Bitcoin or MSTR? Which is smarter?

With Bitcoin down 3% today, and shares of MSTR UP, many MSTR bears are scratching their head (or pulling their hair out) with frustration. Let's dive in!

MSTR has redefined their business as a bitcoin hoarder that also sells software, so all crypto eyes are on it as a stock market alternative to the basket of Bitcoin ETFs out there.

And of course, with MSTR holding over 200,000 bitcoins, and consistently issuing new debt to buy more, its stock trades in line with bitcoin. Let's dive into the last 1 year of trading data, to see which one is the better bitcoin trade:

As you can see, daily moves in bitcoin (since MSTR doesn't trade on the weekend, we rolled bitcoin weekends all into the Fri-Mon change) have a 0.72 correlation with daily moves in MSTR. That's actually a lot less than most would expect.

Since there is some discrepancy, there is opportunity. So let's take a look into the specifics:

On days where bitcoin is UP, was it better to a bitcoin HODLer or a MSTR investor?

Answer: On 59% of the days that bitcoin was up, it was better to be a MSTR investor:

Ok but what about on days (or weekends) when bitcoin was down?

Amazingly, MSTR was STILL the better investment on most days (barely at 51%).

How can this be?

There are 3 key factors at play here:

1) MSTR actually makes money

First and most obvious, is that MSTR is actually a business that prints money. While the market cap of the operating business is dwarfed by that of its Bitcoin holdings, it still makes money, something that Bitcoin cannot do.

2) Win percentage vs Size of move

While it is true that MSTR outperforms Bitcoin more often than Bitcoin outperforms MSTR on both UP and DOWN bitcoin days, when we look at the SIZE of the move, it is clear that some outsized losers for MSTR tip the scales, on average, back to bitcoin, on bitcoin down days. This is what you'd expect with MSTR basically acting as a giant call option on bitcoin.

But the key takeaway here is that MSTR is outperforming Bitcoin on a consistent basis by 0.5% day by day over the last year--which brings us to the final point:

The Saylor Effect

Michael Saylor is the world's biggest bitcoin evangelist. He inspires millions of people to buy and hodl. But that alone doesn't explain why MSTR outperforms Bitcoin. But when you look at his activity as the manager of MSTR, you see that he is making strategic decisions. He is deciding when to issue more debt, when to buy more bitcoin, etc. He is leveraging a company that has cash and makes millions of dollars in order to maximize shareholder value.

In the end, if you're remotely bullish on Bitcoin, the facts are pretty clear that an investment in MSTR is actually a better Bitcoin bullish vehicle than actually owning the coins themselves

Caveats:

*MSTR is highly leveraged in bitcoin, so a sharp drop in bitcoin should lead to an even larger drop in MSTR.

*If MSTR's core business shrinks, it will lose value vs Bitcoin

*MSTR's strategy is solely dependent on Saylor's decision making. Years ago, they were not a bitcoin business. He shifted very quickly. It is not unreasonable to think he may shift again in the future.