Strategy vs Bitcoin ETFs: a comparative analysis

Strategy (formerly known as MicroStrategy) and Bitcoin ETFs represent two distinct approaches to gaining Bitcoin exposure in traditional financial markets. This analysis examines the key differences, advantages, and considerations between these investment vehicles.

Structure differences

Strategy’s approach

Strategy operates as a Bitcoin treasury company that buys and holds Bitcoin as its primary reserve asset. The company currently holds 538.200 Bitcoin, representing 2.56% of the total Bitcoin supply. Unlike ETFs, Strategy uses multiple capital levers to increase its Bitcoin holdings:

  1. Traditional debt
  2. Convertible debt
  3. Equity issuance
  4. At-The-Market (ATM) offerings

ETF structure

Bitcoin ETFs operate as passive investment vehicles that track Bitcoin’s price. They provide a straightforward one-to-one exposure to Bitcoin price movements, with daily redemption windows and simple trading mechanics through traditional brokerage accounts.

Performance comparison

Strategy’s leveraged performance

Strategy’s structure allows it to potentially outperform both Bitcoin and ETFs through intelligent leverage. The company’s current performance metrics show:

  • Bitcoin yield year to date: +10.97%
  • Earnings per share (TTM): +USD 19.90
  • Total gain in current quarter: -USD 5.34 bln

ETF tracking

ETFs typically provide direct price exposure to Bitcoin with minimal tracking error. However, they lack the potential amplified returns that Strategy’s leverage model can provide during bull markets.

Cost analysis

Strategy’s cost structure

Strategy’s cost basis per Bitcoin stands at USD 67,766, with an annual interest expense of USD 34.6 mln on its convertible debt, representing an interest rate of 0.421%.

ETF fee comparison

Bitcoin ETFs charge management fees typically ranging from 0.20% to 0.25% annually. Strategy, as a operating company rather than a fund, doesn’t charge direct management fees to shareholders.

Investment benefits

Strategy’s unique advantages

  1. Largest corporate holder of Bitcoin
  2. Downside protection through corporate structure
  3. Financial leverage capabilities
  4. Generated yield through capital market activities
  5. No direct management fees
  6. Accretive dilution potential
  7. International gateway for institutional investors
  8. Deep liquidity
  9. Bitcoin Bank potential
  10. Index inclusion benefits

ETF advantages

  1. Simple one-to-one Bitcoin exposure
  2. Daily liquidity
  3. Straightforward pricing mechanism
  4. No corporate governance risk
  5. Regulated investment structure
  6. Ease of trading

Conclusion

While both investment vehicles provide exposure to Bitcoin, they serve different investor needs. Strategy offers a leveraged, actively managed approach with potential for outperformance through its treasury operations and capital market activities. Bitcoin ETFs provide a simpler, more direct exposure to Bitcoin price movements with lower complexity but also lower potential for outperformance.

Strategy’s current market metrics demonstrate its significant scale, with a market capitalization of USD 92.25 bln and an enterprise value of . The company’s model has created a unique position in the market, offering investors a different way to participate in Bitcoin’s growth while potentially benefiting from corporate strategy and capital market operations.

For investors seeking straightforward Bitcoin exposure, ETFs may be the preferred choice. However, for those looking for potential outperformance and willing to accept additional complexity and corporate risk, Strategy presents a compelling alternative with its unique business model and market position.