$BTC

Little Gray Scale Infinite Bullets Buy Buy Buy, Will It Crash Like Luna❓

MicroStrategy's financing to purchase Bitcoin is like a loophole that breaks the rules of the game: profitable, but potentially unsustainable.

The well-known short-selling organization Citron Research claims MicroStrategy (MSTR.US) is "overheated." Citron Research analyst Andrew Left stated on social media platform X that MicroStrategy has almost transformed into a Bitcoin investment fund and has been targeted for short selling.

With the launch of Bitcoin ETFs, investors can invest directly in Bitcoin funds without going through MicroStrategy's stock as an alternative option.

Citron Research pointed out that under the leadership of Chairman Michael Saylor, MicroStrategy has massively purchased Bitcoin, even financing through bond issuance. Saylor has utilized capital markets to finance the fervor for Bitcoin, which has also driven MicroStrategy's stock price up more than 600% this year. However, Citron Research believes this looks more like a corporate finance version of an infinite money glitch in video games — profitable, addictive, and potentially unsustainable.

MicroStrategy's core loop model is as follows: raise cash through debt and the stock market, use the cash to buy Bitcoin, watch its stock rise with Bitcoin's price, then return to the market to raise more cash, and so on.

This is the interesting part of any glitch; the license to print massive amounts of cash seems completely disconnected from reality. According to Barclays, MicroStrategy's average purchase price for Bitcoin is slightly below $40,000, while Bitcoin's trading price is close to $100,000, and its current reserves are worth about $24 billion. This is an order of magnitude higher than the $4.3 billion in debt on the company's balance sheet — these debts are taken on through convertible bonds at a 0% coupon rate. The company is preparing to borrow more money.

So for now, Little Gray Scale is transferring the risk of Bitcoin to stocks, which correspondingly means Bitcoin has a harder support. This is complementary, and clearly, this support is much stronger than Luna's support.