Here's some $MSTR cope to finish out 2024... we have a very big 2025 ahead of us.

TL;DR I think that $MSTR is in the process of bottoming and will find its footing in the $270-$300 range (this would satisfy the gap from November 11, it could potentially wick to $250 or lower, but there is some strength in this current range of $270-$300). @Adrian_R_Morris and I are in agreement that there may be some prime buying opportunities over the next week or two. And after that, I think we are going way higher in Q1 2025.

I. Bitcoin - Going Lower?

It's impossible to talk about MSTR without talking about Bitcoin. Most investors are expecting Bitcoin to return to the $80,000s but so far the $92,000 range has acted as very strong support and has absorbed a lot of coins so far. (Also, if everyone expects something to happen, it doesn't usually happen.) This morning, Bitcoin tried to break out of its downtrend and is currently testing the downward trend as support on the 4H chart. No idea if it holds, but the bulls are trying. If it is unsuccessful, I don't think it sends Bitcoin to new lows, it will just delay the breakout by a few days. 

Similar to MSTR (we will look at its technicals in a moment), there is a bullish RSI divergence on the 4H chart. Although the price seems to keep slipping, the market continues to strengthen. This is not a fool-proof indicator, but it shows that Monday (Dec 30) could have been the bottom for this correction. Again, could be wrong, it is totally possible that we see a liquidity grab with a move below $90,000. If this happens, I expect the move to be heavily bid and be short-lived.

We are also entering a very strong year (historically) for Bitcoin. Although, now with a $2T market cap, it is heavily impacted by macro factors and less of the traditional 4-year halving cycle. It may appear that the cycle continues, but it will mirror the overall market (circa November 2021 = overall market peak, and Oct-Nov 2022 = overall market bottom). Since 2016, the market has been moving according to a four year liquidity/presidential cycle, again, not sure how this plays out, but that's how things are tracking currently and it looks like there may be a macro top somewhere in 2025. We will touch on macro in a moment. But historically speaking, post-halving years are where the biggest gains for Bitcoin are.

We are also in a very similar pattern to early 2024 when the ETFs were approved. You can see the general structure in the chart below.

A strong move in Q1 (mostly in February) would align with the historical seasonality for Bitcoin. February is the second best month of the year for Bitcoin and I don't think this year will be any different. In a post back in November, I said that I thought January would be red after a green September, October, November, and December. However, in a few hours here, Bitcoin is going to close the month red, which is bullish in my opinion. So, I have removed my red Jan prediction and now think it will be light green, followed by a deep green February.

There will be some cautious optimism heading into the inauguration but I expect January to be overall a positive recovery month for markets. I expect Bitcoin to track this sentiment and it may close the month over $100,000. Then I expect fireworks in February with a move to $125,000 (life isn't fun without predictions). 

II. The Popping Bubble

Want to know why $MSTR is crashing from $540 to my target low of ~$270? A 50% crash? Because it was a bubble. It decoupled from Bitcoin to the upside and now it is decoupling to the downside (vol works both ways). There was clearly a gamma squeeze that sent us to new highs (which was actually good for the company because it allowed them to harvest the market exuberance to buy Bitcoin). And now that the air is rushing out of the bubble, we are experiencing a reverse gamma squeeze. As traders unwind their long gamma positions, the broker-dealers sell their underlying shares which increases sell pressure to the downside. This is what you're seeing right now. @ActuallyClimber thinks that this could finish with one last flush of high volume, which I think is the highest likelihood, but it could also slowly close the gap at $275 then start its recovery. It will be interesting to see how it plays out. Either way, I think the bottom is near.

I will note, that there are already signs of strength. Similar to Bitcoin, there is a bullish divergence on the 4H RSI. This looks like it could hold even if the stock dropped to around $270. This would complete the 50% move, fill the $275 gap, and finish the descending arc move (reverse gamma squeeze). 

Everyone is crying about the $MSTR bleed when compared to Bitcoin, but it isn't a levered ETF (thank goodness). It's a company that does not have to trade in high correlation with Bitcoin, it just happens to do so because it holds a lot of Bitcoin. The correlation will increase going into 2025 and now that there has been a healthy reset, I think the outperformance will continue.

III. Expanding Premium and Volatility

This reverse gamma squeeze has compressed the MSTR multiple big time (see comment below). Part of this is because of the extraordinary sell pressure (not directly from the ATM). But part of it is due to the accretive equity issuance. The balance sheet now has way more Bitcoin on it compared to its liabilities so the leverage ratio is lower than it has been historically.

This "front-loading" of the ATM (h/t @PunterJeff) has provided a lot of room for the management team to take on a lot of debt at the beginning of 2025. I am expecting multiple convert and other debt offerings in Q1. 

This, in theory, will increase the volatility and premium. THEN, they can accretively issue shares to buy Bitcoin. Remember, MSTR got to $540/share while management was issuing billions of dollars worth of shares a week (for like 4 weeks in a row leading to the all-time high). I am a strong believer that this accretive equity issuance does not materially impact the price because it is instantly accretive.

Expect more debt, more Bitcoin, more vol, and a higher premium in Q1 (h/t @dgt10011).

IV. Macro

Ok, time for the meat and potatoes. Bitcoin is a macro asset and will move with the broader markets. To start, you've likely seen the global M2 chart with a 10-week lag for Bitcoin. Although it has worked over the last 10 months, it is a flawed indicator because it is measuring global M2 as measured by the dollar. And when the DXY is climbing to yearly highs, it looks like global liquidity is decreasing, when it isn't. Economies around the globe have more currency units in circulation, but when denominated in a strengthening dollar, it appears that liquidity is decreasing. Credit is not being repaid which destroys that credit monetary unit. Globally, credit is expanding, primarily through commercial bank lending, and I expect this to continue into 2025. (You don't need low interests to have an increase in liquidity. As long as the economy is strong and banks are lending, money is created.)

I also expect the DXY to start falling early in January. There are a few reasons for this, but to keep this post from being longer than it needs to be here are 2:

1. The Fed/new admin needs to get the dollar down because it hurts growth globally. If Trump wants to have his strong economy (especially a strong stock market), it requires a weaker dollar.

2. In 2016, the exact same pattern happened (see the comments below for the chart). Increase after the election, then a 6-month decline starting in January.

I don't know what the Fed will do, but I know they will likely cut a few times, the more the better, but at this point it really doesn't matter. I think we are within 1% of the new lower bound for the Fed funds rate and it may take a recession to break that, but hopefully we are at least 6-12 months away from that. 

V. Near-Term Catalysts

You probably know about the $MSTR-related catalysts on the horizon like FASB implementation and S&P 500 inclusion (est. June 20, 2025).

However, there are other more important catalysts.

1. FTX Repayments are slated to start this Friday (Jan 3) and will take between 30-60 days to complete. $16B returning to the hands of Bitcoiners (and crypto). 

2. The current US Government debt ceiling expires tomorrow (Jan 1). After the redemption of some unmarked securities (duration: 1-3 weeks), the US Treasury will start to take extraordinary measures to fund the government until there is a new debt ceiling resolution. This will occur around the inauguration and may induce some short-term market uneasiness, but I expect us to be a little higher before that happens and I think it will be temporary.  

3. The S&P 500 just put in a lower high which could indicate a trend reversal. This was a healthy bull-market correction for the US stock market, and it looks like stocks are ready to move higher in January. This will obviously be supportive for Bitcoin and MSTR. 

VI. Conclusion

If it wasn't clear, I think 2025 will be a good year for Bitcoin and specifically MSTR. The new convertible bond ETF and Bitcoin Treasury Companies ETF demonstrate that there is a lot of demand for Bitcoin-exposed securities. I believe this is indicative of the demand for both Bitcoin and MSTR.

Also, the ATM (it's not dilution, it's accretive equity issuance), is not what has been hurting the stock. If you believe that, then you won't be a happy long-term shareholder. They instantly add Bitcoin to the balance sheet, and as a shareholder, you want this to happen as much as possible. If you think the stock can't climb when they issue billions weekly, you should revisit the setup in early November 2024. Because it's blatantly untrue.

Additionally, MSTR is not "over-levered" and I think the fact that they are currently under-levered is the reason this multiple contraction is occurring, not the other way around. 

So yeah, if it wasn't obvious already, I think we are going much higher🟢👆.