Is MSTR the Ultimate Bitcoin Play?
A Deep Dive into Its Valuation and Strategy
Hey everyone, and welcome back to the On-Chain Mind Newsletter.
Is MicroStrategy (now rebranded as Strategy) undervalued right now? By most traditional standards, it’s debatable. But if your portfolio goals revolve around Bitcoin accumulation—not dollar-denominated returns—then you’re playing a very different game. One in which satoshis per share may be the most critical metric of all.
This article will walk you through a powerful valuation framework for assessing Strategy, and why this company could be one of the most misunderstood assets in the market.
Let’s get into it.
Insights at a Glance:
Satoshis per Share is Climbing: Strategy’s dilution is outweighed by Bitcoin accumulation, meaning each share now gives you more BTC exposure.
Strategy Often Lags, Then Leaps: During bull markets, it tends to explode past Bitcoin in returns—but it can underperform in downcycles.
Forget USD—Think in Bitcoin: The real performance measure is BTC terms, not fiat valuation.
Pair Trading Can Enhance Returns: Swapping between BTC and Strategy based on valuation bands can statistically increase long-term satoshi accumulation.
The Evolution of MSTR: From Software to Bitcoin Powerhouse
MicroStrategy, once a traditional business intelligence software company, made headlines in August 2020 when it announced a bold pivot: it would allocate its treasury to Bitcoin, treating it as its primary reserve asset. This wasn’t a modest experiment. Under the leadership of CEO Michael Saylor, Strategy has since acquired over 580,000 Bitcoin at an average price exceeding $69,000 per coin, making it the largest publicly traded corporate holder of BTC. As of today, this position translates to an unrealized profit of over $22 billion, driven by Bitcoin’s price appreciation.
This shift has fundamentally altered Strategy’s identity. The company no longer prioritises software revenue, which now plays a secondary role. Instead, it has become a financial vehicle designed to acquire and hold Bitcoin through a mix of convertible debt, equity issuance, and operational cash flow. This aggressive strategy has delivered staggering returns: since August 2020, Strategy’s stock has yielded over 2,800%, equating to a compound annual growth rate (CAGR) exceeding 100%. For context, this outperforms even the most successful tech stocks over the same period, including giants like NVIDIA or Tesla.
But why has this pivot worked so well? The answer lies in Strategy’s alignment with Bitcoin’s long-term value proposition: a scarce, deflationary asset that many believe will continue to appreciate against fiat currencies. By leveraging capital markets to acquire Bitcoin, Strategy has created a unique investment thesis—one that challenges traditional notions of corporate finance and shareholder value.
The Genius of Financial Engineering: Satoshis per Share
At the heart of Strategy’s investment appeal is a metric that redefines shareholder value: Satoshis per share. A Satoshi is the smallest unit of Bitcoin (1 BTC = 100 million Satoshis), and this metric measures how much Bitcoin each share of Strategy represents. Since its pivot in 2020, Strategy has consistently increased its Satoshis per share, even as it issues new shares—a process that typically dilutes shareholder value in traditional companies.
How Does It Work?
Strategy’s financial engineering is both counterintuitive and brilliant. Here’s how it achieves this feat:
Convertible Debt and Equity Issuance: Strategy raises capital by issuing convertible bonds and new shares, using the proceeds to buy Bitcoin. This increases its BTC holdings faster than the rate of share dilution.
Bitcoin’s Appreciation: As Bitcoin’s price rises, the value of Strategy’s holdings grows, amplifying the Bitcoin exposure per share.
Capital Efficiency: Instead of hoarding cash or repurchasing shares, Strategy converts fiat liabilities (debt and equity) into a scarce, appreciating asset—Bitcoin.
This approach flips the traditional playbook. In most companies, issuing new shares reduces each shareholder’s claim on future profits. But for Strategy, dilution is offset by the rapid accumulation of Bitcoin, which has historically outpaced the dilutive effect. As a result, each share represents more Satoshis over time, giving investors indirect exposure to Bitcoin’s growth without requiring direct custody.
For Bitcoin-native investors—those who measure wealth in BTC rather than fiat—this metric is a game-changer. It aligns Strategy’s performance with the goal of accumulating more Bitcoin, not just dollars. Since 2020, Satoshis per share has trended upward, meaning shareholders are effectively “stacking sats” without additional investment. This compounding effect is rare in traditional finance, where assets typically depreciate or grow more slowly.
To illustrate, consider an investor who bought Strategy shares in 2020. Even if the share count increased due to dilution, their Bitcoin exposure per share has grown significantly, thanks to Strategy’s aggressive acquisition strategy. This dynamic makes Strategy a compelling vehicle for those who believe in Bitcoin’s long-term potential but prefer the liquidity and accessibility of a publicly traded stock.
The Bitcoin Yield
Another critical metric is Bitcoin yield, which measures the year-over-year increase in Satoshis per share. This is akin to a dividend yield in traditional finance, but instead of paying out cash, Strategy delivers growing Bitcoin exposure. Since its pivot, Strategy has consistently achieved a positive Bitcoin yield, meaning shareholders own more Bitcoin per share each year.
The Power of Compounding Bitcoin
Compounding is a powerful concept in finance, but it’s even more potent in the context of a scarce asset like Bitcoin. Traditional investments compound in fiat terms, which can lose purchasing power due to inflation. In contrast, Strategy’s Bitcoin yield compounds exposure to an asset designed to appreciate against fiat over time. This makes it a unique vehicle for long-term wealth preservation and growth.
For example, if Strategy’s Bitcoin yield is 10% annually, a shareholder’s Bitcoin exposure per share grows by 10% each year, assuming no additional investment. Over a decade, this compounding effect could significantly amplify wealth, especially if Bitcoin’s price continues to rise. This aligns perfectly with the ethos of “sound money,” where the goal is to preserve and grow purchasing power in a deflationary asset.
Risks to Bitcoin Yield
While the concept is compelling, it’s not without risks. Strategy’s ability to maintain a positive Bitcoin yield depends on:
Bitcoin Price Volatility: A prolonged bear market could reduce the value of Strategy’s holdings, impacting Satoshis per share.
Debt Management: Strategy’s use of leverage introduces financial risk, particularly if interest rates rise or capital markets tighten.
Operational Execution: Mismanagement or poor capital allocation could undermine the company’s ability to acquire Bitcoin efficiently.
Despite these risks, Strategy’s track record since 2020 suggests it has navigated these challenges effectively, delivering consistent Bitcoin yield and positioning itself as a leader in corporate Bitcoin adoption.
Valuation Dynamics: Dollars vs. Bitcoin
Is Strategy undervalued? The answer depends on how you measure value. In US dollar terms, Strategy’s stock price has followed an impressive upward trajectory, but it currently lags behind Bitcoin’s recent highs. This divergence suggests potential undervaluation, but a deeper analysis requires pricing Strategy in Bitcoin terms.
Dollar-Based Valuation
Using technical analysis, Strategy’s stock price is currently in a trading channel between $280 and $521, with the price near the midpoint as of today.
One of my custom indicators, the dip and spike overlay, suggest the stock is in “fair value” territory based on its long-term trend.
However, Sigma bands—statistical measures of price extremes—provide additional insight:
Green Band: It’s time to pay attention to this rally.
Orange Band: Indicates caution, where accumulation should slow.
Red Band: Suggests overvaluation, where mean reversion is likely.
These bands are dynamic, moving with market conditions, and are most relevant during periods of rapid price appreciation. For traders, monitoring these levels can help with entry and exit points.
Bitcoin-Based Valuation
Pricing Strategy in Bitcoin terms reveals the true story. If Strategy’s stock price isn’t growing in Bitcoin-denominated value, it fails to deliver on its core promise: amplifying Bitcoin exposure. Since the 2023 bear market bottom, Strategy has outperformed Bitcoin significantly. An investment of one Bitcoin in Strategy at that low would now be worth approximately three Bitcoin in dollar terms—a remarkable return.
However, this outperformance comes with volatility. During bear markets, Strategy tends to underperform Bitcoin, sometimes significantly. This is due to its leveraged exposure, which amplifies both gains and losses. Tools like the dip and spike indicator, applied to the Bitcoin pair, can help identify undervaluation. As of May 2025, this indicator suggests Strategy is undervalued relative to Bitcoin on a moving average basis, presenting a potential opportunity for Bitcoin-native investors.
Pair Trading Opportunities
For investors with tax-efficient accounts, pair trading Strategy and Bitcoin can unlock arbitrage opportunities. The strategy involves:
Buying Strategy: When it’s undervalued in Bitcoin terms (e.g., during a dip signal).
Rotating to Bitcoin: When Strategy becomes overextended (e.g., hitting the red Sigma band).
This approach leverages relative valuation to maximise Bitcoin accumulation. By applying Sigma bands to the Bitcoin pair, investors can time entries and exits with greater precision, capitalising on mean reversion trends.
Why MSTR Matters for Bitcoin-Native Investors
Strategy’s transformation into a Bitcoin compounding engine is a paradigm shift in corporate finance. It’s not just a company; it’s a vehicle for accumulating Bitcoin exposure without the complexities of direct custody. For investors who believe in Bitcoin’s long-term potential, Strategy offers a way to amplify returns while maintaining the liquidity of a publicly traded stock.
The key is to focus on Bitcoin-denominated metrics—Satoshis per share and Bitcoin yield—rather than fiat-based measures like stock price. If Strategy continues to increase its Bitcoin holdings faster than its share count grows, it will remain a compelling option for Bitcoin-native investors.
Key Takeaways
Bitcoin-Centric Strategy: Strategy’s pivot to Bitcoin has redefined its business model, delivering over 2,800% returns since 2020 by leveraging capital markets to acquire BTC.
Satoshis per Share: This metric highlights Strategy’s ability to increase Bitcoin exposure per share, offsetting dilution through aggressive Bitcoin accumulation.
Bitcoin Yield: Strategy’s compounding of Bitcoin holdings offers a rare opportunity to grow wealth in a deflationary asset, aligning with sound money principles.
Valuation Opportunities: Pricing Strategy in Bitcoin terms reveals potential undervaluation, with pair trading offering arbitrage opportunities for sophisticated investors.
I’ll see you in the next one.
Cheers,
On-Chain Mind
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Is the sigma indicator available for download?
The leverage is what makes the Satoshis per share growing by nature. It won’t stop until the debts can’t be serviced. So growth in Satoshis per share is not a good indicator of valuation. The rate of it might have some merit as a cannery in the coal mine, imho