Author: 0xTodd
First, let's be excited that our beloved Bitcoin has reached 98,000 dollars!
Without a doubt, the contributors from 40K-70K were Bitcoin's ETFs, and from 70K-100K, the contributor is MicroStrategy.
Now many people compare MicroStrategy to the BTC version of Luna, which makes me a bit awkward because Bitcoin is my favorite cryptocurrency and Luna is exactly the cryptocurrency I dislike the most.
I hope this post can help everyone better understand the relationship between MicroStrategy and Bitcoin.
First, a few conclusions at the beginning:
MicroStrategy is not Luna; its safety cushion is much thicker.
MicroStrategy increases its Bitcoin holdings through bonds and selling stocks.
MicroStrategy's last debt repayment date is in 2027, which is still more than 2 years away.
The only soft threat to MicroStrategy is Bitcoin whales.
MicroStrategy is not Luna; it has a much thicker safety cushion than Luna.
MSTR net value vs Bitcoin price
MicroStrategy was originally a software company with a lot of floating profits, and it did not 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 started leveraging. The way it leveraged was through off-market leverage, determined to borrow money to buy Bitcoin in the form of issuing corporate bonds.
The essential difference is that Luna and UST print each other; essentially, UST is meaningless unanchored printing, solely maintained by a fake interest rate of 20%.
However, MicroStrategy is essentially bottom dollar cost averaging + leverage, which is standard borrowing to go long, and it 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 banking. Quantitative changes lead to qualitative changes, and MicroStrategy is not the only factor determining Bitcoin, so MicroStrategy is definitely not Luna.
MicroStrategy increases its Bitcoin holdings through bonds and selling stocks.
To quickly raise funds, MicroStrategy issued multiple debts totaling 5.7 billion dollars (for intuitive understanding, this is equivalent to 1/15 of Microsoft's debt).
And almost all of this money is used for continuously increasing Bitcoin holdings.
Everyone has used on-market leverage; you need to use Bitcoin as a deposit for the exchange (and other users in the exchange) to lend you money. But off-market leverage is different.
All creditors in the world only worry about one thing: the debt not being repaid. Without collateral, why are people willing to lend money to MicroStrategy off-market?
MicroStrategy's bond issuance is very interesting; in recent years, it has been issuing 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 stocks, divided into two stages:
1. Initial stage:
If the trading price of the bond falls >2%, creditors can exercise their rights to convert the bond into MSTR shares and sell them to recover their costs;
If the trading price of the bond is normal or even rises, creditors can sell the bonds in the secondary market at any time to recover their costs.
2. Later stage: When the bonds are about to mature, the 2% rule no longer applies, and bondholders can take cash and leave or directly convert the bonds into MSTR stocks.
Let's analyze this again; it is generally a no-risk business for creditors.
If Bitcoin falls and MSTR has cash, creditors can get cash back.
If Bitcoin falls and MSTR has no cash, creditors still have a final bottom line, which is to convert into stocks to recover their costs;
If Bitcoin rises, MSTR will rise, and creditors can give up cash to receive more stock returns.
In short, this is a trade with a high lower limit and a very high upper limit, so naturally MicroStrategy successfully raised the money.
Fortunately, no, it should be said that faithfully, MicroStrategy chose Bitcoin.
Bitcoin also did not let it down.
2024 MicroStrategy stock price trend
As Bitcoin rises, the Bitcoin accumulated by MicroStrategy early on is also rising. According to ancient and classic stock principles, the more assets a company has, the higher its market value should be.
Therefore, MicroStrategy's stock price has also skyrocketed.
MicroStrategy's current daily trading volume has already surpassed this year's absolute dark horse, Nvidia. Therefore, MicroStrategy has more options now.
Now MicroStrategy not only relies on issuing bonds but can also directly issue more stocks for sale to raise money.
Unlike many meme coins or Bitcoin developers who have no minting authority, traditional companies can issue more stocks after following the relevant processes.
Last week, Bitcoin rose from just over 80K to the current 98K, thanks to the support from MicroStrategy. Yes, MicroStrategy issued more stocks and raised 4.6 billion dollars.
PS: Companies with trading volumes exceeding Nvidia naturally come with this liquidity.
Sometimes, to admire a company making great profits, one needs to respect its great courage.
Unlike many cryptocurrency companies that sell right away for cash, MicroStrategy, as usual, has a full strategy. MicroStrategy reinvested all the money from selling these stocks into Bitcoin, pushing Bitcoin to 98K.
By now, you should already understand MicroStrategy's magic:
Buying Bitcoin → Stock price rises → Borrowing to buy more Bitcoin → Bitcoin rises → Stock price further rises → Borrowing more debt → Buying more Bitcoin → Stock price continues to rise → Issuing more stocks for sale to raise money → Buying 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 to see through the magic.
Many MSTR short sellers believe that we are now at the standard left side, even suspecting that it has reached the Luna moment.
However, is this really the case?
According to recent statistics, MicroStrategy's average cost for Bitcoin is 49,874 dollars, which means it is currently close to a 100% floating profit, a super thick safety cushion.
Let’s assume the worst-case scenario; even if Bitcoin now plummets 75% (almost impossible) to 25,000, what would happen?
MicroStrategy is using off-market leverage and has no liquidation mechanism. Angry creditors can, at most, convert their bonds into MSTR stocks at a specified time and then angrily sell them on 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 due date that MicroStrategy borrowed is actually in February 2027.
You should pay attention, this is not 2025, nor is it 2026; it is Tom's 2027.
That is to say, we have to wait until February 2027, and if Bitcoin crashes, and if no one wants MicroStrategy's stock anymore, then MicroStrategy will need to sell a portion of its Bitcoins in February.
In total, there are still more than 2 years to continue playing music and dancing.
This is the magic of off-market leverage.
You might ask, could MicroStrategy be forced to sell Bitcoin due to interest?
The answer is still negative.
Due to MicroStrategy's convertible bonds, creditors generally have a no-risk business, so its interest is quite low. For example, the one maturing in February 2027 has an interest rate of 0%.
Creditors are purely after MSTR stocks.
The interest on the several debts it issued later is also around 0.625%, 0.825%, and only one is 2.25%, which has a small impact, so there is no need to worry about its interest.
MicroStrategy's main bond interest, source: bitmex
MicroStrategy's only soft threat is Bitcoin whales.
As of now, MicroStrategy has already become mutually causal with Bitcoin.
More companies are preparing to learn from the great maneuvering of David Copperfield of the Bitcoin world (Saylor).
For example, a listed Bitcoin mining company, MARA, has just issued 1 billion dollars in convertible bonds specifically for bottom fishing.
So I think short sellers should act cautiously; if more people begin to follow MicroStrategy, the momentum of Bitcoin will gallop like a wild horse, after all, there is a vacuum above.
So, right now, MicroStrategy's biggest opponent is only those ancient Bitcoin whales.
As many people predicted earlier, retail investors have already handed over their Bitcoins, after all, there are so many opportunities, like this meme trend; I just don’t believe everyone is empty-handed.
So there are only these whales in the market; as long as these whales do not move, this momentum is difficult to stop. If we are even luckier, if the whales and MicroStrategy form some small tacit agreements, it will be enough to push Bitcoin towards a bigger future.
This is also a major difference between Bitcoin and Ethereum: Satoshi theoretically owns nearly 1 million early mined Bitcoins but has been silent to this day; while the Ethereum Foundation sometimes inexplicably wants to sell 100 ETH to test liquidity.
As of today, MicroStrategy has already achieved a floating profit of 15 billion dollars, relying on loyalty and faith.
Since it is making money, it will increase its investment; it has no turning back and more people will follow suit. With the current momentum, 170K is only 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 seeing a real top-down strategy is truly admirable.
