The rise and fall of Bitcoin hides stories and intricate mechanisms.
Bitcoin's increase cannot solely rely on stories; retail investors are keen on altcoins and meme coins, harboring dreams of sudden wealth, but often become 'chives'.
The previous surge stemmed from the Federal Reserve printing money, but liquidity needs a 'bridge' to enter the market. At that time, Three Arrows Capital and Grayscale were the core sources of liquidity, with the key being 'premium'. Taking Grayscale Bitcoin Trust (GBTC) as an example, due to the premium, issuing Bitcoin funds in the primary market and selling them in the secondary market could yield profits. This could then be reinvested to buy Bitcoin, or securities could be used to leverage increases, pushing up premium and heating up the topic, attracting more institutional funds to enter. At that time, there was no Bitcoin ETF, the premium was high, which attracted funds to buy GBTC, bridging the crypto and securities markets, the premium acted like a 'catalyst' making prices rise along with GBTC and Bitcoin, creating a 'flywheel' that turned faster as institutions poured in. Until the Luna incident triggered a crash in the crypto circle, the premium returned to zero and the 'flywheel' abruptly stopped, Three Arrows Capital went bankrupt, and Grayscale faced numerous risks.
In this round, the main character of the story has changed to Trump, adding a policy 'insurance' to the market to guard against political 'black swans', but the core remains the liquidity 'tool' MicroStrategy issuing convertible bonds to purchase Bitcoin, with its stock premium high, amplifying Bitcoin's gains. Convertible bonds, as corporate debt, serve as a channel for traditional financial institutions (insurance, retirement pensions, etc.) to engage in the Bitcoin market, as many institutions are limited to investing in fixed-income bonds. The bond market, with a trillion scale, far exceeds the securities market; MicroStrategy's convertible bonds have outperformed Bitcoin this year, and the premium is 'at play': investors have a principal guarantee with interest, and with Bitcoin's market value rising, they can convert bonds to earn excess premiums, thus setting the 'flywheel' in motion. Issuing bonds to buy Bitcoin pushes up the premium, Bitcoin's appreciation attracts funds to the bond price, leading to a continuous rise in price.
This design is more stable; the bonds can only be redeemed after five years, and if the market is poor, they can be converted into stock, significantly reducing the risk of defaults, and by that time, it is likely to coincide with the next Bitcoin halving cycle when prices will likely rise. If the strategy is clever, coupled with Bitcoin's deflation, MicroStrategy is expected to drive its price to 500,000 USD in the next cycle, and its market value exceeding one trillion, transforming into a 'giant' in Bitcoin, closely linking the bond and Bitcoin markets.
