Heralded as the flagship cryptocurrency, bitcoin disrupts traditional finance as a decentralized, borderless currency immune to government control or inflation. Its fixed supply of 21 million coins — capped by code — positions it as “digital gold,” a hedge against fiat currency devaluation, especially as global debt rises and central banks print money. Adoption is growing: institutional investors like MicroStrategy (now known as Strategy) and Tesla have bought in, and countries like El Salvador made it legal tender in 2021. With unmatched network security, the blockchain’s hash rate hitting all-time highs in 2025, making it nearly impossible to attack. (The hash rate refers to the computational power used to process and secure transactions on a blockchain network. The higher the hash rate, the more computational effort is needed to alter the blockchain.) The greater the hash rate, the more resistant the network is to attack by malicious actors. Plus, transaction volume keeps climbing, signaling real-world use. Thus, bitcoin possesses key attributes for use as money: scarcity, utility, and trust, which are not subject to government manipulation. Bitcoin’s bullish narrative hasn’t translated to its price lately, and this bearish outlook extends to MicroStrategy (MSTR) , a company whose aggressive bitcoin acquisition strategy has tied its fate inextricably to the cryptocurrency’s performance. Microstrategy was the second-best performing stock in the Russell 1000 in 2024, with a total return of 358.5% trailing only high-flying AppLovin. That eye-opening performance was roughly triple the performance of bitcoin itself , a function of the fact that MicroStrategy uses financial leverage (borrows money) to purchase bitcoin and the fact that investors were willing to award the company a premium to the value of bitcoin the company held on its balance sheet. BTC.CM= 1Y mountain Bitcoin, 1 year Under Michael Saylor’s leadership, MicroStrategy has positioned itself as a bitcoin proxy by amassing a staggering number of BTC on its balance sheet, more than 499,000 as I write this, which is almost 2.4% of all the bitcoin that could ever be mined. While this strategy initially paid off during bitcoin’s bull runs, it now leaves the company vulnerable to the cryptocurrency’s downturns. MicroStrategy’s stock price has become a leveraged bet on bitcoin, amplifying gains and losses. As bitcoin’s price faces downward pressure, MicroStrategy’s valuation will likely suffer disproportionately. But so far this year, it hasn’t. Since Dec. 31 spot bitcoin has declined, but Microstrategy is outperforming both the cryptocurrency and the broad market, with a YTD total return of ~2.7%. As of Friday, March 14th, 2024, Microstrategy’s 499,096 bitcoin were worth almost $42 billion, but the company’s market cap was $77.4 billion, and the company’s enterprise value, which captures net debt (remember debt holders are senior in the cap structure) was $84.6 billion. Effectively the company is trading for 2x the value of the bitcoin on the company’s balance sheet. MSTR YTD mountain MicroStrategy (Strategy), YTD Investors give Microstrategy and CEO Michael Saylor a substantial premium to the value they assign to the cryptocurrency to which they’ve tied their future. While I believe in bitcoin’s utility, and I’m impressed by Michael Saylor’s conviction and financial creativity, I also recognize that Microstrategy’s downside risk is greater than that of bitcoin itself. 1) The company has borrowed money to purchase Bitcoin, which introduces leverage. 2) The premium the stock holds to the cryptocurrency could evaporate. It’s unlikely to trade at a significant discount to bitcoin net of debt — put differently, I do not expect Microstrategy to trade at a meaningful discount to book value. Still, it certainly could revert closer to it. 3) bitcoin itself has been under some pressure lately, and if Microstrategy merely “caught up” to the year-to-date decline it would be down ~30%. The trade A June $250/$200 1×2 put spread, where one would purchase one June $250 put (currently trading ~ $30/contract) and sell two June $200 puts (currently just under $15/contract), one would risk little if Microstrategy’s outperformance continues to the upside. As of June expiration, if the stock fell between $150 and $250 one would see profits, with peak profits of $50/share achieved at the $200 short strike price. The risk is that because one is short two puts for every one held long, the holder of this position could be forced to buy the shares at that $200 strike price. Still, net of the profits on the $250 strike puts, the effective purchase price would be $150/share, or very close to the company’s current book value based on their current bitcoin holdings. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. 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