Is Strategy Inc (MSTR) a Buy or a Short in a Volatile Crypto-Driven Market?

In the ever-shifting landscape of crypto-driven equities, MicroStrategy (MSTR) stands as a paradox: a software company that has become a leveraged Bitcoin proxy, a leveraged Bitcoin proxy that trades at a premium to its net asset value, and a stock with a short interest ratio that suggests both skepticism and contrarian potential. As the market grapples with macroeconomic uncertainty, regulatory scrutiny of digital assets, and the looming threat of index delistings, the question for investors becomes whether MSTR is a speculative short or a contrarian buy.

The Short Interest: A Contrarian Signal or a Bearish Bet?

Short interest in MSTR has surged in Q4 2025, rising 8.77% to 27.49 million shares, or 10.59% of the public float, with a short interest ratio (days to cover) of 2.1 as of November 14. By November 28, the short interest had climbed further to 30.55 million shares, or 11.61% of the float, with a days-to-cover ratio of 2.27. While these levels remain below the frenzy of 2021's GameStop saga, they reflect growing bearish sentiment.

The short interest is fueled by several factors. First, MSTR's Bitcoin-centric strategy has exposed it to the volatility of crypto markets. Second, rumors of a massive short position by JPMorgan have stoked fears of a coordinated short attack. Third, the company's leverage-financing Bitcoin purchases through debt-has raised concerns about solvency risks if Bitcoin prices collapse. Yet, for contrarians, the elevated short interest could signal a potential short squeeze. If MSTR rallies on news of index inclusion or Bitcoin's recovery, short sellers may face margin calls, amplifying upward momentum.

Earnings Revisions and Index Inclusion Risks: A Double-Edged Sword

MSTR's financial performance is increasingly tied to external factors. The company's FY2025 guidance hinges on Bitcoin price assumptions, projecting net income (loss) ranging from $(5.5)B to $6.3B depending on whether Bitcoin closes at $85,000 or $110,000. This volatility underscores the precariousness of its business model.

More critically, MSTR faces dual risks of index exclusion. The Nasdaq 100 is set to reshuffle on December 22, 2025, with analysts speculating that MSTR could be removed due to its controversial classification as a "holding company" rather than a traditional software firm. Separately, MSCI is consulting on a rule to exclude companies with 50% or more of assets in digital assets-a proposal that could force $2.8 billion in passive fund selling. MSTR has pushed back, arguing it is an operating business that uses Bitcoin as productive capital, but the outcome remains uncertain.

Index delistings could trigger massive outflows. For example, exclusion from the Nasdaq 100 could lead to $1.6 billion in passive fund redemptions, while MSCI's rule change could exacerbate selling pressure. For contrarians, these risks represent a potential overreaction. If the market prices in a worst-case scenario, MSTR could trade at a discount to its intrinsic value, offering a buying opportunity for those who believe in its long-term Bitcoin thesis.

Bitcoin Exposure: A Leveraged Bet with Asymmetric Risks

MSTR's stock price has historically exhibited a strong but imperfect correlation with Bitcoin. From 2023 to 2025, the one-year correlation ranged between 0.6 and 0.69, while shorter timeframes showed greater variability, from 0.3 to 0.9. This divergence reflects MSTR's unique dynamics: its leverage amplifies gains during Bitcoin rallies but magnifies losses during downturns.

As of late 2025, MSTR holds 650,000 BTC (3.1% of total supply), and its stock trades at a premium to its mNAV, reflecting investor optimism about future Bitcoin gains. However, this premium is fragile. In late 2025, Bitcoin's drop below $80,000 sent MSTR to $155, a 43.44% decline in its one-year performance compared to Bitcoin's underperformance. The company's leverage-financing Bitcoin purchases with debt-means its equity value is highly sensitive to Bitcoin's price. A 20% drop in Bitcoin could erase significant portions of its net asset value.

For contrarians, the key question is whether MSTR's Bitcoin exposure is a feature or a bug. If Bitcoin rebounds to $150,000 by October 2025, MSTR's leveraged structure could drive outsized returns. However, the risks of a prolonged bear market or regulatory crackdown on crypto remain unresolved.

The Contrarian Case: Buy or Short?

The case for a contrarian buy rests on three pillars:
1. Short Interest as a Catalyst: A short squeeze could occur if MSTR rallies on positive news (e.g., Bitcoin's recovery, index inclusion).
2. Index Delistings as a Pricing Overreaction: If the market overprices the risk of exclusion, MSTR could trade at a discount to its intrinsic value.
3. Bitcoin's Long-Term Thesis: MSTR's leveraged exposure to Bitcoin may outperform the asset itself if the crypto market rebounds.

Conversely, the case for a short is equally compelling:
- Structural Risks: MSTR's leverage and index exposure create tail risks that could lead to a catastrophic decline.
- Bitcoin's Volatility: A prolonged bear market could erode MSTR's net asset value and force debt restructuring.
- Regulatory Uncertainty: MSCI's proposed rule change and potential SEC action on crypto ETFs could further destabilize the stock.

Conclusion: A High-Risk, High-Reward Proposition

MSTR is a stock that defies traditional valuation metrics. For contrarians, it offers the allure of asymmetric upside if Bitcoin rebounds and the market reclassifies its risks. However, the path to such a scenario is fraught with volatility, regulatory uncertainty, and structural fragility. Investors must weigh the potential for a short squeeze or index inclusion against the risks of a prolonged bear market or forced deleveraging.

In a crypto-driven market, MSTR is neither a guaranteed buy nor a slam-dunk short. It is a speculative bet that demands rigorous due diligence, risk management, and a clear understanding of the forces shaping both Bitcoin and the broader financial ecosystem.