MSTR, mNAV, and the Future of Bitcoin Treasury Reserves

Source: On-Chain Mind, compiled by Shaw Jinse Finance. There are some concepts in finance that most of us accept without truly questioning. 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 reflect, some of these ideas begin to look less like immutable laws of nature and more like collective beliefs underpinned by tradition. This article delves into the concepts of MSTR (Market Capital Strategy), the market capitalization-to-net asset value (mNAV) ratio, 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. Ultimately, you understand that companies like MSTR aren't just "buying Bitcoin"—they're reshaping what stock valuations might 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 equity investing, bears a close resemblance to Bitcoin per share for companies holding Bitcoin reserves. The Power of the Growth Narrative: Investors are betting on long-term growth, despite numerous unknowns, which complements Bitcoin's exceptional compounding rate. mNAV is the "new P/E ratio": More than just a valuation tool, it signals operational strength, financing capabilities, and investor confidence in holding Bitcoin. MSTR's Technical Signals: Indicators like the 200-day chart and the Z-score Probability Wave suggest the company's current price of approximately $350 is an attractive entry point. FCF/Share: The North Star of Traditional Investing When stock investing is simplified to its core, 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 viewed as the ultimate measure of a stock's effectiveness in returning capital to shareholders, whether through dividends, buybacks, or reinvestment. Consistent 15% annual growth in free cash flow per share is often called "exceptional" because, compounded at that rate, the stock's value doubles approximately every five years—a feat few companies in the world can consistently achieve. This is why the market assigns premium valuations to such 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 willingness to pay exorbitant multiples for earnings is one of the most widely accepted quirks of the investing world. Few stop to consider why. But if you step back, you see that 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 earnings growth continue uninterrupted? Despite these uncertainties, the growth narrative itself has become a currency. The market embraces it. Because if many 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 dissect it, do a little philosophical thinking, and consider what's really going on, it's actually pretty crazy. 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 capitalization relative to its book value (assets minus liabilities). It shows 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 as they 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: the ability 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 - Companies will find ways to grow their portfolios faster than individuals. Access to cheap capital—something the average investor will never be able to access. Operating leverage—using structures like convertible bonds or equity financing to expand faster. 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 MSTR (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 Bitcoin accumulation. 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," why do we value companies like MSTR that hold Bitcoin at a 1.5x premium (or even 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 key 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 key reason why I'm bullish on companies like MSTR 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 (approximately 13%) trade at a discount to their mNAV. This is very similar to the reason some stocks trade at extremely low price-to-earnings ratios, such as 5x. Many traditional financial investors fall into this "value trap," believing they've bought a bargain because the stock price is low. However, in reality, most of the time, the low stock price stems from the company failing to deliver on the performance promises investors expected. I believe this concept of a value trap also applies to Bitcoin Reserve. For companies trading at a discount to their mNAV, this suggests market skepticism, perhaps related to:

  • weak governance;

  • fragile financing models;

  • operational risks in the current business.

  In fact, it may also indicate investor confidence in the ability of these companies to hold Bitcoin. Mathematically, when mNAV is below 1, it's actually in a company's shareholders' interest to sell Bitcoin to repurchase 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 retain their entire Bitcoin holdings. That's why I'm fairly certain MSTR doesn't fall into this category. I have no doubt they'll continue 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'm not quite as confident about the other 166 publicly traded companies. The only company I'd 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 per-bitcoin earnings increased? Does it have other revenue streams to support its valuation? How resilient is its funding model across market cycles? MSTR's Financial Wizardry What truly distinguishes MSTR from many other Bitcoin reserve companies is its diversified fiat funding capabilities, enabling it to efficiently purchase its Bitcoin holdings. Its low-cost financing tools, such as convertible bonds and a growing list of preferred stock offerings, allow it to rapidly expand its Bitcoin holdings without diluting ordinary MSTR shareholders. For example, convertible bonds allow for 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 it to borrow even more. In my view, this financial wizardry deserves a substantial premium, much like how, in traditional finance, Nvidia commands a reasonable P/E multiple because its free cash flow per share growth far outpaces that of almost every other company. For most people, this is a completely new concept. Bitcoin Reserve wants to increase the number of Bitcoins per share as quickly as possible, while traditional financial companies want to increase free cash flow per share as quickly as possible. It's the same concept. One is simply trying to grow pure capital that will appreciate by at least 30% to 50% annually for the foreseeable future, while the other is trying to accumulate their favorite fiat currency, which is depreciating by 8% to 10% annually. I know which company is more likely to create greater shareholder value over the next decade, based on their respective strategies. Finally, let's take a quick look at some charts to identify some potential value opportunities. 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 happens to be $353. Historically, during this bull market, a drop below -1 standard deviation has often signaled significant price volatility, and if macroeconomic conditions remain positive, a reversion to the mean is likely. Oversold Conditions: My mean reversion oscillator (which uses a similar logic to the RSI) suggests that the MSTR is in deeply oversold territory. Past sessions at these levels have often led to short-term rallies, sometimes even significant gains.
  

  

  MSTR Investment Opportunity Priced in Bitcoin: When priced in Bitcoin, MSTR's risk oscillator is at one of its lowest values, which is a strong signal for investors in a low-tax environment to shift investment from Bitcoin to MSTR. Historically, this lag in MSTR's stock price relative to Bitcoin is often quickly made up. So, with all of this said, am I concerned that MSTR's stock price is lagging behind Bitcoin's current gains? Not at all. Its mNAV may have compressed to around 1.5, but the true measure of its Bitcoin strategy remains intact: the number of Bitcoins per share is still increasing week-over-week. And that, for the most part, is all I care about.

  Like traditional stocks, their free cash flow per share may increase year after year, but their stock price may fluctuate wildly. That's the magic of irrational investor psychology. But if fundamentals continue to improve (such as the number of Bitcoins per share continuing to increase), I would be eager to seize the opportunity to buy this company at a discount. Because as we all know, when investor sentiment turns and the P/E ratio eventually expands again, this stock has the potential to generate huge profits.