To The Moon

$YIELDMAX MSTR OPTION INCOME STRATEGY ETF(MSTY)$ 

$MicroStrategy(MSTR)$  

Yieldmax MSTR Option Income Strategy ETF offers income through covered calls on MicroStrategy stock, providing dividends and mitigating volatility risks in a potential higher-for-longer interest rate environment.

MicroStrategy's leveraged Bitcoin strategy may face challenges in 2025 due to its rate sensitivity and the incoming U.S. administration taking time to ease regulations, making MSTY a safer income-focused alternative.

MSTY's income strategy, through selling call options, delivers regular dividends and cushions against volatility, outperforming other income-focused investments like ProShares Bitcoin Strategy ETF.

For those prioritizing regular income over capital gains, MSTY is a better option, though near-term volatility is expected as the new government settles in.

On a cautionary tone, one of the trade-offs of the income strategy is having to forego the larger capital appreciation obtained by directly owning the stock itself.

Also, one cannot exclude volatility risks because of the high expectations built into Bitcoin's (BTC-USD) price after the election of a crypto-friendly President, especially if the incoming U.S. administration takes time to execute its promises about easing regulations and building a national Bitcoin reserve.

Amid such a backdrop, this thesis aims to show that MSTY which has delivered significant total returns as per the above orange chart, is better for Bitcoin exposure going into 2025 because of the risks associated with MicroStrategy's leveraged approach to crypto investing.

MicroStrategy's Appeal May Falter in 2025

In this connection, I was bullish on the stock back in June based mainly on the Fed cutting down rates, and it has already appreciate by more than 100% since then. Moreover, from an IT play, the company has transformed its business model to be among the top holders of Bitcoin with about 331,200 held according to an SEC filing dated November 18. Subsequently, it purchased additional coins with an estimated total of 444,262 BTC on December 23.

Furthermore, its strategy to continually spend cash generated from its software operations, contract debt, and issue equity has enabled it to position itself as a key corporate holder of BTC, second only to BlackRock’s iShares Bitcoin Trust (IBIT). More importantly, it has outperformed Bitcoin by more than four times during the last 3 years as shown in the orange chart below, and, this, despite the approval of several spot ETFs in January this year. Thus, investors have continued to trust the stock confirming its role as a Bitcoin proxy.

However, it remains highly rate sensitive.

Thus, looking further at the price action, it started surging around November 19 after the Federal Reserve cut interest rates by 50 basis points as highlighted in green below. This is explained by its Bitcoin holdings being financed mostly by debt, meaning a lowering of the cost of capital improves finances.

MSTY's Income Means a Better Total Return

Looking deeper into the strategy, it is tied to MicroStrategy's stock performance and involves selling call options, which allows the fund managers to collect premiums that are eventually paid as distributions to shareholders. Thus, the fund has paid dividends regularly almost every month since its inception in February this year. Also, the yields of 93.35% paid on a trailing twelve-month basis exceed the mean for all other ETFs by a whopping 3,300% as shown below.

MSTY Appears better Positioned than a Direct Investment in MicroStrategy

Therefore, in a macroeconomic environment where rates are maintained at their present level or even raised as the Fed monitors the inflationary effects of the tariffs potentially imposed on imports from the rest of the world, and migration control measures, MicroStrategy's share price may not benefit from the same momentum created by the earlier 50 basis point rate cuts. On the contrary, as a leveraged stock, the disproportionately high gains it has enjoyed from Bitcoin's price moves may work against it.

Moreover, as an alternative, the Yieldmax ETF has been closely shadowing MicroStrategy and has a 0.96 correlation with the stock, except, during periods of extreme Bitcoin fluctuations. Thus, for those wishing to remain invested in BTC, MSTY is a better option as it can mitigate the effects of volatility potentially engulfing MicroStrategy in case market conditions become unfavorable.