Analyzing the Correlation Between MicroStrategy's MSTR Stock and Bitcoin
Exploring MSTR's stock volatility relative to Bitcoin's price movements over various time frames.
Analyzing MicroStrategy’s (MSTR) stock price behavior relative to bitcoin has become a hot topic of interest in Bitcoin. This analysis delves into the beta of MSTR relative to Bitcoin over several distinct time frames, ranging from the launch of spot ETFs to when MSTR started buying bitcoin in 2020. I hope to offer some insights that will be useful to existing or new bitcoin investors.
What is Beta?
Beta is a value that describes how the price of a stock moves compared to the overall market, specifically how their volatilities compare over a given period. A beta of 1 means the stock's price tends to match the market. If the market goes up or down by 1%, the stock is also expected to go up or down by approximately 1%. A beta below 1 means the stock is less volatile than the overall market; greater than 1 means it is more volatile.
In our current analysis, we measure the “commodity beta” of MSTR relative to the underlying asset of bitcoin. This is similar to analyzing the stock price of a gold miner relative to the price of gold. Ideas for further analysis include analyzing the beta for other bitcoin related investments like chip manufacturers or the price of ASICS relative to bitcoin.
MSTR’s Beta to Bitcoin
Since buying bitcoin
I ran several time frames through a beta analysis based on different eras of this relationship. First, since MicroStrategy started buying bitcoin in August 2020, the beta has been remarkably close to 1, specifically 1.00007. As seen below, their price action is very similar. MSTR has gained 162% to bitcoin’s 113%, however, their volatility over that period results in a near perfect beta.
Beta over last year
The next time frame I looked at was of the last year. This period encompasses pre-Blackrock ETF filing (June 2023), as well as the pre-approval speculation period and the time since launch.
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