Remember when the first “Bitcoin President” was elected?  Bitcoin went up 60%, from under $70,000 in November to and all-time high of $108,000 by the middle of December.  Since then, nothing.

How is that possible?  If everyone is buying Bitcoin, why has it entered a new consolidation pattern?  Here’s a closer look:

Bitcoin is trading today, February 1, 2025, at the same price it was on December 5, 2024, around$102,000.

And a one-month view shows a down-channel:

Is the bull market over?

I doubt it.

In the last twelve months, Bitcoin has increased by 145%, which does not sound like the end of a bull market. It has also fallen 7% since its all-time high, which does not look like a crash to me.

Bitcoin is a highly volatile asset. Long-term holders, or HODLers, are sitting on massive gains, so it is only reasonable to assume that they would cash in some of their coins, and that’s what they are doing.

It’s perfectly logical.

Bitcoin could correct back to $90,000 or even $70,000, which would be expected.

Microstrategy Inc.

This brings us to our favourite Bitcoin proxy,  MSTR—Microstrategy Inc.

Over the past year, it has been highly volatile, but it is trading in a nicely sloping up channel:

At the moment, it is roughly in the middle of the up channel. Resistance is around $183 and $293, which are conversion prices of some of their convertible debt. A drop to $250 would not violate the channel, and neither would a pop-up over the all-time high of $525.

They announce earnings after the market closes on Wednesday, February 5.  I expect it to be a non-event.  Future earnings will be much more interesting.

The new FASB accounting rules, specifically ASU 2023-08, are set to significantly impact MicroStrategy due to its substantial holdings in Bitcoin. Here’s a detailed breakdown of the implications:

Under the new rules, effective January 1, 2025, companies can measure digital assets like Bitcoin at fair value, allowing for unrealized gains and losses to be recorded in net income each reporting period. This change departs from the previous practice of only recognizing impairment losses. For MicroStrategy, this means recognizing the current market value of its Bitcoin holdings, potentially reflecting a more accurate financial health on its balance sheet.

Adopting the new accounting standard could significantly increase MicroStrategy’s reported EPS. Estimates suggest that early adoption could increase the company’s 2024 beginning retained earnings by approximately $3.1 billion, translating to a massive gain per share, potentially over $300 for the first quarter of 2024. This could dramatically affect how investors perceive MicroStrategy’s profitability.

Note that these accounting rule changes don’t change Microstrategy’s business. They just allow them to recognize Bitcoin unrealized gains as income. So, for the uninformed investor or computer algorithms, it will appear that MSTR has generated a massive profit. That could move the stock price, but not until the new rules come into force for reporting periods after January 1, 2025.

So, how do you play it, assuming you believe the price of Bitcoin will trend higher?

The obvious answer is to buy and hold.

The more aggressive answer is to sell covered calls against your holdings of Microstrategy.  The trick here is to decide how far out you issue the calls.

Over the last month, Microstrategy has traded in the range of $285 to $405.  It closed on Friday at $335.  If you don’t want to risk losing your shares you sell calls at $410.  At the close on Friday the MSTR $410 calls, expiring February 21 (so two weeks out) closed at $8.60.  That’s a “juice” of $8.60 / $335 = 2.5%.  So, in theory, you could generate 2.5% every two weeks, or 65% return per year, simply by selling far out-of-the-money calls.

The risk, of course, is that if Microstrategy runs to over $405 in the next two weeks, you lose any further upside.  Perhaps you don’t care.  If your shares get called at $405, you’ve made $70 in addition to the premium, a return of 21%, which isn’t bad for two weeks’ work.

I’ve sold calls over the last two weeks and pocketed the premium, because MSTR was relatively stable.  I will likely do the same again this week.

Of course you don’t have to own the underlying shares.  You could buy long-dated call options, and then sell covered calls against them.  More risk, more return.

Tariffs

Finally, how will the Trump Tariffs impact Canada?

I have no idea.  I assume it will be much ado about nothing.  Trump is using the threat of tariffs to get what he wants (better border security).  The Canadians will make some efforts, and Trump will ease off.

That’s my guess, but who knows.

Tune in next week and find out.

 

 

 

 

Bitcoin – New High Incoming

by JDH on January 18, 2025

I’ll keep this brief.  As I write this at 7:15 am on Saturday morning, Bitcoin is at $103,000 USD ($150,000 CDN) and appears poised to exceed the all-time high of $108,000 within the next few days.

While that is interesting, the real question is: what’s next?

My guess is that $108,000 will be significant resistance, and so a pullback is possible.  It’s also possible that Bitcoin will run to $115,000 due to the Trump inauguration and the promise of a more crypto friendly administration.  After that, who knows.  Profit taking seems inevitable.

If you are a long term HODLer, this is all noise.  Ignore it.

If you want to trade it, good luck.

We’ll know more next week.

Enjoy.

Bitcoin: Stuck in a Trading Range: Will it Break Out Up or Down?

January 11, 2025

Let’s zoom out and look at a five-year chart of Bitcoin.  I’ve drawn a red resistance line, joining the two previous all-time highs in 2021. Now, let’s zoom in.  Here’s the chart for the last three months: As you can see, from around November 11, 2024, to around December 19, 2024, Bitcoin stayed in a […]

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Interesting Close on Friday for Microstrategy

January 4, 2025

It’s been a fun ride on  MSTR—Microstrategy Inc. Since November 11, 2024, MSTR has gone up 84% in ten days, but then it “round-tripped” and gave it all back, so 50 days later, it was back where it started. Since bottoming on New Year’s Eve at just under $293, it has been up almost 20% […]

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Bitcoin and MSTR: The Action Starts in January

December 28, 2024

I did a Deep Dive on Microstrategy last week. This week, nothing much happened, which isn’t surprising since it was Christmas week, and many participants were on vacation. In the last five days, the price of Bitcoin has remained flat. MSTR—Microstrategy Inc. closed at $330, which is exactly the price it traded at on Christmas Eve. So, there […]

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MicroStrategy: A Deep Dive

December 21, 2024

MSTR—Microstrategy Inc. is a data analytics company. In 2000, Michael Saylor, then the CEO of MicroStrategy, faced significant sanctions from the U.S. Securities and Exchange Commission (SEC) due to accounting irregularities. Here’s the story. In March 2000, at the height of the dot-com boom, MSTR hit $333 per share.  But, that same month, MicroStrategy announced […]

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Microstrategy Added to QQQ

December 14, 2024

As expected,  MSTR—Microstrategy Inc. will join the Nasdaq 100 Index effective before the market opening on Friday, December 23, 2024. The QQQ, and other related tracking funds, will buy MSTR to track the index.  Estimates vary, but it’s possible that Microstrategy could see an initial influx of approximately $2.1 billion in share purchases from ETFs that track […]

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Are we at a Bubble Top?

December 7, 2024

Many “experts” predicted the S&P500 would hit 6,000 this year.  It closed at 6,090 on Friday.  Has it reached its limit? Perhaps, but in my roughly drawn up-channel, there would appear to be more room to run.  My working theory is that the market will continue to run up to the Trump inauguration, which may […]

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A Less Eventful Week Than Expected

November 30, 2024

Last week, I discussed Bitcoin $100,000 and the Microstrategy Rocket Ride.  This week, neither of those things happened.  Bitcoin got as high as $99,800 but did not crack the elusive $100,000 barrier, and MSTR—Microstrategy Inc. was down on the week by around 5%. The hype did not live up to reality. The hype is that Microstrategy […]

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Bitcoin $100,000 and the Microstrategy Rocket Ride Continues

November 23, 2024

Last week, I asked a simple question: Microstrategy: Is the Bump Over?  I said: My guess is that there is more gas in the tank. MSTR—Microstrategy Inc. gained another 24% on the week, closing at $421.88, but it was up as high as $543 on Thursday, before crashing down to the same level it had […]

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