Source: Talking Li Outside
Today I saw a partner in the group sharing a piece of news: the China-based cloud computing company SOS announced plans to purchase $50 million worth of BTC on Wednesday morning, and as a result, the company's stock price soared over 97% within minutes after the news was released, nearly doubling in price. As shown in the figure below.
This is probably another company that is emulating Microstrategy. It can be anticipated that in the future, there may be more and more companies following Microstrategy to purchase BTC. So in this session, let's briefly discuss Microstrategy.
When mentioning Microstrategy, one cannot help but mention the company's founder Michael Saylor, who is a loyal believer in Bitcoin and has publicly stated multiple times that Bitcoin is digital gold and the most scarce asset in the world.
Since four years ago, under the leadership of Michael Saylor, MicroStrategy has been buying Bitcoin. The chart below shows their recent purchase records:
For example, on November 25, they spent $5.4 billion to purchase 55,500 BTC, with an average cost price of $97,862 per BTC. As of the time of writing this article, MicroStrategy holds a total of 386,700 BTC, with an average purchase cost of $56,849.75, making it the company with the most BTC held among all publicly traded companies. The total value of the Bitcoin held by the company is approximately $37 billion, with a P/L of $15 billion, achieving an overall return rate of 68.45%.
A few days ago, Michael Saylor also posted in X saying: hoping to increase more green dots. This actually hints that they will continue to buy more Bitcoin. The green dots refer to the green points, which need to be combined with the figure below; each green dot represents that MicroStrategy has bought another Bitcoin. As shown in the figure below.
Furthermore, the purchase record of $54 million on November 25 is also the largest single Bitcoin purchase transaction record that MicroStrategy has set since it began acquiring Bitcoin in 2020. It was precisely on November 22 that the company announced it had completed a $3 billion fundraising (i.e., sold $3 billion in convertible bonds) and issued nearly $2.5 billion in stock. As shown in the figure below.
MicroStrategy, without blinking, once again splurged tens of billions of dollars to buy Bitcoin at a price of $97,862, while most retail investors either complain about Bitcoin being expensive or slowly lose themselves in the process of chasing and cutting losses, and some have been watching Bitcoin rise from around $20,000 to $90,000 without daring to take action, always maintaining a stance of watching the excitement, afraid to buy when it rises, and waiting for a larger correction when it falls.
As for how MicroStrategy's approach works, I have seen an article from WOO X Research that has already clarified it well, you can just take a look at it directly. As shown in the figure below.
Next, let's continue discussing a possibly interesting question: Will Microstrategy blow up if it goes on like this?
After understanding how Microstrategy operates, we may realize that the biggest liquidation risk for Microstrategy is the convertible bonds it issued.
Specifically, it means:
- If the convertible bond buyer does not convert to stock before maturity, it may force Microstrategy to sell BTC to repay the debt holders.
- If Microstrategy's pump needed (which can be understood as the conversion premium) cannot be maintained at around 40% within 5–7 years (of course, it varies by bond, see the chart below for specifics), then the situation mentioned above may occur.
So, will the situation mentioned above really happen?
We believe that at least in the short term, we will not see it.
First of all, Microstrategy (MSTR) currently has a market value of about $94 billion, with bonds totaling $4.25 billion (reportedly the main debt holders are Vanguard Group and BlackRock), and their overall liabilities do not account for a high proportion in the company's financial structure (in other words, the leverage is not as exaggerated as imagined), and these bonds are generally due between 2027 and 2032.
Secondly, the current market is in a bull market phase, and Microstrategy and BTC are in a positive flywheel cycle, unless BTC collapses on its own (which is unlikely) or the correlation between Microstrategy and BTC is broken.
Again, it is Microstrategy's framework, or Michael Saylor's framework. Although they have already generated considerable returns on BTC, according to Michael Saylor, they will not sell any Bitcoin. Of course, you can choose to believe it or not; after all, we can only half believe what the big shots say. Moreover, not selling BTC is just one aspect; it does not rule out the possibility that they will lend their BTC to hedge funds.
Therefore, from an overall perspective, even if Bitcoin experiences a short-term crash next, theoretically, even if Microstrategy is forced to sell some Bitcoin, it is estimated that it will not cause too severe a chain reaction in stock price or coin price. And in this process, those who get thrown off the bus are likely to still be the majority of the unstable chips or retail investors.
But that doesn't mean that Microstrategy's approach won't encounter any problems at all. Currently, the potential issues or black swan events regarding Microstrategy include:
- Being shorted by some well-known short-selling institutions (such as Citron) against MSTR (MSTR is the stock code for Microstrategy).
- More and more companies are following Microstrategy's approach to enter the crypto market, leading to potential competitive risks for Microstrategy, which may further lower the premium of MSTR relative to net asset value.
- If the SEC intervenes from a regulatory perspective, it may also lower the premium of MSTR relative to net asset value.
- Key figure Michael Saylor experiencing an unexpected event, or suddenly changing his faith in BTC to no longer be a steadfast holder.
- Management risks from within Microstrategy.
- Custodial risks from Fidelity and Coinbase, meaning that if Michael Saylor does not use a robust and secure multi-signature setup and relies solely on centralized custodians, it may lead to a single point of failure.
- As mentioned above, we do not rule out the possibility that Microstrategy will lend its BTC to hedge funds. If the hedge fund messes up the arbitrage operations and cannot return the BTC, then it is equivalent to Microstrategy losing the BTC it lent out.
- etc.…
But regardless of how the market changes in the future, we still say that if you always hold Bitcoin, you will ultimately become a winner. Perhaps only true veterans will understand Bitcoin, just as a partner in the group said: BTC is never expensive at any time. As shown in the figure below.
Note: The above content is just personal views and analyses, only for learning records and communication purposes, and does not constitute any investment advice. Any projects or websites mentioned in the article have no direct interest relationship with Talking Li Outside (Talking Li Outside does not accept any advertising from project parties), please assess the safety of the corresponding projects or websites on your own. Investment always carries risks; do not enter situations you do not understand and do not play in situations you cannot afford to lose.
