MSTR, mNAV, and the Future of Bitcoin Treasury Reserves

This article analyzes the true value of Bitcoin treasury reserves, focusing on MicroStrategy (MSTR) and the concept of mNAV (market cap to net asset value). It challenges traditional financial metrics and argues that Bitcoin-centric companies are reshaping stock valuation.

Challenging Traditional Metrics: Free cash flow per share (FCF/Share), a key metric in traditional investing, is compared to Bitcoin per share for companies holding Bitcoin. The article questions why investors accept high P/E ratios for growth narratives in traditional finance but scrutinize premiums for Bitcoin holdings.
The Rise of mNAV: mNAV is presented as a new valuation tool similar to a P/E or P/B ratio. It reflects the premium investors pay for a company’s ability to acquire Bitcoin more efficiently than individuals could. The current S&P 500 P/B ratio (~5.4) is noted to be similar to MSTR’s historical mNAV range.
Why Bitcoin Premium Exists: The premium is justified by:
- Trust in growth plans and operational leverage.
- Access to cheap capital (e.g., near-zero interest convertible debt).
- Bitcoin’s exceptional compounding growth rate (60-80% annually over the past 5-10 years).
mNAV Discounts and Value Traps: Companies trading below mNAV may indicate market skepticism due to weak governance, fragile financing, or operational risks. However, MSTR is highlighted as a resilient company that held Bitcoin even during the 2022 bear market, avoiding value trap pitfalls.
MSTR’s Financial Advantage: MSTR uses innovative financial tools like convertible bonds to accumulate Bitcoin without diluting shareholder value. This creates a flywheel effect where more Bitcoin enables more borrowing, deserving a substantial premium.
Market Signals: Technical analysis suggests MSTR is at a key support level (~$353), with indicators showing oversold conditions and potential for mean reversion. The stock’s lag behind Bitcoin is seen as a buying opportunity, as fundamentals (Bitcoin per share) continue to improve.

The conclusion is that companies like MSTR are not merely buying Bitcoin but are fundamentally changing how stocks are valued, with long-term potential for significant shareholder value.

Author: On-Chain Mind

Compiled by Shaw Golden Finance

There are some concepts in finance that most of us accept without truly questioning them. Think price-to-earnings ratios, "fair value" metrics, and even the belief that the value of money itself will remain stable. But when you step back and think about it, some of these ideas start to look less like immutable laws of nature and more like collective beliefs bolstered by tradition.

This article delves into the concepts of the Market Capitalization Strategy (MSTR), the Market Capitalization to Net Asset Value (mNAV), and how these concepts fit into the evolving world of Bitcoin-centric companies. It offers a more fundamental and philosophical perspective on this new type of company, connecting familiar concepts from traditional finance (TradFi) while questioning the assumptions many investors take for granted.

In the end, you’ll understand that companies like MSTR aren’t just “buying Bitcoin”—they’re reshaping what stock values are likely to look like over the next decade.

Let's get started.

Key Points at a Glance

Challenging Traditional Metrics: Free cash flow per share (FCF/Share), the North Star of traditional stock investing, bears a close resemblance to Bitcoin per share for companies with Bitcoin reserves.
The power of the growth narrative: Investors are betting on long-term growth, despite many unknowns, which complements Bitcoin’s exceptional compounding rate.
mNAV is the “new P/E ratio”: it is not only a valuation tool, but also indicates operational strength, financing capabilities, and investor confidence in holding Bitcoin.
Technical Signals for MSTR: Indicators such as the 200-day chart and Z-score Probability Wave suggest that the company's current price of around $350 is an attractive entry point.

FCF/Share: The North Star of Traditional Investing

If you simplify the essence of stock investing, one metric tends to stand out: free cash flow per share (FCF/Share).

Why? Because free cash flow represents the actual cash a company generates after paying for operating expenses and capital investments.

Free cash flow per share is often considered the ultimate measure of a stock's effectiveness at returning capital to shareholders, whether through dividends, buybacks, or reinvestment. Consistently growing free cash flow per share by 15% annually is often called "outstanding" because, compounded at that rate, the stock would double in value approximately every five years—a feat that few companies in the world can consistently achieve.

This is why the market assigns premium valuations to these companies, typically trading between 25 and 30 times earnings. In some cases, investors are willing to accept multiples exceeding 100. At first glance, this may seem absurd—many companies never see the expected returns. But the reason is simple: growth. If the story is compelling enough, investors will pay a premium.

The madness of high price-to-earnings ratios

The willingness to pay exorbitant price-to-earnings ratios for earnings is one of the most widely accepted quirks of the investing world. Few people stop to consider why. But if you step back and see, people are essentially betting on an unknowable future.

Will this company still exist in 25 years?
Will it still dominate its industry?
Will the compounding of earnings continue uninterrupted?

Despite these uncertainties, the growth narrative itself has become a currency. Markets accept it as the gold standard.

The reason is that if a lot of people believe in a company's growth, that narrative can drive its stock price higher for years to come. This concept is widely accepted in the investing world, but when you simply break it down, do a little philosophical thinking, and consider what's really going on, it's actually pretty crazy.

The rise of mNAV

Now, apply this logic to Bitcoin Treasury Reserves. The same concept is currently playing out in the Bitcoin Reserve space. mNAV (market capitalization to net asset value) is the “premium” investors pay for a company to acquire more Bitcoin in an efficient manner that they couldn’t achieve on their own.

I like to compare it to the "new age" P/E ratio (price to earnings). In reality, it's more conceptually similar to the P/B ratio (price to book value), although that term is less familiar to the average investor. Interestingly, the S&P 500's current P/B ratio is approximately 5.4, with a historical range of 1.5 to 5.5, which is strikingly similar to MSTR's historical average mNAV.

The price-to-book ratio measures a company's market value relative to its book value (assets minus liabilities). It indicates how much investors are paying for each dollar of net assets.

It's refreshing to see many investors question why we pay a premium for the underlying Bitcoin asset, rather than blindly accepting it like we do with many aspects of traditional finance. We should question why things are priced the way they are. I think this is a huge advantage for the average Bitcoin investor: being able to question widely accepted views simply because "that's how it's always been done."

Why does the Bitcoin premium exist?

Trust in Growth Plans – The company will find ways to grow its portfolio faster than an individual could.
Access to cheap capital – something that the average investor will never be able to achieve.
Operating leverage – using structures such as convertible debt or equity financing to achieve faster expansion.

Could you get a loan at around 0% interest to accumulate more Bitcoin? Hardly. This is where the best Bitcoin reserve companies—especially larger and more committed ones like Strategy (MSTR)—come in.

Specifically, companies like MSTR utilize convertible bonds, where lenders accept lower interest rates in exchange for the right to convert to equity. This effectively subsidizes the accumulation of Bitcoin. In traditional finance, this is similar to how tech growth companies use leverage to scale without immediate dilution.

But if a 15% annual growth rate in free cash flow per share for traditional financial stocks is considered "exceptional," then why do we value companies like MSTR that hold Bitcoin at a 1.5x premium (or perhaps a 4x to 5x premium), given that Bitcoin has grown at a compound annual growth rate of 60% to 80% over the past 5 to 10 years?

I believe this is a major concept that the broader investment community still doesn’t understand: Bitcoin is a top-five asset class globally and is steadily consuming global capitalization. This is a major reason why I’m bullish on companies like MSTR for the long term.

mNAV Discounts: Pitfalls and Real Signals

So, can a company trade at an mNAV below 1? Absolutely. According to Bitcoin Treasuries, 21 of 167 publicly traded companies (about 13%) trade at a discounted mNAV.

This is very similar to why some stocks trade at extremely low price-to-earnings ratios, such as 5. Many traditional financial investors fall into this "value trap," believing they've bought a bargain because the stock price is low. But in reality, most of the time, the low stock price is because the company hasn't delivered on the performance promises investors expected.

I believe the concept of a value trap also applies to Bitcoin Reserve. For companies trading at a discount to mNAV, this suggests market skepticism, perhaps related to the following factors:

weak governance;
fragile financing models;
Operational risks of current business.

In fact, it may also indicate that investors have confidence in the ability of these companies to hold Bitcoin, because, mathematically speaking, when mNAV is below 1, it is actually in the company's shareholders' interest to sell Bitcoin to buy back shares.

But companies like MSTR resisted this temptation. Even during the 2022 bear market, when their mNAV fell below 1, they restructured their debt to preserve their entire Bitcoin holdings. This is why I'm fairly certain MSTR doesn't fall into this category. I have no doubt they would have continued to hold all their Bitcoin even under less favorable circumstances. This long-term holding philosophy stems from Michael Saylor's vision of Bitcoin as pure collateral.

I have less confidence in the other 166 listed companies. The only company I would put in the "HODL" category is Japan's Metaplanet.

Therefore, mNAV isn't a simple buy or sell signal—it's a perspective. A premium can indicate confidence or hype, while a discount can reflect distress or value. The key lies in the context:

How much has the company's Bitcoin per share increased?
Does it have other revenue streams to support the valuation?
How resilient is its funding model during market cycles?

The Financial Magic of MSTR

What truly distinguishes MSTR from other Bitcoin reserve companies is its diversified fiat financing capabilities, which enable it to efficiently purchase its Bitcoin holdings. Its low-cost financing tools, such as convertible bonds and a growing list of preferred stock offerings, enable it to rapidly expand its Bitcoin holdings without diluting the interests of ordinary MSTR shareholders.

For example, convertible bonds allow borrowing at a near-zero effective interest rate when converted into equity during a bull market. This creates a flywheel: More Bitcoin increases the value of the collateral, enabling more borrowing. In my view, this kind of financial wizardry deserves a substantial premium, just as in traditional finance, Nvidia commands a reasonable P/E multiple because its free cash flow per share is growing much faster than almost any other company.

For most people, this concept is completely new. Bitcoin Reserve aims to increase the number of Bitcoins per share as quickly as possible, while traditional financial firms aim to increase free cash flow per share as quickly as possible. It's the same concept. One side wants to grow pure capital that will appreciate by at least 30% to 50% annually for the foreseeable future, while the other side is trying to accumulate their favorite fiat currency, which is depreciating by 8% to 10% annually.

I know which company will be more likely to create more value for shareholders in ten years if they continue to develop according to their respective strategies.

Market Signals

Finally, let’s take a quick look at some charts to uncover some potential value opportunities.

The 200-Day Chart Signals Strength: MSTR is poised to show a green signal dot on its 200-day chart for the second time in this cycle, trading at its 200-day moving average of $353. This level serves as key support for bulls, marking the beginning of this rally. A breakout at this level could signal strong upside potential.

Z-score probability wave: MSTR's stock price has fallen to -2 standard deviations, which also happens to be $353. Historically, during this bull market, a drop below -1 standard deviation has often signaled significant price volatility. If the macro outlook remains positive, a reversion to the mean is likely.

Oversold Conditions: My mean reversion oscillator (which uses a similar logic to the RSI relative strength index) shows that MSTR is in deeply oversold territory. Past exposure to these levels has often led to short-term rallies, sometimes even significant gains.

MSTR Investment Opportunity Priced in Bitcoin: MSTR's risk oscillator is at one of its lowest values when priced in Bitcoin, which is a strong signal for investors in a low-tax environment to shift investments from Bitcoin to MSTR. Historically, such lags in MSTR's stock price relative to Bitcoin are often quickly recovered.

Why I'm Not Worried About MSTR's Lagging Stock Price

So, am I concerned that MSTR's stock price is lagging behind Bitcoin's current gains? Not at all. Its mNAV may have compressed to about 1.5, but the true measure of its Bitcoin strategy remains intact: the number of Bitcoins per share it owns is still increasing week-over-week. That, for the most part, is all I care about.

Just like traditional stocks, their free cash flow per share may increase year after year, but their stock price can fluctuate wildly. Such is the wonder of irrational investor psychology. But if fundamentals continue to improve (for example, the number of Bitcoins per share continues to increase), I'd be eager to jump at the opportunity to buy this company at a discount. Because, as we all know, when investor sentiment shifts and the P/E ratio eventually expands again, this stock has the potential to generate significant profits.