Original author: 0xTodd (X: @0x_Todd)
First, get excited about our beloved Bitcoin hitting $98,000!
There is no doubt that the contributor to the 40K-70K is the Bitcoin ETF, and the contributor to the 70K-100K is MicroStrategy.
Many people now compare MicroStrategy to the BTC version of Luna, which makes me a little embarrassed because Bitcoin is my favorite cryptocurrency, and Luna happens to be the cryptocurrency I hate the most.
Hopefully this post will give you a better understanding of the relationship between MicroStrategy and Bitcoin.
First, a few conclusions are put at the beginning:
MicroStrategy is not Luna; its safety cushion is much thicker.
MicroStrategy increases its Bitcoin holdings through bonds and stock sales.
MicroStrategy's recent debt repayment date is in 2027, which is still more than 2 years away.
MicroStrategy's only soft threat is Bitcoin whales.
MicroStrategy is not Luna; it has a much thicker safety cushion than Luna.
MSTR Net Worth vs Bitcoin Price
MicroStrategy was originally a software company with a lot of unrealized gains, and it didn't want to invest in production anymore. So it started to shift from real to virtual, using its own money to buy Bitcoin since 2020.
Later, MicroStrategy bought all the money on its books and began to leverage. Its way of leveraging is off-exchange leverage, determined to borrow money to buy Bitcoin through issuing corporate bonds.
The essential difference between it and Luna is that Luna and UST print each other; essentially, UST is meaningless unanchored printing, relying entirely on a fake interest rate of 20% to barely sustain itself.
But MicroStrategy is essentially bottom-dipping + leverage, which is a standard borrowing to go long, and it has bet in the right direction.
The popularity of Bitcoin far exceeds that of UST, and MicroStrategy's influence on Bitcoin is significantly lower than Luna's influence on UST. It's a simple principle: a daily return of 2% is a Ponzi scheme, while an annual return of 2% is a bank. Quantity change causes quality change, and MicroStrategy is not the only factor determining Bitcoin, so it is definitely not Luna.
MicroStrategy increases its Bitcoin holdings through bonds and stock sales.
In order to quickly raise funds, MicroStrategy has issued multiple debts totaling 5.7 billion USD (for everyone's intuitive understanding, this is equivalent to 1/15 of Microsoft's debt).
And almost all this money is used to continuously increase Bitcoin holdings.
Everyone has used on-exchange leverage; if you want to use Bitcoin as collateral, the exchange (and other users in the exchange) will lend you money. But off-exchange leverage is different.
All creditors are only worried about one thing: that debts are not repaid. Without collateral, why would anyone be willing to lend money to MicroStrategy?
MicroStrategy's bond issuance is very interesting; in recent years, it has issued a type of convertible debt.
This convertible bond is very interesting; let’s give an example:
Bondholders have the right to convert their bonds into MSTR shares, divided into two phases:
1. Initial Stage:
If the trading price of the bond drops > 2%, creditors can exercise their rights to convert the bonds into MSTR shares and sell them to break even;
If the trading price of the bonds is normal or even rises, creditors can sell the bonds on the secondary market at any time to break even.
2. Later Stage:
When the bond is about to mature, the 2% rule no longer applies. Bondholders can either take the cash and leave or directly convert the bonds into MSTR shares.
Let’s analyze this; for creditors, this is generally a business that guarantees profit.
If Bitcoin drops and MSTR has cash, creditors can get back cash.
If Bitcoin drops and MSTR has no cash, creditors still have a final guarantee, that is, they can convert to stock and cash out to break even;
If Bitcoin rises, MSTR will rise, and creditors can give up cash to get more stock returns.
In short, this is a trade with a high lower limit and a very high upper limit, which naturally allows MicroStrategy to raise money smoothly.
Fortunately, or rather loyally, MicroStrategy chose Bitcoin.
Bitcoin has not let it down either.
2024 MicroStrategy stock price trend
As Bitcoin soared, the Bitcoins accumulated by MicroStrategy early on rose in value. According to the ancient and classic principle of stocks, the more assets a company has, the higher its market value should be.
Therefore, MicroStrategy's stock price has skyrocketed.
MicroStrategy's current daily trading volume has already surpassed this year's absolute dark horse NVIDIA. Therefore, MicroStrategy now has more options.
Now MicroStrategy not only relies on issuing bonds but can also directly issue more shares for sale to raise money.
Unlike many meme coins or Bitcoin developers who do not have minting authority, traditional companies can issue more shares after meeting the relevant procedures.
Last week, Bitcoin rising from just over 80K to the current 98K is inseparable from MicroStrategy's assistance. Indeed, MicroStrategy issued more shares, selling for 4.6 billion USD.
PS: Companies with trading volumes exceeding NVIDIA naturally have this liquidity.
Sometimes, you admire a company for making great profits, and you need to respect its great courage.
Unlike many crypto companies that sell off to cash out, MicroStrategy, as always, is fully committed. MicroStrategy reinvested all the money from selling stocks back into Bitcoin, pushing Bitcoin to 98K.
So far, you should have understood the magic of MicroStrategy:
Buy Bitcoin → Stock price rises → Borrow to buy more Bitcoin → Bitcoin rises → Stock price further rises → Take on more debt → Buy more Bitcoin → Stock price continues to rise → Issue more shares to sell for cash → Buy more Bitcoin → Stock price continues to rise...
Presented by the great magician MicroStrategy.
MicroStrategy's recent debt repayment date is in 2027, so we still have at least 3 years.
As long as there is a magician, there will be a time when the magic is revealed.
Many MSTR shorts believe that it has reached the standard left side and even doubt that it has reached the Luna moment.
But is the reality really like this?
According to recent statistics, MicroStrategy's average cost for Bitcoin is 49,874 USD, meaning it is currently close to an unrealized profit of 100%, which is a super thick safety cushion.
Let’s assume the worst-case scenario; even if Bitcoin drops 75% from its current level (which is nearly impossible) to 25,000, what will happen?
MicroStrategy borrows through off-exchange leverage, with no liquidation mechanism at all. Angry creditors can at most convert their bonds into MSTR shares at a designated time and then angrily smash them into the market.
Even if MSTR is smashed to zero, it still does not need to be forced to sell these Bitcoins because the earliest debt that MicroStrategy borrowed needs to be repaid is actually in February 2027.
You should keep an eye on this; it's not 2025, nor 2026, but Tom's 2027.
That is to say, it will have to wait until February 2027, and if Bitcoin plummets, if no one wants MicroStrategy's stock anymore, then it needs to sell part of its Bitcoin in February.
All things considered, there is still more than 2 years to keep playing music and dancing.
This is the magic of off-exchange leverage.
You may ask, could MicroStrategy be forced to sell Bitcoin due to interest?
The answer is still negative.
Due to MicroStrategy's convertible bonds, creditors are generally guaranteed to make a profit, so its interest is relatively low. For example, this bond maturing in February 2027 has an interest rate of 0%.
Creditors purely seek MSTR stock.
The interest rates on several subsequent bonds it issued are also at 0.625%, 0.825%, and so on, with only one at 2.25%, which has a very small impact, so there is no need to worry about its interest.
The main bond interest of MicroStrategy, source: bitmex
MicroStrategy's only soft threat is Bitcoin whales.
At this point, MicroStrategy has already become a causal relationship with Bitcoin.
More companies are preparing to start learning—the great maneuvering of Bitcoin's David Copperfield (Saylor).
For example, a listed Bitcoin mining company, MARA, has just issued 1 billion USD in convertible bonds specifically to prepare for bottom-fishing.
So I think shorts should be cautious; if more people begin to imitate MicroStrategy, the momentum of Bitcoin will run wild, as the space above is all vacuum.
So, now MicroStrategy's biggest opponent is only those ancient Bitcoin whales.
Just as many people predicted before, retail investors have already given up their Bitcoins; after all, there are simply too many opportunities, such as the meme trend, I just don't believe everyone is left empty-handed.
So only these whales are in the market, and as long as they don't move, this momentum is hard to stop. If we're a bit luckier, if the whales and MicroStrategy form a small tacit agreement, it could push Bitcoin towards a greater future.
This is also a major difference between Bitcoin and Ethereum: Satoshi theoretically owns nearly 1 million early mined Bitcoins but remains silent to this day; while for some reason, the Ethereum foundation sometimes just wants to sell 100 ETH to test liquidity.
As of today’s writing, MicroStrategy has already achieved an unrealized profit of 15 billion USD, relying on loyalty and faith.
Since it is making money, it will increase its investment; it cannot turn back now, and more people will follow suit. According to the current momentum, 170K is the mid-term target for Bitcoin (not financial advice).
Of course, we are used to seeing conspiracy groups design conspiracies every day in memes, and occasionally when we see a real top-level conspiracy, we are sincerely amazed.
Original link
