MSTR’s True Potential: Bitcoin Per Share Defines Future Value
MicroStrategy’s bold Bitcoin (BTC) strategy is aggressively reshaping the corporate finance and investment world.
Is a crash imminent?
Or is it going to the moon?
In MSTR: The Ballistic Acceleration Model, we examined the relationship between BTC and showed a potential trajectory that would make most bulls blush.
This article will examine MSTR’s primary key KPI, BTC Per Share, to understand how it provides even more data-driven clarity about its future.
Highlights
· The historical relationship between MSTR's price and BTC Value Per Share enables us to understand whether MSTR is overvalued or undervalued and defines a fair market price and a typical price range based on its current BTC per share.
· The only way for MSTR’s fair value price to keep up with the Ballistic Acceleration Model in the future is for MSTR to continue increasing BTC Per Share. This requires continued ATM selling, which may increase volatility and suppress its share price in the short term.
Decoding MSTR’s Valuation Through BTC Holdings
MSTR has seen stellar returns, massive retracements, and plenty of FUD (fear, uncertainty, and doubt). But, like Bitcoin, there is plenty of argument and controversy over whether it’s worth everything or nothing.
MSTR started its Bitcoin journey by converting its cash to BTC on 11 August 2020 and then borrowing to buy BTC.
But everything changed in August 2024 when they started accumulating more funds from selling their share and convertible debt to accelerate their bitcoin buying.
To reflect this pivot, MSTR’s Q3 earnings report emphasised BTC Yield and Bitcoin Per Share as its primary KPI (not share price). As you’ll see in this article, Bitcoin Per Share is important.
The chart below shows the amount of BTC per basic share (in blue) along with the BTC share price (in green), showing:
· Aggressive purchasing occurring (with borrowed money) until the end of the top of the last cycle at the end of 2021.
· In August 2024, MSTR commenced their ATM (at the market) strategy and convertible bonds, facilitating massive BTC purchases, further increasing the BTC per share. In recent months, the BTC per share has gone almost vertical.
The Meaning of Life = 42b = 21b + 21b
Saylor explained in this recent interview how they recently stumbled upon selling MSTR common shares at the market (ATM) to raise money and buy more Bitcoin. Instead of borrowing (which puts their BTC stack at risk if they default on the loan), the ATM allowed them to take $1 of fiat currency from the equity market and convert it into $2-3 worth of Bitcoin—effectively mining Bitcoin for free in modern-day alchemy (or genius financial engineering).
Their Q3 earnings report outlined a nominal timeframe of 3 years (or as the market allows) to raise $42b of capital to buy more BTC. But the market is allowing them to burn through the $42b capital-raising target much faster thanks to many tailwinds like a new administration in the US and an imminent BTC bull run!
Saylor also explained that once they chew through the $42b plan, they’ll double it, rinse and repeat. With such stellar returns, there’s no reason they can’t keep doing this until they’ve extracted a significant amount of the wealth preservation value from equities, bonds, gold, and real estate.
The BTC-MSTR Connection: Insights From Regression Models
The chart below shows the BTC value per share calculated using the daily BTC price and BTC price since the start of the MSTR Bitcoin Treasury Strategy in August 2020.
If we plot BTC value per share vs MSTR Share price, we see some correlation, but with a correlation coefficient (R2) of 0.81, it’s not great.
However, similar to our Ballistic Acceleration Model, we see a much better correlation if we plot the same data in log-log space. Similar to BTC vs. time, the relationship between BTC Value Per Share and MSTR is scale-invariant (aka power law). Hence, we get a much higher R2 of 0.957.
MSTR’s Fair Value: Decoding the Historical Relationship
This regression formula allows us to estimate MSTR’s fair value using the current BTC price and MSTR’s bitcoin per share. While it’s not a perfect fit, we’re getting closer to modelling MSTR’s actual value (or at least how the market values it, which is all that matters)!
Using this, we can create an indicator to show when MSTR is overvalued vs. undervalued based on the historical relationship between MSTR's fair value (based on BTC price and BTC per share).
The chart below shows that the price/fair value ratio is currently below 1 as Microstrategy works overtime to load up on BTC while BTC is still around $100k. They are acutely aware that stacking stats will be much more expensive once the price doubles or triples next year.
The chart also shows that the price/fair value ratio was at its lowest in January 2024, when the BTC ETF was announced. Everyone thought MSTR was done because, up until then, it had been seen as a de facto Bitcoin ETF.
To take things a step further, we can create a percentile range of the current price, ranging from 0 (underbought) to overbought (100%). Again, this oscillator shows that MSTR is currently oversold, with a current percentile rank of 25%.
While MSTR's aggressive ATM selling, shorting, and FUD have pushed the share price down over the past few weeks, it is undervalued based on this model. But if history repeats, this should bounce back quickly, especially if BTC makes a big move up now that it’s broken through the mega sellwall at $100k (for the first time, at least).
Navigating MSTR’s Price Swings: Data-Backed Trading Ranges Explained
MSTR is known to be a volatile stock, but this is by design.
Saylor knows that traders crave volatility. The more volatility he can create in the MSTR price, the more money flows from options traders and convertible bonds, eventually landing in the MSTR share price.
But what if we could calculate the likely trading range of MSTR?
The chart below shows:
· MSTR price,
· MSTR fair value,
· The Ballistic Acceleration Model estimate and
· The 5th and 95th percentile range.
Notice how the MSTR price (maroon line) sometimes drops to the 5th percentile and sometimes rises to the 95th percentile, but it stays within this range most of the time.
What’s Next for MSTR? Forecasting Its Bitcoin-Backed Future
History never repeats, but sometimes it rhymes.
As detailed in MSTR: The Ballistic Acceleration Model, I’ve used the power law quintiles and the average of previous cycles (i.e. annual, halving and election) to forecast future BTC price action (as shown in the chart below).
There will always be the hopium pushers who prophesy continually that BTC is about to go from $100k to $1M tomorrow. Instead, I prefer to be conservative and assume BTC will stay within its historical guardrails. The data for MSTR and BTC are plenty bullish enough!
The chart below shows the power law Bitcoin trajectory if the previous cycles repeat. While we’ve had some sharp drops in the past after extreme FOMO buying, I’m secretly hoping that the BTC price will grind up and not plummet in early 2026 because major companies, countries, and MSTR hold a lot more of it and are less likely to sell or short it. As we get more data, the gradient of the power law and the quantile guardrails will also be updated to know when we’re approaching the top of the range.
Using this relationship, we can forecast future MSTR fair value (green line) if BTC Per Share stays the same. The chart above also shows the range that MSTR could conceivably trade in, with projections of the MSTR fair value at the 5th, 25th, 66th, 85th, and 95th percentiles.
Notice how the current price sits on the 25th percentile line,th which is below the Ballistic Acceleration Model estimate.
Fair Value Model vs Ballistic Acceleration Scenarios
The following chart shows what the percentile ranges look in the future.
What probably jumps out at you is the difference between the MSTR fair value and the Ballistic Acceleration Model.
This difference is because the MSTR fair value model is based on the CURRENT BTC per share. The way for the MSTR share price to reach the Ballistic Acceleration Model is for MSTR to keep stacking stats as fast as possible before the BTC price rises significantly.
This model is based on current data but will be refined continually as more data becomes available. Saylor’s followers have come to expect Tweets every Monday morning announcing how much BTC he’s bought in the past week.
You can keep an eye one the latest BTC per share data at MSTR Tracker.
Every new announcement will recalibrate the MSTR fair value and move the lines closer to the Ballistic Acceleration Model. Conversely, the relationship between BTC and MSTR will continue to refine the Ballistic Acceleration model (up or down).
Note: This doesn’t include the coming tailwinds, like inclusion in the NASDAQ and QQQ indexes, which may believe will see more money flow into MSTR.
Turning Insight into Action
Below are a few ways that you could use this information. I’m sure you can think of more. If you do, feel free to share them in the comments below.
Note: This is not intended to be financial advice; it is just a data-driven exploration of MSTR’s fair value based on its BTC Per Share.
Overbought vs Oversold?
In addition to the Ballistic Acceleration Model, the BTC Value Per Share model can indicate, based on historical trends, whether MSTR is currently overbought or oversold.
Remember: MSTR is a Long Term Trade
While many people who bought in recently at the peak are becoming impatient that Saylor seems to be keeping the price down with the ATM selling, it’s critical to remember that the more fiat currency MSTR can gather from the equity market now, the higher they can drive BTC Per Share and thus the higher the eventual price of MSTR.
Be patient and remember that this is a long-term volatile trade. Volatility is vitality.
Remember that the #2 principle for MSTR is prioritising long-term value creation for MSTR common stock. Saylor is a major shareholder, so he won’t let the MSTR share price crater, but he’s playing the long game.
Blackout Periods
While MSTR will likely continue aggressive ATM sales to build its BTC stack, there will be occasional blackout periods (e.g., before quarterly earnings results) when it cannot sell ATMs, and the price will likely naturally bounce up due to market demand.
Notice in the chart below how MSTR’s price had a strong run-up before the last earnings report on 30 October 2024, followed by a drawdown, presumably due to MSTR's resumed ATM selling.
We may see a similar run-up before the next following earnings announcement on 4 Feb 2025, when it may rebound from the bottom to the top of the range.
Options Trading
Long-call options on MSTR are becoming very popular.
If BTC price (intrinsic value) and volatility (extrinsic value) spike to the upper end of the normal range before expiration, the upper percentile range could be used to determine profit-taking targets.
The trading range defined by the BTC Value Per Share model could also be used to define a conservative risk/reward for options trades.
Strategic Portfolio Rebalancing
Many MSTR holders are Bitcoin maxis and split their investments between BTC (savings) and MSTR (investment). They’d love to do what MSTR is doing, taking money from the equity market into their BTC savings.
If you want to maintain a reasonable balance between MSTR and BTC (e.g. 50/50), you could place a limit order at the upper end of the current trading range to bring your MSTR holdings back to 50/50, take the money back to their BTC savings account until MSTR drops back down to the lower range.
Cycling some of the funds from MSTR back into savings and then back into MSTR would likely provide an even better longer-term return.
Bringing It All Together: A Data-Driven Lens on MSTR’s Value
Our analysis reveals compelling insights into MicroStrategy's BTC Value Per Share and its historical relationship with the MSTR stock price.
By leveraging regression techniques and creating robust indicators, we’ve established a data-driven framework for assessing whether MSTR is overvalued or undervalued at any given time based on the current BTC Value Per Share.
This analysis can inform low and high price targets. While we can project out the current price based on the current BTC Per Share, MSTR is working hard to increase BTC Per Share as it’s the #1 priority to drive the future price of MSTR even higher.
What do you think of MicroStrategy's bold approach to harnessing the volatility of Bitcoin? Share your insights in the comments below.