MicroStrategy (MSTR) has become the focus of the market by issuing convertible bonds to purchase a large amount of Bitcoin. This article explores its investment logic and potential risks, and shares the author's reflections and cognitive upgrades. This article is sourced from a piece written by Jian Shu, organized and translated by PANews. (Previous Summary: How long can the "BTC Hoarding Craze" in the US stock market follow the MicroStrategy frenzy?) (Background Supplement: MicroStrategy adds $5.4 billion to buy 55,000 BTC: Bitcoin at $97,000 is not expensive!) MSTR (MicroStrategy) has risen from $69 at the beginning of the year to a peak of $543 last week, far exceeding the rise of Bitcoin! What impressed me is that when BTC was being pressed down due to the election pullback, MSTR was singing all the way up. This made me rethink its investment logic: it is not just riding on the BTC concept, but has its own gameplay and logic. The core gameplay of MSTR: issuing convertible bonds to buy BTC MSTR originally operated in BI (Business Intelligence Reporting System), but this is already a sunset industry. Now its core gameplay is: raising funds through issuing convertible bonds, buying a large amount of BTC, and considering it an important component of the company's assets. 1. What are convertible bonds? Simply put, a company raises funds by issuing bonds, and investors can choose to receive the principal and interest at maturity, or convert the bonds into company stock at an agreed price. If the stock price rises sharply, investors will choose to convert to stock, diluting the shares. If the stock price does not rise, investors choose to take back the principal and interest, and the company needs to pay a certain cost of capital. 2. The operation logic of MSTR: Use the money raised from issuing convertible bonds to buy BTC. Through this method, MSTR's BTC holdings continue to increase, and the value of BTC per share also grows. For example: as of early 2024, the BTC corresponding to every 100 shares grew from 0.091 to 0.107, and by November 16 it had risen to 0.12. Understanding this with the chart below will be clearer: The relationship between the BTC purchased through issuing convertible bonds and the diluted shares in the first three quarters of 2024 MSTR increased its BTC holdings from 189,000 to 252,000 (a growth of 33.3%) through convertible bonds, while the total number of shares only diluted by 13.2%. The BTC corresponding to every 100 shares rose from 0.091 to 0.107, gradually increasing the BTC equity. Calculating at the beginning of the year: 100 shares of MSTR stock priced at ($69) $6900, 0.091 BTC priced at $3822, compared to the value of directly buying BTC (-45%), it seems very unprofitable. But with this growth model, through continuous bond issuance, the amount of BTC held per share will continue to increase. 3. Latest data: On November 16, MSTR announced the acquisition of 51,780 BTC for $4.6 billion, bringing its total holdings to 331,200 BTC. At this trend, the BTC value corresponding to every 100 shares has approached 0.12. From a currency-based perspective, MSTR shareholders' BTC "equity" is continuously increasing. MSTR is the "golden shovel" of BTC From a model standpoint, MSTR's gameplay is similar to using Wall Street leverage to mine BTC: continuously issuing bonds to buy BTC, increasing the BTC holdings per share through share dilution. For investors, buying MSTR shares is equivalent to indirectly holding BTC, while also enjoying the leveraged gains from the stock price due to the rise in BTC. By now, readers should have noticed that this gameplay is somewhat similar to a Ponzi scheme, using newly raised funds to subsidize the rights of old shareholders, continuously fundraising in rounds. 4. When will this model cease to continue? Increased fundraising difficulty: If the stock price does not rise, subsequent convertible bond issuance will become difficult, and the model will be hard to sustain. Excessive dilution: If the speed of issuing new shares exceeds the speed of increasing BTC holdings, shareholders' equity may shrink. Homogenization of the model: More and more companies are beginning to imitate MSTR's model, and after increased competition, its uniqueness may be lost. The logic and future risks of MSTR Although MSTR's logic is somewhat like a Ponzi scheme, from a long-term perspective, the hoarding of BTC by American capital has strategic significance. The total amount of Bitcoin is only 21 million, while the US national strategic reserves may occupy 3 million. For large capital, "hoarding coins" is not only an investment behavior but also a long-term strategic choice. However, currently, the risks of MSTR outweigh the benefits, and everyone should operate cautiously! If the price of BTC pulls back, MSTR's stock price may suffer a greater decline due to its leverage effect; whether it can continue to maintain high growth depends on its fundraising ability and market competition environment. Reflections and cognitive upgrades In 2020, when MSTR first hoarded BTC, I remember Bitcoin rebounding from $3,000 to $5,000. I thought it was too expensive and didn't buy, while MSTR bought a large amount at $10,000. At that time, I thought they were foolish, but BTC rose all the way to $20,000, and the fool turned out to be myself. This missed opportunity with MSTR made me realize that the operational logic and cognitive depth of American capital tycoons are worth serious study. Although MSTR's model is simple, it represents a strong belief in the long-term value of BTC. Missing out is not scary; what matters is learning from it and upgrading one's cognition. Related Reports Analyzing MicroStrategy's behavior and funding sources for buying Bitcoin = Enhanced Version of "Grayscale + Luna" Rich Dad predicts Bitcoin will reach $13 million! Strongly supports Michael Saylor's prediction: MicroStrategy is correct Bitcoin aims for $100,000) Cathay Digital Payment "00909" heavily invests in MicroStrategy, Coinbase...winning three crowns in ETF returns "Missing out on MicroStrategy (MSTR), my reflections and cognitive upgrades" This article was originally published in BlockTempo (Dynamic Blockchain - the most influential blockchain news media).

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