How can MicroStrategy upgrade its strategy to survive the bull and bear markets?
$MSTR has become a recognized Bitcoin leveraged asset, and MicroStrategy's Bitcoin reserve strategy of stock-bond double helix is textbook perfect. But I still have to pour cold water on it. This strategy will only work if Bitcoin appreciates in the long term. After the bull market peaks, $MSTR will also accelerate its decline due to financial leverage.
Is there any way to enhance MicroStrategy's safety cushion to survive the bull and bear markets?
To summarize MicroStrategy's strategy, it takes advantage of:
1) Bitcoin's rising potential in a bull market
2) Bitcoin's high volatility
3) Low-cost financial leverage (ATM and convertible bonds)
4) Financial markets are willing to pay a premium for Bitcoin reserves
It seems to be perfect, but there is still one thing missing: Bitcoin's capital efficiency.
Now MicroStrategy's earnings are completely dependent on the rise in Bitcoin prices. Once the market turns to a bear market and Bitcoin prices fall, MicroStrategy's earnings will also plummet and turn negative.
If Bitcoin is converted from an idle reserve asset to an interest-bearing asset, generating income in Bitcoin terms, then MicroStrategy's strategy can 1) continue to accumulate more Bitcoin in a bull market environment; 2) also obtain positive returns in Bitcoin terms when Bitcoin prices fall in a bear market.
This is why I believe that on-chain micro-strategies have the potential to surpass off-chain micro-strategies. DeFi already has the ability to provide advanced financial instruments such as bonds, stocks, and interest rate swaps, and can completely replicate micro-strategies; on top of this, the chain has created sufficient application scenarios for Bitcoin, and Bitcoin can become an economically vibrant interest-bearing asset.
@SolvProtocol is already doing this: creating the first on-chain micro-strategy in the crypto world.
2.6 billion TVL + 500,000 users + 90% Bitcoin capital efficiency, Solv has built a solid business foundation, and will launch more "micro-strategy" operation strategies plus financial flywheels in the future, so stay tuned...
In other words, traditional finance and DeFi have never been in opposition,
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