Large-scale purchases of Bitcoin have raised questions about stability.
American business intelligence company MicroStrategy has spent about $17.5 billion in the past two months to crazily purchase Bitcoin, sparking a market uproar. Data shows that the company quickly raised funds through the issuance of zero-coupon convertible bonds and new stock offerings, then converted all of it into Bitcoin, becoming one of the most active "Bitcoin whales" in the market. However, this strategy has drawn warnings from several economists and analysts, with some bluntly calling it a "Ponzi scheme," emphasizing that as long as the price of Bitcoin stagnates or falls, the entire structure will face the risk of collapse.
MicroStrategy, led by its Executive Chairman Michael Saylor, has repeatedly increased its Bitcoin holdings, causing investors to have divergent views on the company's prospects. One side believes that Saylor has a long-term vision, intending to treat Bitcoin as "digital gold" to create long-term value for the company and shareholders; the other side criticizes this practice of continuously purchasing Bitcoin through leveraged financing as inherently high-risk and not a sound financial strategy for the company.
Analysts slam it as a high-stakes bet on Bitcoin's rise.
Economist Jacob King wrote on social media platform X, directly criticizing MicroStrategy's practices as "very much like a Ponzi scheme." King pointed out that the company raises cash through bond issuance and capital increases, then converts all of it into Bitcoin. When the price of Bitcoin rises, the stock price, company valuation, and financing capability further improve, forming a "positive feedback loop." However, the premise of this loop is that the price of Bitcoin must always rise: once the price stagnates or plummets, the debt burden that MicroStrategy carries will become a huge burden, and asset value shrinkage will raise doubts about its debt repayment ability, possibly forcing it to sell Bitcoin at a loss, leading to a vicious cycle.
Image Source: Jacob King King pointed out that MicroStrategy raises cash through bond issuance and capital increases, then converts all of it into Bitcoin, which is like a "Ponzi scheme."
Bitcoin skeptics and prominent American economist Peter Schiff have also harshly criticized MicroStrategy's strategy. He emphasized that Bitcoin lacks the characteristics of producing income like real estate, and does not have cash flow such as rent to pay interest or principal. The act of borrowing funds to purchase Bitcoin is like building a staircase in the air, supported by the assumption of endless appreciation; if the market turns, the company will face unbearable loss pressure.
Saylor and bullish supporters: We are the pioneers of digital gold.
In the face of criticism, MicroStrategy and the Saylor camp remain confident in the rationality of the strategy. Saylor has even likened it multiple times: "Buying Bitcoin is like buying Manhattan real estate a hundred years ago; even if the price has risen, it is still a quality investment in the long run." Supporters like Robert Kiyosaki, author of Rich Dad Poor Dad, praised Saylor as a "genius," believing that the wealth accumulated through Bitcoin will benefit shareholders and the company.
However, economists and skeptics disagree. They question whether MicroStrategy can ultimately withstand the inevitable cyclical fluctuations of Bitcoin, and caution investors not to be deceived by temporary high returns and glamorous stories. Especially recently, although Bitcoin has reached a new high of around $100,000, if regulations and market conditions change next year, the price trend remains unpredictable.
Are prophets always lonely? MicroStrategy has been long questioned.
MicroStrategy, due to its large holdings of Bitcoin, once showed strong stock performance, even successfully being included in the Nasdaq-100 index, becoming a star company in that camp. However, critics argue that the ultimate judgment requires time to test: during a market boom, leveraged buying strategies may profit; but if the market cools, the company may be forced to sell Bitcoin at a low price to cover debts and interest, quickly depleting corporate capital and causing huge losses for shareholders.
Overall, MicroStrategy's massive $17.5 billion bet on Bitcoin is both eye-catching and controversial. This company, which started with traditional analytical software, has now become a major leveraged player in the Bitcoin market. In a future cryptocurrency market that is still full of uncertainties, can this strategy escape the "Ponzi doubts" and stand firm on the global crypto investment stage? Investors, industry observers, and economists will continue to pay close attention.
[Disclaimer] The market has risks, and investments should be approached with caution. This article does not constitute investment advice. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Invest accordingly at your own risk.
'MicroStrategy spends $17.5 billion on Bitcoin! Economists criticize: it's essentially a Ponzi scheme' was first published on 'Crypto City'.
