Tom Lee: Short MSTR has become the preferred hedge against market declines, a phenomenon that reveals deeper structural problems.

According to Mars Finance, on November 23, BitMine Chairman and CEO Tom Lee stated that MicroStrategy has become the preferred tool for crypto investors to manage risk, which partly explains its 43% drop in stock price over the past month. "Strategy is probably the most important watchlist right now because it's both a Bitcoin proxy stock and the most liquid alternative asset," Lee said in an interview with CNBC on Thursday. Institutional traders have turned to short Strategy stock due to the limited tools available for directly hedging losses in the crypto market. The company holds nearly 650,000 Bitcoins, making its stock price closely correlated with Bitcoin's performance. "In my view, when crypto market participants are trying to hedge losses on their Bitcoin and Ethereum positions, they don't see any other way to hedge except by short their liquid alternative stocks—and MicroStrategy is the best option," Lee explained. He added that native hedging tools like Bitcoin and Ethereum derivatives are not liquid enough for large sums of money, "Any investor holding a large long position in Bitcoin... has very limited hedging capabilities in the crypto derivatives market." But Strategy provides an alternative. “Investors can use the highly liquid Strategy Options Chain to hedge all crypto asset risks,” Lee points out. “Essentially, Strategy is absorbing all the hedging pressure generated by the entire crypto industry to protect long positions.” Lee also mentions the lingering impact of the October 10th market crash, which wiped out $20 billion in market capitalization and destroyed exchange liquidity. “This completely devastated market makers,” he says, referring to them as the “central bank” of the crypto market. Since then, cracks have persisted, and liquidity remains scarce for Altcoin, mining stocks, and Bitcoin proxy assets like Strategy. In the current downturn, MSTR is one of the hardest hit assets. Lee believes this is partly due to its function as a “pressure valve” in the market. He points out that the underlying structure of the crypto market remains fragile, and the phenomenon of Strategy becoming a hedging tool reveals deeper structural problems.