Now MicroStrategy's biggest competitor is only those ancient Bitcoin whales.
Written by: 0xTodd
First, let's be excited for Bitcoin reaching $98,000, which we all love!
There is no doubt that the contributors to 40K-70K are Bitcoin ETFs, while the contributors to 70K-100K are 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 happens to be my least favorite cryptocurrency.
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 shares.
MicroStrategy's next debt repayment date is in 2027, so we have more than 2 years to go.
MicroStrategy's only soft threat is the 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 didn't want to invest in production anymore, so it started to shift from reality to virtual, using its own funds to buy Bitcoin since 2020.
Later, MicroStrategy bought all the money on its account and started leveraging. Its way of leveraging is off-exchange leverage, determined to borrow money to buy Bitcoin in the form of company bonds.
The essential difference between it and Luna is that Luna and UST print each other; essentially, UST is meaningless unanchored printing, barely maintained by a 20% fake interest.
However, MicroStrategy is essentially making bottom investments + leverage, which is a standard way to borrow money to go long, and it has bet in the right direction.
The popularity of Bitcoin far exceeds UST, while MicroStrategy's impact on Bitcoin is significantly lower than Luna's impact on UST. It's a simple principle; a daily return of 2% is a Ponzi scheme, while an annual return of 2% is a bank. Qualitative changes arise from quantitative 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 shares.
To quickly raise funds, MicroStrategy has issued multiple debts totaling $5.7 billion (to give everyone a visual understanding, this is equivalent to 1/15 of Microsoft's debt).
And almost all this money is used to continuously increase the Bitcoin position.
Everyone has used on-exchange leverage; you need to use Bitcoin as collateral for the exchange (as well as other users in the exchange) to lend you money. But off-exchange leverage is different.
All creditors in the world are only worried about one thing: not repaying the debt. Without collateral, why are people willing to lend money to MicroStrategy off-exchange?
MicroStrategy's bond issuance is quite interesting; in recent years, it has issued a type of convertible debt.
This convertible bond is quite interesting; let's take an example:
Bondholders have the right to convert their bonds into MSTR shares, and this is divided into two stages:
1. Initial phase:
If the trading price of the bonds drops >2%, creditors can exercise their rights to convert the bonds into MSTR shares and sell them to recover their investment.
If the trading price of the bonds is normal or even rises, creditors can sell the bonds in the secondary market at any time to recover their investment.
2. Later stage: When the bonds are about to mature, the 2% rule no longer applies; bondholders can either take back cash and leave or directly convert the bonds into MSTR shares.
Let's analyze this again; this is generally a guaranteed business for creditors.
If Bitcoin falls and MSTR has money, creditors can get cash back.
If Bitcoin falls and MSTR has no money, creditors still have a final guarantee, which is to convert to stock and recover their investment.
If Bitcoin rises, MSTR will rise, and creditors who give up cash can still get more stock returns.
In short, this is a business with a high lower limit and an extremely high upper limit, so MicroStrategy naturally raised the funds smoothly.
Fortunately, or rather loyally, MicroStrategy has chosen Bitcoin.
Bitcoin has not disappointed it.
2024 MicroStrategy stock price trend.
As Bitcoin surged, the Bitcoin accumulated by MicroStrategy in its early days also increased significantly. According to the ancient and classic principle of stocks, the more assets a company has, the higher its market value should be.
Thus, 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 now has more options.
Now MicroStrategy not only relies on issuing bonds but can also directly issue more shares to sell for cash.
Unlike many meme coins or Bitcoin developers who do not have minting authority, traditional companies can issue more shares after following the relevant processes.
Last week, Bitcoin was able to rise from just over 80K to the current 98K, thanks to MicroStrategy's assistance. That's right, MicroStrategy issued more shares, raising $4.6 billion.
PS: Naturally, companies with trading volumes exceeding Nvidia are equipped with this liquidity.
Sometimes, you admire a company for making great profits; you need to respect its great courage.
Unlike many companies in the crypto space that sell off for immediate cash, MicroStrategy, as always, maintains a full strategy. MicroStrategy has reinvested all the money gained from selling shares into Bitcoin, pushing Bitcoin towards 98K.
By now, you should have understood MicroStrategy's magic:
Buy Bitcoin → Stock price rises → Borrow to buy more Bitcoin → Bitcoin rises → Stock price rises further → Borrow more debt → Buy more Bitcoin → Stock price continues to rise → Issue more shares to sell for cash → Buy more Bitcoin → Stock price continues to rise...
Presented by the great magician MicroStrategy.
MicroStrategy's next debt repayment date is in 2027; we still have at least 3 years.
As long as there is a magician, there will be a time to expose the magic.
Many MSTR shorts believe that we have now reached the standard left side, even doubting it has reached its Luna moment.
However, is this really the case?
According to recent statistics, the average cost of MicroStrategy's Bitcoin is $49,874, which means it is now close to a floating profit of 100%, which is a super thick safety cushion.
Let's assume the worst-case scenario: even if Bitcoin now plunges 75% (which is almost impossible) to $25,000, what then?
MicroStrategy borrows through off-exchange leverage and has no liquidation mechanism at all. Angry creditors can at most convert their bonds into MSTR shares at the specified time and then angrily sell them to the market.
Even if MSTR is driven down to zero, it still does not need to be forced to sell these Bitcoins, because the earliest debt borrowed by MicroStrategy is due 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, if no one wants MicroStrategy's stock anymore, then MicroStrategy would need to sell some of its Bitcoins only in February.
All things considered, there are still more than 2 years left to continue playing music and dancing.
This is the magic of off-exchange 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 make a guaranteed profit, so its interest is quite low. For example, this one that matures in February 2027 has an interest rate of 0%.
Creditors purely seek the stock of MSTR.
And the interest rates of the several debts it issued later are also around 0.625% and 0.825%, with only one at 2.25%, which has minimal impact, so there is no need to worry about its interest.
MicroStrategy's main bond interest, source: bitmex.
MicroStrategy's only soft threat is the Bitcoin whales.
At this point, MicroStrategy has already become causally intertwined with Bitcoin.
More companies are preparing to start learning—from the great operation of Bitcoin's David Copperfield (Saylor).
For example, a listed Bitcoin mining company, MARA, has just issued $1 billion in convertible bonds specifically for bottom fishing.
So I think shorts should act cautiously; if more people start to imitate MicroStrategy, Bitcoin's momentum will be like a runaway horse, after all, there is a vacuum above.
So, now MicroStrategy's biggest opponent is only those ancient Bitcoin whales.
As many have predicted before, retail investors have already given out their Bitcoins, after all, there are just too many opportunities, such as the meme trend; I refuse to 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 hard to stop. If they are even luckier, a small tacit understanding between the whales and MicroStrategy could push Bitcoin to a greater future.
This is also a major difference between Bitcoin and Ethereum: Satoshi Nakamoto theoretically owns nearly 1 million early-mined Bitcoins, but has been silent; whereas the Ethereum Foundation, for some reason, sometimes particularly wants to sell 100 ETH to test liquidity.
As of today’s writing, MicroStrategy has already reached a floating profit of $15 billion, relying on loyalty and faith.
Since it is making money, it will increase its investment; it cannot turn back, and more people will follow suit. According to the current momentum, 170K is the mid-term target for Bitcoin (not financial advice).
Of course, we are used to seeing conspiracy groups design conspiracies in memes every day, and occasionally seeing a real top-level plot is truly admirable.
