From Ecoinometrics

Since 2020, MicroStrategy has primarily been a Bitcoin holding company. Yes, they engage in other activities, but the bulk of their business value stems from the Bitcoins they possess.

During this period, MicroStrategy's stock (MSTR) has frequently outperformed Bitcoin (BTC).

Valuing MicroStrategy based on its Bitcoin holdings somewhat explains this. Owning Bitcoins doesn’t yield more Bitcoins. However, owning MSTR stocks, assuming minimal dilution, effectively grants exposure to an increasing amount of Bitcoin for the same price. This holds true as long as Michael Saylor finds creative ways of acquiring new coins.

Additionally, before the approval of a batch of spot Bitcoin ETFs last week, the options for trading to gain 

exposure to BTC were somewhat limited. Choices included MicroStrategy, miners' stocks, Grayscale, or certain futures/options products. If one sought simple, straightforward exposure to Bitcoin, none of these options were as effective as a bona fide Bitcoin ETF.

Now, with the advent of these ETFs, MicroStrategy makes less sense as  a pseudo-ETF play. So it could be more tricky for them to raise capital to buy more coins. Perhaps it's no coincidence that we're witnessing MSTR's lead over BTC diminish.

Let’s see if it stays that way.

This cycle comes to an end, Ethereum did not collapse

If you haven't gone through a full cycle yet, here is something you need to know:

When it comes to the big cycles what we expect is for Bitcoin to move first, followed by Ethereum and then everything else.

Now clearly it isn't Ethereum's time right now. Bitcoin is in the spotlight. The ETFs are there. The halving is coming soon. That doesn't leave much space for ETH to exist.

But don't worry. Time will come. 

Anyway it isn't like ETH is performing badly either. Actually this time is different for Ethereum. The bear market of the last cycle was really bad for Ethereum. ETH completely collapsed against BTC. 

But not this time. 

Inflation: when transitory lasts a long time

Do you remember the transitory inflation meme? For a while central bankers were like no way inflation will come. Then mainstream economists hit you on the head with the transitory nature of inflation.

And yet here we are.

Let me remind you that COVID hit the global economy in 2020. That's like four years ago already. Whatever temporary supply chain disruption that was touted as the root cause of the subsequent inflation spike is gone by now. 

Yet inflation is still there. Not as high as the peak of course. But still.

And this is not a local phenomenon specific to the United States. Almost the entire world is affected. Actually a lot of countries are doing way worse than the US.

On the chart below you can see year-on-year inflation data as of December 2023 on a wide range of countries grouped by broad geographic regions. Each point represents a country. If inflation is up compared the previous month the point is red. Otherwise the point is blue.

Not represented on the chart are:

Inflation is so high for those that you wouldn't be able to see the other countries on the chart if we included them... that's how bad it is.

And it could be years until the world comes back to the pre-pandemic level of inflation.

That’s it for today. I hope you enjoyed this. We’ll be back next week with more charts.

Cheers,

Nick