Capital advisor Jeff Walton's analysis indicates that MicroStrategy's debt-to-equity ratio is as high as 5 times, meaning the leverage ratio is only about 20%, far lower than the leverage levels of traditional giants like Apple and JPMorgan Chase. Moreover, he pointed out that only when the price of Bitcoin plummets by 80% will the value of MicroStrategy's Bitcoin assets fall below its liabilities. (Background: Buy again! MicroStrategy spent another $1.5 billion to increase its Bitcoin holdings, surpassing 400,000 BTC) (Additional background: Reflection and cognitive upgrade after missing out on the soaring stock MicroStrategy (MSTR)) MicroStrategy has adopted a Bitcoin reserve strategy since September 2020, accumulating a total investment of $23.427 billion, purchasing 402,100 Bitcoins, currently valued at approximately $38.75 billion, with a return rate of 65%. At the same time, this strategy has caused the company's stock price to skyrocket more than 26 times in the past four years, currently around $373.43. With Bitcoin recently hitting the $100,000 mark, market researchers have focused on MicroStrategy's strategy known as the "capital perpetual motion machine," attempting to analyze its funding sources and the extent of its leverage. Further reading: Breaking down MicroStrategy's behavior in buying Bitcoin and its funding sources = Enhanced version of "Grayscale + Luna" Experts: MicroStrategy has not fully utilized leverage. Yesterday, capital advisor Jeff Walton highlighted in the following analysis that MicroStrategy's leverage ratio is currently only about 20%, averaging 24% from the end of last year to now, which is still lower than the following companies: FTX: 110% (indicating excessive leverage) Apple: 85% JPMorgan Chase: 92% Berkshire Hathaway: 45% Tesla: 41% Allstate Corporation: 81% Jeff Walton stated that as of December 2 of this year, MicroStrategy's assets are 5 times its liabilities. This can be compared to purchasing a house with a 20% mortgage. With the recent rise in Bitcoin prices and ATM (stock issuance) activities, MicroStrategy's leverage ratio has significantly improved, dropping from 31% at the end of 2023 to the current 20%, allowing more room to increase debts on its balance sheet. Jeff Walton further pointed out that the use of ATM takes precedence over convertible debt, allowing the company to issue new debt while maintaining a stable leverage ratio. He concluded: For those who doubt that MicroStrategy is a "Ponzi scheme" or a "pyramid scheme," they can crunch the numbers. From the perspective of leverage usage, MicroStrategy's balance sheet is evidently underutilized. Bitcoin needs to drop 80% for assets to fall below liabilities. Furthermore, Jeff Walton calculated to what extent the Bitcoin price would need to fall for MicroStrategy's Bitcoin asset value to be lower than its liabilities. The result shows that the price would need to drop to $18,826, a decrease of 80% from the current price, for this situation to occur. Jeff Walton added: If MicroStrategy's debt were secured by Bitcoin (which it actually is not), then the debt would equate to the company holding around 79,000 Bitcoins, while the remaining 322,800 Bitcoins would be considered "free Bitcoins," meaning Bitcoins not subject to collateral restrictions. However, he also emphasized that this is just a simulated scenario, and in reality: These debts do not have EBITDA (earnings before interest, taxes, depreciation, and amortization) covenants. The debts are not secured by Bitcoin. All debts can be converted into company shares, rather than being directly linked to Bitcoin. This statement is merely used by analysts to indirectly highlight that the value of MicroStrategy's Bitcoin assets currently far exceeds its liabilities. Related reports: MicroStrategy increases its holdings by $5.4 billion to purchase 55,000 BTC: Bitcoin at $97,000 is not expensive! Rich Dad calls for Bitcoin at $13 million! Supporting Michael Saylor's prediction: MicroStrategy is right. Is it better to invest in MicroStrategy than to buy Bitcoin? Three reasons explain how MSTR tops NASDAQ trading volume. "Analyst: MicroStrategy's leverage is lower than you think, Bitcoin needs to drop 80% to hit debt warning" This article was first published in BlockTempo (BlockTempo - The most influential blockchain news media).

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