Because Bitcoin Doesn't Have Enough Volatility

The Wall Street Journal wrote about the "crumbling" of the Bitcoin treasury trade that companies like Strategy (MSTR) are involved with. If it's crumbling it's because Bitcoin's price has taken a hit lately, along with Ether (there are Ether treasury companies too). 

Here's the last three months for Bitcoin, Strategy common stock and the Strategy ETF ecosystem.

But as you can see below, when things go well, they go very well.

Sort of. The prices in the second chart are obviously up a ton, taking advantage of the upward volatility but the tracking is all over the place with no reasonable reliability between the different proxies. 

Brent Donnelly is quoted in the article as saying you're paying $2 for $1's worth of crypto, it makes no sense. I believe that at one point, MSTR's leverage on Bitcoin was up to 4-1 but has since come down from there. If you know differently about the 4-1 leverage please leave a comment. 

I think I've been consistent about Bitcoin, believing in the asymmetric opportunity even if not being a true believer in Bitcoin. I've owned it a long time and the payoff so far as been asymmetrical. Part of my sentiment is that after having spent a lot of time trying to learn about it, it would be hard to then watch it go to a bazillion without me. To the comments on the WSJ article, I probably fall into the speculator camp where Bitcoin is concerned. 

Bitcoin had probably grown to about 5-6% of our investible assets before I sold a little to put toward the down payment on the Tucson house. I added some of what I sold back into our various qualified accounts but not all of it. 

Trying to engage in all of this via the embedded extra leverage of Strategy or other Bitcoin treasuries seems like a very difficult way to make a living. Bitcoin's volatility has scaled back some since the ETFs started trading in early 2024. Pre-ETF, Testfol.io has Bitcoin's volatility at 103%. Since then it runs at 50% which is still a very high number. Strategy's volatility is now 96% so it is sort of what Bitcoin used to be and MSTU's volatility is 173%.

Being a market participant may not be easy but it doesn't have to be as difficult as trying to gamble on Bitcoin treasury companies. There's a lot more that can go wrong beyond the price of Bitcoin falling. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.