Bitcoin Pricing of MicroStrategy Under Strain Due to ETF Uptrend in America

Bitcoin Pricing of MicroStrategy Under Strain Due to ETF Uptrend in America

Morning Brew - US Crypto News Roundup: Jim Chanos Takes Aim at MicroStrategy, Spot Bitcoin ETFs Rattle the Status Quo

Grab your cup o' joe and settle in for today's crypto updates, brought to you by our team of expert analysts. We're diving into a hot topic: the controversial long-short trade between Bitcoin (BTC) and MicroStrategy's (MSTR) stock, championed by notorious short-seller Jim Chanos.

Crypto News of the Day: Spot Bitcoin ETFs vs. MicroStrategy's Inflated Bitcoin Premium

At the Sohn Investment Conference in New York, Jim Chanos let the crypto cat out of the bag - a daring long-short trade involving MSTR stock and Bitcoin. "Selling MicroStrategy stock, buying bitcoin. Buying something for $1, selling it for two and a half dollars," Chanos remarked, according to CNBC.

His strategy, described as a "classic arbitrage," capitalizes on what he views as an irrational premium on MicroStrategy's stock and the undervalued price of Bitcoin.

MicroStrategy, known for its prominent BTC evangelist, Michael Saylor, has been a corporate proxy for Bitcoin. However, Chanos points out that the firm trades at a steep premium due to leverage, narrative-driven enthusiasm from retail investors, and the presumption that corporate-wrapped BTC holdings justify a substantial premium.

Meanwhile, industry experts agree that Chanos's comments come at a crucial juncture, as the rise of low-fee, direct spot Bitcoin ETFs like BlackRock's IBIT calls into question the MicroStrategy premium.

OG Labs co-founder, Michael Heinrich, expressed this sentiment, noting, "This is the classic basis trade. Short the overpriced proxy (MSTR), long the actual asset (BTC)."

Breaking Down MicroStrategy's Premium: Expert Insight

Michael Heinrich appears to share Chanos's view on MicroStrategy's premium and the impact of spot Bitcoin ETFs.

"Spot Bitcoin ETFs deliver direct BTC exposure without the corporate and leverage risks baked into MSTR," Heinrich said.

Moreover, concerns have been raised around MicroStrategy’s aggressive debt-fueled BTC accumulation strategy. This stance intensifies as the company faces potential risks, such as substantial debt stress, dilution, impairment losses, or forced BTC sales, in the event of a sharp BTC correction.

Acknowledging the evolving landscape, Solv Protocol's Chief Business Officer, Jingxiong Hwang, also weighed in, stressing that the MicroStrategy premium looks increasingly unsustainable.

"MicroStrategy is no longer a proxy for Bitcoin exposure, but a levered play on BTC plus a speculation premium," Hwang said.

Bonus Content: Briefly on Bitcoin fundamentals- The recent US Crypto News publication indicates that MicroStrategy's BTC assets amount to an impressive 568,840 BTC on the balance sheet.- The firm financed a significant portion of its BTC portfolio through more than $4 billion in convertible bonds and other debt instruments, amplifying returns during bull markets but introducing notable risks.

* #ThingsToSetYourSightsOn

1. Exclusive Insights: Join Uphold and gain early access to new assets, easy one-step trading, multi-asset support, and more.
2. Coinbase's Dogecoin Wave: Dogecoin active addresses soared by 990% in a week, indicating renewed interest ahead of Coinbase's upcoming wrapped DOGE launch.
3. Ethereum Foundation's 'Trillion Dollar Security' Initiative: Focused on building trust and enhancing security to support trillions in on-chain value.
4. Abraxas Capital's Massive ETH Accumulation: Check out Abraxas Capital's recent acquisition of 242,652 ETH, worth approximately $561 million, in under a week.

Sources:* [1] CNBC, April 18, 2023.* [2] BeInCrypto, April 18, 2023.* [3] Coindesk, April 18, 2023.

Disclaimer

We at BeInCrypto are committed to unbiased, transparent reporting. This article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions and Privacy Policy have been updated. Enjoy your day of crypto adventures!

1. Jim Chanos, an infamous short-seller, proposed a controversial long-short trade, selling MicroStrategy's (MSTR) stock and buying Bitcoin, capitalizing on MicroStrategy's inflated Bitcoin premium and the undervalued price of Bitcoin, as reported by CNBC.
2. MicroStrategy, led by BTC evangelist Michael Saylor, has been seen as a corporate proxy for Bitcoin, but is reportedly trading at a steep premium due to leverage, retail investor enthusiasm, and the assumption that corporate-wrapped BTC holdings justify a substantial premium.
3. The rise of low-fee, direct spot Bitcoin ETFs like BlackRock's IBIT poses a challenge to the MicroStrategy premium, according to industry experts.
4. OG Labs co-founder, Michael Heinrich, agrees with Chanos, noting that spot Bitcoin ETFs deliver direct BTC exposure without the corporate and leverage risks baked into MSTR.
5. Concerns have been raised around MicroStrategy’s aggressive debt-fueled BTC accumulation strategy, which could lead to substantial debt stress, dilution, impairment losses, or forced BTC sales in the event of a Bitcoin correction.
6. Solv Protocol's Chief Business Officer, Jingxiong Hwang, also believes that the MicroStrategy premium looks increasingly unsustainable, characterizing MicroStrategy as a levered play on Bitcoin plus a speculation premium.
7. In accordance with the US Crypto News publication, MicroStrategy holds an impressive 568,840 BTC on its balance sheet, financed through over $4 billion in convertible bonds and other debt instruments, amplifying returns during bull markets but introducing notable risks.
8. Coinbase's upcoming wrapped DOGE launch has spurred renewed interest in Dogecoin, as indicated by a 990% increase in Dogecoin active addresses in a week.
9. Abraxas Capital's recent acquisition of 242,652 ETH, worth approximately $561 million, in under a week, underscores the growing interest in Ethereum and NFT markets, with significant investments in ETH tokens likely to impact the crypto market cap and overall liquidity in the wallets of crypto whales.

Read also: