- Institutions used MSTR as a hedge as bitcoin derivatives liquidity thinned and on-chain options failed to meet scale.
- The Oct. 10 crash damaged market makers, reducing depth and pushing traders toward Strategy’s stronger stock liquidity.
- MSTR absorbed volatility as investors relied on its deep options market to manage bitcoin and ethereum downside risk.
Strategy shares fell 43% as institutions hedged Bitcoin, Tom Lee said in a CNBC interview Thursday at 9 a.m. ET. He described Strategy as a liquid proxy, absorbing pressure as crypto hedging options thinned across global trading venues. According to Lee, weakened market makers and poor derivatives depth forced traders toward shorting MSTR for protection.
Institutions Turn to Strategy as Crypto Hedge Route
Notably, Lee linked the shift to limited on-chain hedging capacity and shrinking bitcoin derivatives liquidity. However, large institutions required broader protection tools as direct crypto options failed to meet scale demands.
Therefore, traders increasingly chose Strategy’s deep option chain to offset sizable bitcoin and ethereum positions. Lee said Strategy holds nearly 650,000 BTC, tightening its link to bitcoin price movement. Consequently, institutions shorted MSTR shares when market access for direct crypto hedging narrowed.
Liquidity Damage After Oct. 10 Crash
Notably, Lee referenced the Oct. 10 crash that erased $20 billion and strained trading infrastructure. He explained that damaged market makers reduced depth across exchanges and derivatives venues.
As a result, liquidity across altcoins, miner stocks, and bitcoin proxies remained thin. However, Strategy continued attracting heavy hedge flows due to superior stock market liquidity. Lee compared market makers to a crypto central bank stressed by prolonged structural damage.
MSTR Absorbs Pressure Valve Role
Therefore, Strategy became a practical pressure valve for institutions managing bitcoin and ethereum risk exposure. Lee stated that investors redirected hedge pressure from crypto derivatives into MSTR short positions.
Consequently, the stock absorbed outsized volatility compared to other bitcoin-linked equities. He added that weakened market plumbing continued disrupting smooth risk management across crypto-linked assets.
Meanwhile, institutions monitored Strategy closely as liquidity stress persisted within interconnected trading systems. Notably, traders viewed Strategy’s liquidity as more accessible than bitcoin and ether derivatives markets.
However, the heavy reliance highlighted persistent gaps in direct crypto hedging frameworks across institutional operations. Lee noted that these conditions forced consistent activity around MSTR during volatile sessions. Therefore, Strategy remained central as traders managed downside exposure through stock-based hedging tools.
