Let’s first talk about the logic behind the last round of Bitcoin surge as a foundation.
The story of Bitcoin's rise is the background, but the story alone is not enough, and retail investors are not enough either. Retail investors are the main promoters of altcoins and meme coins, because retail investors like to get rich overnight, so they are all leeks. The story of the last round was that the Federal Reserve printed money, but liquidity requires tools and channels, otherwise it cannot enter the market.
The core liquidity of Bitcoin in the last round came from Three Arrows Capital and Grayscale Fund. The top priority here is premium. Because GBTC has premium, you can buy Bitcoin, issue Bitcoin funds in the primary market, and sell them in the secondary market, making money for free. Then you can continue to buy Bitcoin with the money you earn, or use securities to mortgage loans and leverage to continue buying Bitcoin. At the same time, you can push up premiums and stir up topics, and more institutional money will pour in. The fundamental reason is that there was no Bitcoin ETF at the time, so the premium was very high, and this premium was another reason to buy GBTC. The core of the last round was to open up the cryptocurrency market and the securities market, provide tools and channels, and premium was the catalyst for all this. The flywheel is that on the one hand, as the price of Bitcoin rises, the price of GBTC rises, attracting institutions to pour in, and on the other hand, using GBTC with premium as collateral to borrow more funds, buy more Bitcoin to push up the price, and so on.
In the end, the cryptocurrency circle collapsed due to the Luna incident, premium disappeared, the flywheel stopped, everything stopped, Three Arrows Capital went bankrupt, and Grayscale almost exploded.
This round of the story is about Trump, which is equivalent to insurance at the policy level to prevent political black swans. But the core is still liquidity tools.
The mechanism of this round is that MicroStrategy issued convertible bonds to buy Bitcoin, and MicroStrategy's stocks have high premiums, which amplified the increase in Bitcoin. Convertible bonds, as corporate bonds, provide a channel for traditional financial institutions (such as insurance, retirement annuities, etc.) to enter the Bitcoin market, because many institutions can only buy fixed-income bonds and cannot buy securities. The bond market is a trillion-level market, much larger than the securities market. MicroStrategy's convertible bond has increased more than Bitcoin this year because premium provides an amplification effect. On the one hand, bond investors have a guaranteed principal and can also get a small amount of interest. More importantly, they can convert to equity at the peak of Bitcoin's market value and enjoy excess premium. In this way, the flywheel rotates. On the one hand, it is found that bonds buy Bitcoin to drive up premiums. On the other hand, as Bitcoin appreciates, the increase in bond prices attracts more capital inflows. In this way, the price of Bitcoin soars.
This design is more reliable because the bonds can only be redeemed after five years, and if the price is not good at that time, they can be converted into shares, which greatly reduces the risk of a default. Five years later is the next halving cycle, and the price will be higher if nothing unexpected happens.
If this set of tools is used well, as Bitcoin deflation continues, MicroStrategy can push the price of Bitcoin to 500k USD in the next cycle. MicroStrategy's market value can reach trillions, making it the largest Bitcoin vehicle, connecting the bond market and the Bitcoin market.