More than 80% of people think this is a scam...
Author: Crypto_Painter
Interesting fact: Michael Saylor’s MicroStrategy was one of the companies that suffered the most severe market value shrinkage and losses during the Internet crisis in 2000, and his own wealth also suffered a huge drawdown when the bubble burst.
Now, MicroStrategy's main business is online AI and data analysis, and its official website interface remains at the level of a traditional Internet ToB company;
Apart from the company's large holdings of BTC, in my opinion, there are almost no products or technologies that can support MicroStrategy's current market value of more than $20 billion...
So we can roughly understand MicroStrategy’s stock as a corporate “ETF” based on BTC prices;
Even so, if the BTC he holds is converted into the current price of $63,000, the market value of these BTC is only $15.89 billion, while the market value of his stocks exceeds $20 billion.
At the same time, MicroStrategy is said to still have 2,000 employees. I am curious, if the company's value comes from BTC, then where does the expense of these employees come from? After all, MicroStrategy's self-operated business seems to be losing money.
This leads to a "new Ponzi scheme" that was once widely circulated on the Internet, namely the "reverse Ponzi scheme";
The traditional Ponzi scheme relies on a large number of new users to pay for the returns of a small number of old users, thus forming a pyramid-like scam structure;
The "reverse Ponzi scheme" is to attract both new and old users, and to raise the market value of the overall fund pool by attracting external investment or loans. This is a structure similar to the "stick method", that is, an internal circulation model of "left foot stepping on right foot, spiraling up";
Now let’s take a look at whether MicroStrategy’s behavior is in compliance with this rule.
First of all, MicroStrategy has been continuously purchasing BTC since the beginning of 2020. The most recent purchase actually occurred on September 13. It currently holds 252,220 BTC at an average price of approximately US$38,585.
The funds for purchasing BTC do not come from company deposits, but are raised from the market in a manner similar to convertible bonds. Borrowers can obtain MicroStrategy shares of the same amount or at a negotiated price.
Simply put, MicroStrategy sold its own stocks and used the proceeds to buy BTC. Because of the purchase of BTC, the company's stock price has maintained a high correlation with the BTC price since 2020, especially in the past six months, with an almost completely consistent price trend;
From the perspective of investors or borrowers, this is equivalent to purchasing the equivalent of BTC, so if there is any risk, the risk only remains in the price fluctuation of BTC, and the whole process is completely legal.
But is this really the case?
I held a poll yesterday using analogies, and here are the results:
More than 80% of people think this is a scam...
So I am also wondering how this behavior of incorporating large amounts of BTC into corporate balance sheets will end?
The first problem is: the gap between inflows and asset valuations;
Assuming that MicroStrategy raised $2 billion from the market to buy BTC, and after the purchase, both the company's stock price and BTC rose, then in terms of conversion, the profit behind MicroStrategy actually doubled. In other words, if you only hold BTC or only hold MicroStrategy stocks, the price increase can only bring a 1:1 profit, while for MicroStrategy, you can get two profits from the increase in the coin price plus the increase in the stock price, that is, a 1:2 return;
From the perspective of investors or borrowers, it is indeed equivalent to buying BTC spot and enjoying the benefits, but for MicroStrategy, the coins are in its hands, the stock price is still rising, and the rate of increase of book wealth is twice that of the former.
Not to mention, there are possible manipulations behind the act of lending and pledging stocks.
The second question: BTC cannot be issued, but stocks can...
As long as the market believes that the MicroStrategy stock price will always follow BTC by continuously purchasing BTC, even when the stock price is slightly lower than BTC, a large amount of arbitrage funds will enter the market to repair this short-term negative premium. The specific operation is to short BTC and long stocks at the same time, and then close the position to obtain profit after the price difference is restored (but I think this operation is actually difficult to execute);
But this only needs to explain why the MicroStrategy stock price is highly consistent with the BTC price;
Back to the question of MicroStrategy's stock, is there a total limit on the number of shares it can issue? Can MicroStrategy split its stock or issue additional shares in the future?
If the answer is yes, then there is an obvious arbitrage opportunity here;
Using assets that appear to be equivalent to BTC in exchange for real BTC, even if BTC or stocks plummet in the future, investors sell stocks when they leave at a loss, but there is no need for MicroStrategy to sell BTC, right?
If the price of BTC falls below 38,500, is it possible that the stock price will have a large negative premium relative to BTC?
In other words, investors or borrowers have suffered losses far exceeding those caused by the decline of BTC?
I haven’t thought this through, but logically speaking, MicroStrategy’s model may not be a scam in the strict sense, but more of a means of transferring risks to borrowers or investors.
For Michael Saylor, if BTC continues to rise, he will sooner or later become the richest man in the world. If BTC falls below 38,500, he will still be the person or entity with the most BTC in the world besides Satoshi Nakamoto. Either way, he will win.
Unless he is willing to sell BTC to buy back stocks to stabilize the price difference when the stock price shows a negative premium, causing BTC and stocks to fall further, his model can theoretically continue forever.
Do you think it's possible?
