We have to talk about Michael Saylor.

Saylor has become a near-mythical figure in the crypto world in recent years.

Through his company, MicroStrategy, he has been one of Bitcoin's loudest advocates. He follows a relentless accumulation strategy and surprises with bold predictions, seeing Bitcoin beyond 1m USD.

While his contributions to Bitcoin's adoption are undeniable, the question remains: could Saylor also pose the single greatest risk to the market?

Let's explore why Saylor and his approach could be a ticking time bomb. And why you should have a close eye on what he is doing. 👇

MicroStrategy & The Saylor Revolution

Saylor founded MicroStrategy in 1989 and has grown into a business intelligence provider. During the dot-com bubble, the company's share price reached 300 USD before falling sharply to 10 USD after the bubble burst.

In 2020, Saylor stunned the corporate world by announcing that it would use Bitcoin as a strategic reserve currency to hedge dollar inflation. Since then, MicroStrategy has started to accumulate Bitcoin.

MicroStrategy's Bitcoin Accumulation

Here's an overview of the MicroStrategy's Bitcoin purchases:

  • 2020: 38.250 BTC ($425m), Average price per Bitcoin (APB) $11,111

  • 2021: 57,100 BTC ($2,1b), 36,800 APB

  • 2022: 5,900 BTC ($130m), 22,000 APB

  • 2023: 25,735 BTC ($667m), 25,917 APB

In 2024, Microstrategy accelerated its accumulation:

  • September 2024: 18.300 BTC ($1.1b), APB 60.408 USD.

  • Early November 2024: 51.780 BTC ($4.6b), APB 88.627 USD.

  • Late November 2024: 55,000 BTC ($5,4b), APB 97.862 USD.

Overall, Microstrategy owns 386.700 at an APB of $56,760,

MicroStrategy's Purpose

At the same time, Microstrategy's original business model has constantly lost significance.

Although software solutions revenues increased in Q3/24, profitability was relatively weak. In 2024, the company achieved a negative GAAP-based result of $459 m.

Subsequently, MicroStrategy became synonymous with Bitcoin, and its stock performance was tied almost entirely to BTC's movements.

Today, Microstrategy is no longer a software company. Microstrategy is a Bitcoin proxy.

Implications of MicroStrategy's Strategy

Here are a few core implications to understand:

  • Microstrategy has become one of the biggest institutional Bitcoin holders.

  • The MSTR share has become the top-performing stock, outperforming Tesla, Alphabet, and all other top performers.

  • Microstrategy has reached a market capitalization of more than $70b, with only 1,500 employees.

MicroStrategy's Major Shift In Buying Bitcoin

To understand the risk linked to MicroStrategy, we must examine its Bitcoin accumulation process more closely.

Initially, Microstrategy used available assets to buy Bitcoins. However, since the core business model does not generate enough cashflow, Microstrategy created two approaches to generate fresh money for buying Bitcoin:

Shares

Since 2020, MicroStrategy has raised approximately $6.63 billion by issuing new shares. While this provides a seemingly limitless pool of capital, it comes at a cost—dilution for existing shareholders.

Dilution reduces the value of existing shares, which could alienate investors and make future fundraising more challenging. This issue becomes particularly significant if MicroStrategy's stock trades at a discount to its Net Asset Value (NAV).

Convertible Bonds

MicroStrategy has also raised $6.97 billion through convertible bonds. These instruments allow investors to earn a fixed return while retaining the option to convert their bonds into company shares at a pre-defined price.

For example, in November 2024, MicroStrategy issued convertible senior notes worth nearly $3 billion at 0% interest, maturing in 2029. If MicroStrategy's stock price exceeds $672.40 at conversion, the bonds become shares, creating future dilution.

Summarized, MicroStrategy secures capital without immediate dilution.

But here's the risk? If the stock underperforms, the company must repay bondholders in cash, straining its finances.

The Bitcoin Flywheel

Based on the above, Saylor has created an approach that became popular as "Saylor's Bitcoin Flywheel" — a self-reinforcing cycle:

  • MicroStrategy raises capital through shares or convertible bonds.

  • That capital is used to buy more Bitcoin.

  • Rising Bitcoin prices elevate MicroStrategy's stock, attract investors, and enable further fundraising.

  • The cycle repeats, growing both MicroStrategy's BTC holdings and stock valuation.

This flywheel has been essential in driving Bitcoin's price during this bull run. It's an ingenious use of financial instruments but also precariously balanced.

A Model Built on Assumptions

The flywheel relies on two critical conditions:

  • Investors must remain bullish on MicroStrategy.

  • Bitcoin's price must continue climbing.

If either of these assumptions falters, the entire system could unravel. But what happens if the flow of capital dries up?

The Net Asset Value (NAV) Dilemma

MicroStrategy's business model heavily depends on the relationship between its NAV (the value of its Bitcoin holdings) and its market capitalization. Historically, the stock has traded at a premium to NAV, driven by Bitcoin's rally and the lack of institutional alternatives for BTC exposure.

However, this premium is not guaranteed. If MicroStrategy's stock begins trading at a discount to its NAV, its ability to raise funds could evaporate. The company's ambitious goal to raise $42 billion over the next three years hinges on maintaining this delicate balance.

The Nightmare Scenario 🛑

As described above, Saylor's flywheel heavily depends on raising fresh capital to keep the wheel spinning. However, this also carries a huge risk.

  • MicroStrategy's ability to raise capital diminishes.

  • Without new funds, Bitcoin purchases halt, weakening price support.

  • Investors lose confidence in Bitcoin and MicroStrategy, triggering stock and crypto sell-offs.

  • In extreme cases, MicroStrategy may be forced to sell Bitcoin to meet financial obligations, potentially collapsing BTC's price.

In 2021, cracks in the model began to show. As Bitcoin's price dipped, MicroStrategy struggled to raise fresh funds. With no new capital to buy BTC, the flywheel slowed, and investor enthusiasm waned. However, MicroStrategy's exposure to Bitcoin was massively more minor back then.

Therefore, the company weathered that storm. However, it highlighted a critical vulnerability: without new money, MicroStrategy risks stagnation—or worse.

Brilliant but Fragile

Saylor's strategy is undeniably bold and has delivered impressive results during bull markets. However, it's also fragile and heavily reliant on continuous momentum.

The model works beautifully in an optimistic market, but Bitcoin's notorious volatility could easily disrupt the delicate balance.

If the flywheel continues, Saylor could push Bitcoin to new heights. But if it falters, his strategy could create a cascading failure unlike anything we've seen in crypto before.

3 Things To Watch

To be prepared, here are three core aspects to watch that could signal a stalling flywheel.

  • Fundraising Challenges: Declining demand for MicroStrategy's equity or convertible bonds, indicated by rising bond interest rates or dilution concerns, could stall Bitcoin purchases.

  • Stock Price vs. NAV: MicroStrategy's Bitcoin holdings' consistent discount to the Net Asset Value (NAV) signals reduced investor confidence.

  • Bitcoin Price Trends: Prolonged stagnation or drops in BTC price below MicroStrategy's acquisition cost (~$56,000) would weaken its balance sheet and investor excitement

Monitoring these indicators provides early insight into whether Saylor's "Bitcoin Flywheel" is losing momentum and, subsequently, whether the entire Bitcoin market is becoming fragile.