10x Research: Why is no one mentioning the signals behind the extremely overvalued stock price of Metaplanet?

*This article is from *“Metaplanet Is Trading at $ 596, 154 per Bitcoin—Time to Short?”

Compiled by: Odaily Planet Daily jk

Bitcoin has risen by $15,000 in a matter of weeks—but the reasons are not what the market generally believes. The stock price of a “little-known” Japanese listed company Metaplanet reflects an implied value of Bitcoin as high as $596,154, more than five times the actual market price. Meanwhile, the Asian trading session is quietly dominating the market narrative, and a dangerous distortion of net asset value (NAV) is brewing beneath the surface of the market.

Volatility continues to decline, and the flow of retail funds is changing. The signals we observe are highly similar to key turning points in history. From Japan’s bond market to currency flows and then to crypto holding instruments (such as Metaplanet), some anomalies are occurring—but have not yet appeared in mainstream news. If you are looking for the starting point of the next big market movement, this report is worth reading.

Bitcoin vs. MicroStrategy vs. Metaplanet - Who is Most Likely Overvalued?

Core Viewpoints:

Bitcoin is undoubtedly one of the most disruptive innovations of the 21st century, yet many misconceptions surrounding it still widely exist. One of the most fundamental principles — “Not your keys, not your coins” — is rarely taken seriously. Today’s market has strayed far from Satoshi Nakamoto’s original vision of a “peer-to-peer electronic cash system.”

Today, billions of dollars in retail funds are attempting to gain exposure to Bitcoin through various financial instruments, but many of these instruments often require a high premium. In some cases, investors even inadvertently purchase Bitcoin at a price of $596,154, while the actual market price is only $109,000, resulting in a premium of up to 447%.

Some of our market views have sparked controversy, but they have been repeatedly validated by the market as highly forward-looking. It is worth mentioning that in December 2022, we pointed out that Grayscale’s GBTC was trading at a 47% discount to NAV (at that time, the price of Bitcoin was $18,000), and we listed it as a key investment recommendation for 2023 (other recommendations at the same time included Solana, which was priced at $13.70). At that time, market sentiment was extremely pessimistic, with widespread concerns about an economic recession.

On January 29, 2024, we expressed the view that “MicroStrategy may have more investment value than a Bitcoin ETF”. At that time, the company’s stock price was trading at a 7% discount compared to its Bitcoin holdings, effectively capturing the starting point of its subsequent market capitalization revaluation. We also pointed out on October 7, 2024, that MicroStrategy was poised for a breakthrough, when its stock price was $177 (it has since risen to $380).

Main Text

Most people do not understand what Net Asset Value (NAV) is and do not realize that they may be paying a very high premium when gaining exposure to Bitcoin.

Some investors believe they have gained a certain upward leverage effect, which is similar to the logic of Wall Street selling gold mining stocks to retail investors: these stocks are packaged as leveraged bets on rising gold prices, especially when institutions need to sell stocks to retail investors.

Currently, MicroStrategy’s stock price implies a Bitcoin price of $174,100, although this premium is not extreme, it is still significant. After all, when there are Bitcoin ETFs available in the market providing exposure at actual market prices (around $109,000), who would still be willing to pay such a high price? The answer often lies in information asymmetry, a lack of awareness of NAV, or effective marketing rhetoric.

Every time MicroStrategy issues new shares to retail investors, the Bitcoin value represented by these shares only accounts for a small portion of their stock price. The company profits from the price difference and packages it as so-called “Bitcoin revenue.” Existing shareholders applaud this, as new investors are essentially purchasing Bitcoin indirectly at a price of $174,100 per coin, while the company uses this capital to buy BTC at market prices. In the long run, this will dilute the net asset value (NAV) per share, and this cost will be borne entirely by the new shareholders.

Although the crypto media refers to this operation as a “masterpiece of financial engineering,” the fundamental reason for this model’s existence is that most retail investors no longer purchase full bitcoins directly, as the price of one BTC has now exceeded that of a new car (over $45,000). After the price of Bitcoin broke this psychological barrier, MicroStrategy’s NAV rapidly increased, thereby supporting its so-called “Bitcoin yield” strategy — but from another perspective, this is actually “squeezing retail investors to finance its Bitcoin empire.”

As we pointed out earlier: with the decline in volatility and the dilution of MicroStrategy’s NAV, the company’s ability to purchase Bitcoin through the issuance of additional shares is gradually being limited. However, in the past month, the company still managed to acquire $4 billion worth of Bitcoin, an operation that few can match. In contrast, Japan’s Metaplanet, despite its stock price soaring, only purchased $283 million worth of Bitcoin during the same period, currently holding 7,800 BTC (with a book value of approximately $845 million), while the company’s market value has reached $4.7 billion, corresponding to an implied price of $596,154 per Bitcoin.

Given that its average acquisition cost is $91,343 per coin, a 15% drop in Bitcoin price would completely evaporate Metaplanet’s paper profits. It should be noted that the company was merely a traditional hotel business with a market value of $40 million a year ago. With the appreciation of the yen (the dollar to yen exchange rate declining), increased capital repatriation, and the Japanese economy entering a new phase, the decrease in foreign tourists could directly impact its core business – hotels.

It is even more noteworthy that the recent rise of Bitcoin by $15,000 mainly occurred after the Bank of Japan’s policy meeting. During the meeting, officials significantly lowered economic growth forecasts, while Japanese government bond yields soared and demand for bond auctions weakened. At the same time, various Asian currencies (such as the New Taiwan Dollar) appreciated significantly, although officials denied any negotiations with the Trump administration regarding currency appreciation.

There is increasing evidence that the recent price movements of Bitcoin are mainly driven by the Asian trading session, possibly influenced by Michael Saylor’s suggestive tweets about Bitcoin purchases or a surge in retail activity in Japan. Over the past 30 days, Bitcoin has seen an overall increase of 16%, but the gains during the Asian trading session reached as high as 25%. In contrast, the US market session contributed almost nothing (with prices remaining flat), while the European session recorded a decline of 8%. This further indicates that Asia is currently the dominant force in Bitcoin pricing. If the flow of funds from Asia begins to weaken, Bitcoin may enter a consolidation period.

It is worth mentioning that Google Trends shows that there has not been a widespread retail frenzy for Bitcoin in Japan, indicating that the parabolic rise in Metaplanet’s stock price may be driven by a few speculative funds rather than a nationwide enthusiasm.

At its current market value, the stock is trading at 5.47 times its NAV, representing a 447% premium, providing an enticing opportunity for arbitrage trading. Hedge funds can express market views through a pair trade: buy 5 Bitcoins while shorting Metaplanet stock worth $550,000 (about 70,000 shares at ¥1,116 per share, calculated at USDJPY 142). The attractiveness of such trades is rising, especially in the context of Japan’s expected approval of a Bitcoin ETF within the next 12 months, at which point Metaplanet’s NAV premium may significantly compress, and valuations will trend towards rationality.

Although we accurately predicted the bullish trend of Bitcoin that started on April 12, we believe that the current price level is a reasonable time to take profits. If the price of Bitcoin breaks through $105,000, traders should consider reducing their long positions.

The options market has issued a warning signal: the implied volatility skew of Bitcoin—i.e., the difference in implied volatility between call options and put options—has fallen to nearly -10%, indicating that the market is pricing call options much higher than put options. In other words, traders are actively chasing upward momentum rather than hedging against downside risk. In our experience, such extreme skew levels often reflect that the market is in a state of extreme optimism, which is a typical contrarian signal.

Several of our technical reversal indicators, such as the RSI and Stochastic, are also currently showing signs of being overbought and are starting to reverse downwards, creating divergences from the Bitcoin price. The current gap between the price of bitcoin and our trend signals has reached $20, 000, and the gap is narrowing, indicating that the market momentum is weakening. We have maintained our bullish view since mid-April (when we were contrarian), but now believe it is wiser to reduce our exposure and wait for a more favorable time to re-enter the market.

Chart explanation: Bitcoin (left axis) and the Random Indicator (right axis) - the divergence is widening.

The gains over the past six weeks have certainly been astonishing, but the core of trading is risk-adjusted return management, rather than blindly chasing trends. At the current overvalued level, the last batch of Japanese retail investors buying Metaplanet may bear a heavy cost.

Conclusion:

Now is the time to lock in some profits. We recommended buying MicroStrategy put spread options last Friday, and so far the stock has dropped 7.5%, achieving a 66% return on that strategy. Next, Metaplanet seems likely to become the next target for a valuation correction in the coming months. Shorting it while hedging against Bitcoin is an effective way to express this judgment.

From a broader market perspective, as June approaches and the traditionally quieter summer trading period arrives, we believe that Bitcoin itself may also enter a period of consolidation. At this stage, more attention should be paid to profit-taking and risk control, rather than blindly chasing high prices.