Bybit TradFi x Crypto Report: Deep dive into Strategy: Is MSTR valuation reasonable?

Strategy (NASDAQ: MSTR), previously known as MicroStrategy, is no longer being evaluated as a conventional software firm. Its transformation into a Bitcoin-centric holding company with over 592,000 BTC on its balance sheet, valued at more than $60 billion, has fundamentally altered its investment profile. The company’s strategy of issuing low-cost convertible debt and preferred equity in order to accumulate Bitcoin has effectively turned it into a leveraged Bitcoin proxy, amplifying both upside potential and downside risk.

In terms of valuation, is it worth investing in MSTR?

Strategy presents a unique valuation challenge in 2025. At a market capitalization of approximately $108 billion, the company is trading at a price-to-sales ratio exceeding 228x, based on trailing 12-month revenue of just $471 million. From a traditional equity valuation standpoint, this would be considered extremely overvalued.

In order to evaluate the intrinsic value of Strategy (MSTR), one can disregard the company’s legacy software operations and instead focus solely on its Bitcoin holdings net of debt. This net asset value (NAV) — defined as the total value of Bitcoin owned, less outstanding borrowings used to finance its purchases — serves as a proxy for the underlying economic value of the company’s dominant asset.

MSTR data as of Jun 27, 2025. Source: strategy.com

As of the latest filings, Strategy holds 592,345 BTC, equivalent to approximately 2.8% of Bitcoin’s total maximum supply. Based on prevailing market prices and the company's balance sheet disclosures, its Bitcoin NAV remains materially below its current market capitalization, implying that the stock is trading at a 68% premium to the net value of its crypto treasury.

This premium appears significant, especially when viewed through the lens of traditional asset valuation. Whether this is justified depends upon how investors assess Strategy’s role in the Bitcoin ecosystem. Some may view this premium as reflecting the following intangible factors:

• First-mover advantage in institutional BTC exposure

• Access to capital markets that allows continued Bitcoin accumulation

• Public market liquidity unavailable through direct Bitcoin ownership

Nevertheless, the rationale for such a markup isn’t universally compelling. Given Bitcoin's decentralized nature, and the absence of historical precedent for mass liquidations by institutional holders, it's challenging to determine whether the market is overpricing this exposure — or simply front-running future demand.

In summary, while the NAV methodology offers a tangible baseline, the 68% premium underscores market expectations and speculative appetite surrounding Strategy’s role as a proxy for institutional Bitcoin accumulation. Whether this high premium is reasonable remains an open-ended debate.

However, statistically, MSTR is undervalued

Strategy’s position in the market remains highly unconventional. Whether assessed through traditional metrics like the price-to-sales or via intrinsic value approaches tied to its Bitcoin holdings, the company consistently defies conventional valuation logic.

MSTR vs. other major stocks’ performance historically. Source: strategy.com

Functionally, MSTR operates as a highly leveraged proxy for Bitcoin. This positioning has allowed it to substantially outperform most traditional asset classes — but that outperformance is closely tied to Bitcoin’s proximity to its all-time highs. In bull markets, Strategy has acted as a high-octane Bitcoin derivative, delivering amplified gains well beyond the underlying asset.

However, this leverage cuts both ways. While MSTR currently stands out for its dominant returns, its performance edge is contingent upon Bitcoin’s maintenance of momentum. In less favorable market conditions, the very attributes that drive MSTR’s outperformance could just as easily magnify losses.

MSTR: The Ballistic Acceleration Model by Marty Kendall on MSTR: how Strategy's share price could grow based on the historical relationship between BTC and MSTR. Source: strategy.com

A statistical model analyzing the historical relationship between Bitcoin’s price movements and Strategy’s stock performance estimates the fair value of MSTR at $468. Compared to its current trading price of $384, this implies a potential undervaluation of approximately 17.9%. This model underscores MSTR’s role as a high-beta proxy for Bitcoin, suggesting that the stock may be lagging relative to its underlying crypto exposure.

It’s important to note that the MSTR premium only applies to MSTR, not other stocks (or any stocks mimicking MSTR’s business strategy)

Strategy’s valuation premium is likely a product of its unique first-mover advantage, and may not be replicable by other market participants. Its status as the earliest and most aggressive corporate accumulator of Bitcoin has earned it a position that commands substantial investor attention — and a substantial valuation premium.

Source: Bitcoin Treasuries

In contrast, peers such as MARA Holdings (MARA) remain significantly smaller in both market capitalization and exposure to Bitcoin. Moreover, most corporate Bitcoin holders maintain their crypto positions as non-core treasury assets, whereas Strategy has redefined its entire corporate identity around a long-duration, high-conviction Bitcoin holding strategy.

Importantly, Bitcoin miners like MARA, Riot Platforms (RIOT) and CleanSpark (CLSK) operate under fundamentally different economic models. Their core revenues are tied to mining operations — energy, hardware efficiency and block rewards — rather than Bitcoin’s appreciation itself. While these miners hold BTC on balance sheets, their focus is on short-term profitability, not strategic accumulation or long-term stewardship of digital assets.

Ultimately, Strategy’s premium reflects its singular approach: a pure-play, high-leverage buy-and-hold Bitcoin vehicle — an identity that most other public companies are neither structurally built for, nor strategically inclined to replicate.

Strategy’s gambit appears to be working so far. However, there’s a significant risk if, due to a sharp market meltdown, it fails to meet loan covenants.

Strategy’s current capital strategy has yet to face a true stress test. Notably, its most aggressive phase of Bitcoin accumulation — funded through debt refinancing — commenced during the current bull cycle. During the prior downturn in 2021–2022, the company was relatively insulated from default risk due to a higher proportion of equity-based financing in its capital mix at the time.

At present, Strategy maintains a loan-to-value (LTV) ratio of just 11.46%, which — in comparison to real estate or structured finance benchmarks — remains well within conservative territory. This suggests that the company’s Bitcoin acquisition strategy, while bold, is currently underpinned by prudent leverage management.

Barring a sharp and unforeseen collapse in the crypto markets, it’s unlikely that Strategy (MSTR) would face credit distress. Even in a severe correction, the company would need to see its LTV rise to the 50% threshold or higher to trigger more serious concerns about liquidity or default risk. As it stands, Strategy’s financial structure appears stable — though heavily reliant on Bitcoin’s resilience.