In my post from a few day ago “Iran, oil, and stocks: taking a victory lap,” I didn’t mention Bitcoin. It would appear I was wrong about so far about Bitcoin diverging from stocks. Bitcoin has done well, at $79,000 as of writing this, an increase of 21% since early April, tracking the stock market since the bottom. So I was wrong?
This is once of those cases where I can be wrong in the short-term but have very high conviction of being right in the long-term. Zooming out, Bitcoin is repeating the same pattern as seen in the second half of 2025 and early 2026, in which it initially tracks the stocks market, only to fall inexplicably.
The catalyst in 2025 for Bitcoin’s weakness was the realization there would be no bitcoin reserve. On August 14, 2025, Treasury Secretary Scott Bessent ruled out the possibility of taxpayer-funded Bitcoin purchases, and then reiterated this later in the year. Bitcoin was trading at $118k at the time, and after peaking at $125 in October 2026, it fell in half. I believe this was the catalyst for the crash, albeit delayed, as the expectation was that the Bitcoin Reserve would be partially funded by federal purchases, the possibility of which went out the window.
There was a lot of coping at the time that “Trump would come through.” A year later–nothing. Trump never even tweets about Bitcoin. It’s DOA, as I predicted.
As of May 2026, I am shorting Bitcoin. Although it may appear I’m wrong, there is a new catalyst for Bitcoin to fall. This time it’s Michael Saylor of MicroStrategy (ticker: MSTR) breaking his pledge to not sell Bitcoin:
“We will sell bitcoin when it’s advantageous to the company,” Le said later on the same call. “We’re not going to sit back and just say, ‘We’ll never sell the bitcoin.’ We want to be net aggregators of bitcoin – increasing our total bitcoin, but more importantly, increasing our bitcoin per share because we think that is what is going to be most accretive long term for MSTR.”
For reasons that are complicated to explain, MicroStrategy is something of a Ponzi scheme. Saylor sells high-yield bonds to buy Bitcoin. MicroStrategy has 800,000 Bitcoin on its books. In the face of mounting Bitcoin losses and lack of demand, Saylor has been forced to sell Bitcoin to pay bondholders, like a Ponzi scheme. This will put downward pressure on MicroStrategy and Bitcoin.
A lot of people are asking, “Is this a bubble?” or “What inning is the bubble in?”
This is why shorting Bitcoin is so great. I don’t need to know what will happen with Trump or Iran, or if AI is a bubble (I am predicting it’s not, and was right about that too). As seen in 2022, 2025 or 2026, if the stock market falls even a little, Bitcoin will fall a lot, but it does not participate on the upside as much. So I am covered either way. Shorting Bitcoin hedges perfectly against geopolitical risk (Iran, China) or economic risk (stagflation, recession, rate hikes, etc.).
Also, Bitcoin is “old tech” and does not benefit from the “AI boom,” and is at risk of being obsoleted due to quantum computers.
So here is how I might structure the trade:
STRC is a variable-rate perpetual preferred stock instrument issued directly by Strategy. Although not a bond, it’s a suitable proxy for MSTR bonds. STRC pays out a 11% yield.
So combine STRC with IBIT/bitcoin puts, BITI, or MSTR puts. The trade can be structured in such a way that you can profit if Bitcoin falls, but otherwise the downside of the puts is negated by the STRC payouts.
Saylor will drive Bitcoin and MSTR into the ground to prop up STRC. He has implied he will sell BTC to fund STRC dividends. So this puts downward pressure on both BTC and MSTR. MSTR falls as the value of BTC holdings falls, due to Saylor selling BTC to fund STRC.
So let’s say you put 1/3 of your account in STRC and then some in Bitcoin/MSTR puts . You are getting free hedging , pretty much. If the market falls even a little bit, like 2025 or early 2026, Bitcoin will get clobbered, but STRC will be unaffected.
For example, let’s say you have $216,000. You put $70,000 to buy STRC and $140,000 in SPY. The at-the-money IBIT put which expires in ~330 days costs ~$6.5. So you can buy 10 of these ($6,500) and this is covered by the yield on STRC. Regression analysis shows that a 10% decline in the SPY equals a 30-40% decline in BTC.
So if IBIT is trading at $45 today, you will make ~$14k with this, which will hedge the $14k lost with the long SPY position, for free. This can be modified for leveraged products, too.
What if STRC fails? This would imply a significant decline in the price of Bitcoin, and MSTR stock being worthless. So the puts on MSTR and Bitcoin would negate the decline of STRC. However, STRC is still trading at par ($100) despite Bitcoin being down 40% from its highs and MSTR down 66% from its highs. Being preferred debt, STRC will be paid out in line before MSTR holders.
Even if inflation was to surge, which is bad for fixed income, Bitcoin will crash, as seen in 2022. So you will make money anyway. This method is a hedge against inflation, geopolitical uncertainty (e.g. China, Iran), tariffs, or recession. It also takes advantage Bitcoin being persistently weaker than tech stocks and capturing the downside by a factor of 3-5x when shorting to hedge, and much less or none of the upside, as seen in 2025 and first half of 2026.