Watch MicroStrategy's "Stretch" notes (STRC), as a sustained move above the key $100 level is expected to trigger the company to sell more notes to raise cash. This capital raise would then be used to purchase more Bitcoin, adding to their already massive holdings and serving as a direct bullish catalyst for the stock. As a leveraged play on crypto, MicroStrategy (MSTR) recently outperformed Bitcoin by 26% in a single week, demonstrating its high-growth potential. This comes as Bitcoin (BTC) itself has hit a new all-time high of over $125,000, signaling strong market momentum. With CEO Michael Saylor expected to resume buying as soon as next week, MSTR remains a high-conviction investment for exposure to Bitcoin's continued appreciation.

MicroStrategy (MSTR)

• No recent stock purchases: The company did not buy any of its own stock recently. This was not due to a lack of confidence, but because of SEC regulations and accounting rules that prevent buys during the week when a quarter ends (in this case, Q3 ending on September 30th).
• Expected to resume buying: The speaker believes CEO Michael Saylor will likely resume buying MSTR stock as soon as next week.
• Massive unrealized gains: Saylor tweeted about a $9 billion "reminder of why we huddle," which the speaker interprets as the company's unrealized profit on its Bitcoin holdings for either the recent week or the quarter.
• Bitcoin holdings growing: The company's Bitcoin stack is valued at $79 billion and is growing at an estimated 29% per year.
• Valuation perspective: The speaker suggests that traditional valuation metrics like Price-to-Earnings (P/E) may not be suitable for MSTR. Instead, investors might start valuing it based on its assets, specifically its Bitcoin holdings, using a Price-to-Book or Modified Net Asset Value (MNAV) approach.
• Recent outperformance: Over the last five trading days, MSTR stock was up 12%, outperforming Bitcoin (as measured by the IBIT ETF, which was up 9.5%). This represents a 26% outperformance over Bitcoin for the week.
  • This is below Saylor's stated long-term goal of 50% outperformance but is seen as a positive sign after two months of negative sentiment around the stock.

Takeaways

• Bullish Sentiment: The overall sentiment on MSTR is bullish, driven by the rising price of Bitcoin and the company's strategy of accumulating more.
• Potential Buying Catalyst: Expect MicroStrategy to potentially buy more Bitcoin soon, funded by selling its "Stretch" (STRC) notes, which could be a positive catalyst for the stock.
• Valuation Method: When evaluating MSTR, consider its value based on its large Bitcoin holdings (an MNAV approach) rather than just its software business profits (a P/E approach).
• Leveraged Bitcoin Play: MSTR continues to act as a leveraged bet on the price of Bitcoin. Its recent 26% outperformance shows that when Bitcoin does well, MSTR can do even better, but investors should be aware that the reverse is also true.

Bitcoin (BTC)

• New All-Time High: Bitcoin reached a new all-time high of $125,449, with some exchanges reporting it as high as $125,600.
• Supply Squeeze Rumors: There are rumors on social media platform X that Over-The-Counter (OTC) desks are "drying up." OTC desks are where large institutions buy and sell massive amounts of Bitcoin. A lack of supply on these desks would imply very high demand, which is a bullish signal.
  • The speaker is cautious about these rumors, noting that many accounts posted the exact same message, but acknowledges the long-term bullish trend.
• Long-Term Conviction: The speaker has "full confidence in the price of bitcoin over the long run," stating that its price will continue to go up over time.

Takeaways

• Strong Bullish Momentum: Bitcoin has broken its previous price records, indicating strong positive momentum in the market.
• Potential for a Supply Shock: If the rumors about low supply at OTC desks are true, it could lead to higher prices as large buyers compete for a limited amount of available Bitcoin.
• Long-Term Hold: The speaker's perspective is that Bitcoin is a long-term investment. Short-term price movements are less important than the overall upward trend.

MicroStrategy "Stretch" Notes (STRC)

• What it is: "Stretch" appears to be a type of preferred stock or convertible note issued by MicroStrategy. These are now available for trading on platforms like Robinhood.
• Approaching Key Price Level: STRC recently traded as high as $99.74, very close to the important $100 mark.
• Catalysts for reaching $100:
  • Fed Rate Cuts: The speaker believes that anticipated interest rate cuts by the Federal Reserve will make the dividend yield on STRC more attractive compared to government bonds.
  • Dividend Hike: A recent dividend increase on STRC further boosts its appeal.
• Strategic Importance: The speaker predicts that once STRC trades consistently at or above $100, MicroStrategy will use its At-The-Market (ATM) offering. This means the company will sell new STRC shares into the open market to raise cash, which will then be used to buy more Bitcoin.

Takeaways

• Key Level to Watch: Investors should watch if STRC can break and hold the $100 price level.
• Signal for More Bitcoin Buys: If STRC reaches $100, it is a strong signal that MicroStrategy is about to raise more capital to add to its Bitcoin treasury, which is the core of its investment thesis.
• Potential Investment: For investors interested in fixed-income-like assets with a connection to the crypto space, STRC could be an interesting opportunity, especially with potential Fed rate cuts on the horizon.