power law.

While the power law sounds mysterious, it’s not a “law” written in stone. It’s a mathematical concept that helps us understand trends in many orders of magnitude (e.g., bitcoin going from USD0.05 to 100k over 15 years).  The internet, viruses and many other things in nature follow a power-law growth curve. 

While there is plenty of FUD about Bitcoin going to zero, as well as hopium pushers talking about a “phase shift” and omega candles that will take Bitcoin to $1m next week, plotting Bitcoin’s price or market cap on a log-log scale bring some sanity to the emotional extremes. 

But the cool thing about the “power law” is that it adapts to recent price data like a flashlight in the dark to give us a more accurate picture of where it’s going in the next few years. 

The Adaptive Powerlaw

As shown in the chart below, with increasing R2 over the past 6 years, the strength of this power-law relationship has only strengthened over time. 

Importantly, the gradient of the power law also adapts to more recent price data, giving us a refined understanding of where bitcoin might go in the coming months and years. 

Notice how the gradient has steepened through 2024 as the Bitcoin price growth accelerated after the ETFs' approval earlier in the year and then again after the US election. 

Rethinking Bitcoin’s Birthday for Better Predictions

While most people take Day 0 as the date of the genesis block, optimising Day 0 can improve the regression fit. 

While the first Bitcoin block was mined on 3 January 2009, the first financial transaction wasn’t until May 22 2009 (Pizza Day), and it didn’t become a meaningful store of value until much later.

As shown in the chart below, assuming a Day 0 of 26 October 2009 optimises R2 and AIC.  Remaining flexible on the start date for our modelling improves accuracy for future modelling. 

Setting Boundaries: Quantiles to Keep Bitcoin Predictions on Track

The power law regression analysis also gives us clear guardrails (quantiles) for how high or low the price may go.

While price oscillates wildly within these guardrails, it’s statistically unlikely that we’ll see the Bitcoin price spike above or below these lines. Any time we get a massive run-up, the long-term momentum tends to pull the price back to the long-term trend. 

Riding the Wave: How Halving Cycles Shape Bitcoin

Oh, and Bitcoin has seen some crazy bubbles and crashes in the past around the approximately four-year halving cycle. If we continue these cycles forward, we get the green line in the market cap chart above. 

The chart below shows what prices will look like if these cycles continue. While we can’t know the future, Bitcoin may reach $342k in October this year if cycles repeat. 

While some people on X are forecasting a massive supply shock and price spike if/when the US adopts a Strategic Bitcoin Reserve and other nations continue to buy Bitcoin to preserve their wealth, the mathematical reality is that we need major companies and countries to buy into Bitcoin for it to continue the log-log power law trend. 

While the prospect of $340k bitcoin in 10 months is exciting (400% CAGR), I’d prefer a slower grind-up with the power law trend adjusting without the fear-driven plunge after the FOMO spike. 

With the vast majority of the ultimate 21m bitcoin supply already mined, many believe that the halving cycles will play less of a role in the future, particularly with companies and countries buying the tops and every dip.  Global liquidity will likely play a larger role in future cycles.  Eventually, however, once Bitcoin consumes enough of the world’s capital, there may be nowhere safer to run to avoid future downturns. 

Regardless of how things play out, 2025 will be a big year for Bitcoin. 

We’re still early! 

MSTR’s Bold Moves: Building the Future on Bitcoin

Next, let’s look at MicroStrategy, which has been building on a Bitcoin treasury since 2020. Similar to BTC, it has phenomenal returns but is volatile and misunderstood. 

How MSTR’s Aggressive Bitcoin Strategy Outpaces BTC

Because it’s so poorly understood, there is plenty of hopium and FUD around MSTR.  No one understands how to value a Bitcoin treasury company stacking Bitcoin exponentially. 

But again, the log-log power plot gives us some insights. 

Because MSTR is aggressively increasing its bitcoin per share (i.e., bitcoin yield), MSTR's price accelerates faster than Bitcoin's. Notice on the plot of log BTC vs. log MSTR price (since July 2022) that the best fit is a second-order polynomial.

With this understanding of the relationship between BTC price and MSTR, we can model where the MSTR price might go if Bitcoin continues as it has in previous cycles. The chart below shows that the MSTR price and the model match quite nicely. 

The model also indicates that the MSTR price will get pretty crazy later next year, peaking at around $22k as BTC rips to $340k.

What’s MSTR Worth?  The Fair Value Model

But, beyond the simple relationship between BTC and MSTR price, we can dig another layer deeper to examine what MSTR is trying to do—build BTC Per Share with a laser focus on BTC Yield.  The more BTC they can pack into each share of MSTR, the more the value of MSTR will increase as BTC rises. 

The chart below shows BTC Value Per Share (i.e. BTC per share x BTC price) vs MSTR price.  Because the Bitcoin Yield is accounted for separately, this relationship is linear.  You can think of this as a more refined version of the mNAV relationship on a log-log scale.

BTC Yield: How MicroStrategy Maximizes Shareholder Value

The chart below shows MSTR’s BTC per diluted share since they started their BTC treasury operations in August 2000.

Initially, they simply recycled profits from the software business into BTC. But everything changed in August 2024 when they realised they could sell shares at the market (ATM) to raise money to buy more Bitcoin and increase the BTC Yield (i.e. the cumulative change in BTC per share).  Notice the step change in BTC per share since August 2024! 

To the right of the red line (today’s date) is the projected BTC Yield required to keep up with the Ballistic Acceleration Model.  It’s still early days, but we can see that they’ve been stacking stats super aggressively since November 2024, with weekly announcements of more Bitcoin buys.   

While their official target BTC long-term BTC Yield is 6-10% (according to their Q3 earnings call), the model fit to match the ballistic growth is 0.43% per day (i.e. 3.1% per week or 386% per year)!

It’s still early days, and the recent drop in share price has slowed ATM sales to raise capital to stack Bitcoin.  However, the focus on convertible bonds will likely ramp up in 2025, with companies like Strive lining up to market their Bitcoin bonds to the retail market. 

Using the BTC per share trajectory and the forecast BTC price, we can map out the future MSTR price.  I’ve called this the MSTR Fair Value Model, shown in the chart below (blue line), along with the Ballistic Acceleration Model (green line). 

While we can calculate the theoretical model price, markets are driven by fear and greed, so they don’t nearly follow fair value. 

Like the quantiles on the power law Bitcoin model, I’ve shown ranges for the fair value model.  When the market is greedy and has FOMO, MSTR’s price pushes along the 95th percentile red dotted line.  However, when there is confusion and uncertainty, it drops to the 5th percentile lower boundary. 

I’ve created oscillators for the ballistic acceleration and fair value models in the chart below. If I had to pick one, I would use the fair value model oscillator (blue line) to indicate when we’re overbought vs. oversold based on the value of the bitcoin per share.  As at the time of writing (2 January 2025), the fair value oscillator is down to 7%. 

The last time we saw the oscillator this low was in January 2024, when the Bitcoin ETFs were announced. Everyone dropped MSTR, thinking it was dead. 

However, shortly afterwards, once the options traders pivoted from the miners to MSTR for the volatility, the price of MSTR jumped from $43 to $200 in late March 2024, back up to the top of the fair value range. 

Current MSTR Setup

As we kick off 2025, we have a very interesting MSTR setup; after coming off the 21 November highs, we’re at the lower end of the fair value range. Trading volume and bitcoin price are down, with everyone de-risking before the holiday break and traders harvesting their end-of-year tax losses.  But Bitcoin will undoubtedly come to life again once everyone returns to work. 

Interestingly, there has been talk of market makers trying to suppress MSTR prices until the historic 17 January 2025 options expiry to minimise their losses due to the massive run-up in MSTR to date.  The lowest point on the 5th percentile ‘guardrail’ is $259 on 7 January 2025. 

However, on 21 January 2025, after the inauguration and the US public holiday (Martin Luther King Day), the options market makers will likely need to buy many MSTR shares to make good on the options trades. 

This is also about when MSTR will likely start their blackout period when they can’t sell shares ATM before the next earnings call.  While the earnings call date hasn’t been announced, it’ll likely be 4 or 9 February 2025). 

If all the shorts also need to be covered when people start getting more excited about a possible US Strategic Bitcoin Reserve, we could see another explosive move from up to the upper end of the fair value range at around $1000. 

This would be the perfect time for MSTR to hammer the ATM again to bring the mNAV back down and increase BTC Yield exponentially, but Saylor has hinted that he would like to focus more on the convertible debt to raise funds and let the equity price run to benefit loyal shareholders.

Wrapping It Up: Key Takeaways for Bitcoin and MSTR in 2025

We’ll refine the models and provide updates as we get more data. But if historical trends continue, MSTR’s ascent, riding on the back of the Bitcoin bull, will be unprecedented. It’s also sure to be a bumpy ride.

MSTR is a long-term play for those who believe in Bitcoin and trust in Saylor’s engineering of the financial markets. Volatility is a feature, not a bug. 

This is not financial advice; it is just my musings as an engineer trying to understand Saylor’s unprecedented financial engineering Godzilla model.  It’ll be interesting to revisit this in 12 months to see how my model is. 

Let me know in the comment below what you think the trajectory of BTC and MSTR and if you would like to see regular updates of these models as 2025 unfolds.