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MicroStrategy (MSTR) stock has once again reversed its trajectory surging past $400 as Bitcoin price rallies past $103,000 to a new all-time high. With an over 500% rally this year, MSTR has outperformed BTC and is on the path to attain new highs. As a result, it has become one of the top picks for hedge funds looking to ride the MSTR volatility.
MicroStrategy Stock on Upward Trajectory Again
MicroStrategy stock is once again showing strength by reversing from the lows of $350 last week, as Bitcoin breaks out of its consolidation phase. On Wednesday, the MSTR stock price gained 8.72% surging past $400 levels once again.
Furthermore, the stock price jumps 10% in overnight trading as Bitcoin breaks the $100,000 milestone. The company’s Bitcoin holdings have now surpassed a valuation of $40 billion for the first time ever.
MicroStrategy co-founder Michael Saylor revealed that the company raised $13.5 billion in November to acquire 149,880 BTC at an average price of approximately $90,231 per Bitcoin.
This strategic move delivered a Bitcoin yield of 38.7%, equating to a net benefit of 97,500 BTC for shareholders, or an impressive 3,250 BTC per day. This amount translates to $10 billion.
Amid the current BTC price rally, the company’s value of total Bitcoin holdings of 402,100 BTC, has surged past $40.8 billion. As a result, the company is sitting on a massive profit of $18 billion in its BTC pile. Bernstein analysts have already given the MSTR stock target of $600 suggesting another 50% gain from here.
Hedge Funds Riding MSTR Volatility
Eli Pars, co-chief Investment Officer at Calamos Advisors LLC, has played a significant role in acquiring over $6 billion in convertible notes issued by MicroStrategy this year. Like other firms, Pars uses the notes in market-neutral arbitrage strategies that capitalize on the heightened volatility of the underlying asset—Bitcoin.
Calamos Advisors holds more than $130 million in MicroStrategy notes, employing a mix of long positions and arbitrage strategies to manage exposure and maximize returns. Pars said: “Convertibles are a way for issuers to monetize the volatility of their stocks, and MicroStrategy is an extreme example”.
Additionally, MicroStrategy’s convertible bonds have captured the attention of Wall Street professionals, thanks to their attractive pricing, which offers the potential for substantial arbitrage profits. The company has emerged as the largest global issuer of convertible bonds this year. “The trade is attractive because the implied vol of the converts is way below realized vol or option implied vol,” said Pars.
As the MicroStrategy stock surges, Michael Saylor continues to raise more money through stock sales and puts that back into Bitcoin. This pushes BTC price even higher, which triggers additional gains for MSTR, thereby creating a loop.
The risk lies in the potential for Bitcoin’s year-long rally to reverse, which could lead to significant consequences for investors holding increasingly leveraged positions on its value. David Trainer, CEO of market research firm New Constructs LLC said:
“It could be a giant house of cards that will crush many shareholders when it crashes. There is no fundamental benefit here. It has become a game of musical chairs, you play until the music stops and you just hope you can get out before the crash.”
BTC price jumped 7% in the past 24 hours to hit a high of 103,900. Bulls maintain the price above $102K as the trading volume has increased by 75% in the last few hours, indicating a massive interest among traders.
Bhushan Akolkar
Bhushan is a FinTech enthusiast with a keen understanding of financial markets. His interest in economics and finance has led him to focus on emerging Blockchain technology and cryptocurrency markets. He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.