BITCOIN FELL 0.9% FRIDAY — STRATEGY FELL 9.6% — THE PREMIUM THAT PAYS FOR ITS BITCOIN SHRANK BY MORE THAN HALF IN ONE DAY

Bitcoin had a quiet week. IBIT, BlackRock’s bitcoin fund, closed Friday, October 16, down 0.9% on the week and 0.9% on the day. The stocks built around bitcoin had a bad one. Strategy (MSTR) lost 11.3% on the week and 9.6% on Friday alone, closing at $136.83 after a low of $134.11. Riot lost 11.5% Friday, CleanSpark 10.2%, Marathon 9.6% and Nakamoto 11.9%. Two things hit in three days.

Wednesday, CPI. The BLS said September consumer prices rose 3.7% from a year earlier, and 2.6% without food and energy. The Nasdaq 100 fell 2%, IBIT 1.9% and MSTR 5.9%. Strive (ASST) fell 10.5% on its heaviest volume in at least four months. Bonds shrugged. The 10-year Treasury yield closed at 5.19%, down from 5.21%.

Thursday, MSCI. MSTR closed up 5.6%. Then at 4:48 PM ET, after the bell, MSCI said “non-operating companies” can’t be in its indexes. It’s a general rule, not a bitcoin rule. Yellow Cake, which holds uranium, is on the cut list. So is Metaplanet. MSCI’s list marks Strategy “Deleted,” and Strategy is $40.3 billion of float, 93.6% of the whole list. The final list comes November 11, and the selling happens at the close on November 30. Strategy says funds tracking MSCI hold about 13 million of its shares. At Thursday’s close that’s about $2 billion, less than one normal day of trading. Friday took back Thursday’s gain and then some.

The preferreds held. STRF lost 0.5% Friday, STRD 1.4% and STRC 1.8%. STRK, the one that converts into common stock, lost 3.5%. That isn’t only the design working. From September 21 to October 11, Strategy’s filings show $520.4 million spent buying back STRC and no preferred sold. STRC still closed at $97.72, under its $100 target.

The number that matters. Strategy pays for bitcoin by selling stock for more than the bitcoin behind it. Take its 848,250 bitcoin, subtract $6.8 billion of debt and $13.8 billion of preferred, add back $5.5 billion of cash, and compare what’s left to the stock’s market value. Thursday the stock traded at about 1.16 times that. At Friday’s close it was about 1.07. The version most sites quote, enterprise value over bitcoin, went from about 1.13 to 1.05. Either way, the premium shrank by more than half in one day. That premium is why selling new stock helps the people who already own it. At 1, it’s gone. At Friday’s bitcoin price, that line is about $128 a share, $8.52 under the close. Over the last three weeks Strategy sold $282.9 million of common stock, and its weekly bitcoin buys fell from 1,665 coins to 250.

MSCI’s $2 billion is a one-day problem. A premium this thin is a problem every week. Next up: the Fed decision and Strategy’s vote on daily preferred dividends, both October 28. If the vote passes, STRC pays a dividend every day in November, a dollar a share in all. Then MSCI’s final list on November 11 and the cut at the close on November 30. At the time of this writing, bitcoin was $81,638.