First of all, let's be excited that our beloved Bitcoin has reached 98,000 USD! Undoubtedly, the heroes behind the 40K-70K rise are Bitcoin ETFs, while MicroStrategy is the hero for the 70K-100K rise. Many now liken MicroStrategy to the BTC version of Luna, which makes me a bit awkward, because Bitcoin is my favorite cryptocurrency, while Luna happens to be my least favorite cryptocurrency. I hope this post helps everyone better understand the relationship between MicroStrategy and Bitcoin. First, let me put a few conclusions at the beginning:
MicroStrategy is not Luna; its safety cushion is much thicker.
MicroStrategy increases its Bitcoin holdings through bonds and selling shares.
MicroStrategy's next debt repayment date is in 2027, which is still more than 2 years away.
MicroStrategy's only soft threat is Bitcoin whales.
[MicroStrategy is not Luna; it has a much thicker safety cushion.]
MSTR Net Worth vs Bitcoin Price
MicroStrategy was originally a software company with a lot of floating profits and did not want to invest in production anymore, so it began to shift from tangible to intangible, starting to buy Bitcoin with its own money since 2020.
Later, MicroStrategy bought all the cash it had and began to leverage. Its way of leveraging is off-exchange leverage, determined to borrow money to buy Bitcoin through issuing corporate bonds.
The essential difference from Luna is that Luna and UST print each other; essentially, UST is meaningless unanchored printing, relying solely on a fake interest rate of 20% to barely maintain.
However, MicroStrategy is essentially dollar-cost averaging at the bottom + leverage, which is standard borrowing to go long, and it has bet in the right direction.
The popularity of Bitcoin far exceeds that of UST, and MicroStrategy's influence on Bitcoin is significantly less than Luna's influence on UST. It's a simple principle; as the saying goes, a 2% daily return is a Ponzi scheme, while a 2% annual return is a bank. Quantitative changes lead to qualitative changes, and MicroStrategy is not the only factor determining Bitcoin, so MicroStrategy is definitely not Luna.
[MicroStrategy increases its Bitcoin holdings through bonds and selling shares.]
To quickly raise funds, MicroStrategy has issued multiple debts totaling 5.7 billion USD (for a clearer understanding, this is equivalent to 1/15 of Microsoft's debt).
And almost all of this money is used to continuously increase its Bitcoin position.
Everyone has used on-exchange leverage; you need to put Bitcoin as collateral for the exchange (and other users in the exchange) to lend you money. But off-exchange leverage is different.
All creditors only worry about one thing, which is not repaying the debt. Without collateral, why are people willing to lend money to MicroStrategy off-exchange?
MicroStrategy's bond issuance is very interesting; over the past few years, it has issued convertible debt.
This convertible bond is very interesting; let's take an example:
Bondholders have the right to convert their bonds into MSTR shares, divided into two phases:
1. Initial stage:
1.1 If the trading price of the bond drops >2%, creditors can exercise their rights to convert the bonds into MSTR shares and sell them to recover their costs;
1.2 If the trading price of the bonds is normal or even rises, creditors can sell the bonds in the secondary market at any time to recover their costs.
2. Later stage: As the bond approaches maturity, the 2% rule no longer applies; bondholders can take cash and leave or directly convert the bonds into MSTR shares.
Let's analyze this; it is generally a risk-free business for creditors.
If Bitcoin drops and MSTR has money, creditors can get cash back.
If Bitcoin drops and MSTR has no money, creditors still have a final safety net, which is to convert into shares to recover their costs;
If Bitcoin rises, MSTR will rise, and creditors can give up cash to get more stock returns.
In short, this is a trade with a high lower limit and a very high upper limit, so MicroStrategy successfully raised money.
Fortunately, I should say loyally, MicroStrategy chose Bitcoin.
Bitcoin has not let it down.
2024 MicroStrategy Stock Price Trend
As Bitcoin soars, the Bitcoin accumulated by MicroStrategy in its early days has also risen significantly. According to ancient and classic stock principles, the more assets a company has, the higher its market value should be.
Therefore, MicroStrategy's stock price has also soared to the sky.
MicroStrategy's daily trading volume has now surpassed this year's absolute star, NVIDIA. Therefore, MicroStrategy now has more choices.
Now, MicroStrategy is not just relying on issuing bonds; it can also directly issue more shares for sale to raise money.
Unlike many meme coins or Bitcoin developers who have no minting authority, traditional companies can issue more shares after following the relevant processes.
Last week, Bitcoin rose from just over 80K to the current 98K, thanks to the support from MicroStrategy. Indeed, MicroStrategy issued more shares and sold them for 4.6 billion USD.
PS: Companies with trading volume exceeding NVIDIA naturally have this liquidity.
Sometimes, you admire a company for earning great profits; it requires respect for its great courage.
Unlike many companies in the cryptocurrency circle that sell off to cash out, MicroStrategy, as usual, has a full-scale approach. MicroStrategy uses all the money obtained from selling shares to reinvest in Bitcoin, pushing Bitcoin to 98K.
By now, you should have understood MicroStrategy's magic:
Buy Bitcoin → Stock price rises → Borrow to buy more Bitcoin → Bitcoin rises → Stock price further rises → Borrow more debt → Buy more Bitcoin → Stock price continues to rise → Issue more shares for sale to raise money → Buy more Bitcoin → Stock price continues to rise……
Presented by the great magician MicroStrategy.
[MicroStrategy's next debt repayment date is in 2027; we still have at least 3 years.]
As long as there is a magician, there will be a time to expose the magic.
Many MSTR short sellers believe we have now reached the standard left side and even suspect it has reached the Luna moment.
However, is the reality really like this?
According to recent statistics, MicroStrategy's average cost for Bitcoin is 49,874 USD, meaning it is now close to a floating profit of 100%, which is a super thick safety cushion.
Let's assume the worst-case scenario; even if Bitcoin drops 75% now (which is nearly impossible), down to 25,000, what can you do?
MicroStrategy is borrowing off-exchange leverage, and there is fundamentally no liquidation mechanism. Angry creditors can at most convert their bonds into MSTR shares at the designated time and then angrily dump them onto the market.
Even if MSTR is driven to zero, it still does not need to be forced to sell these Bitcoins, as the earliest debt borrowed from MicroStrategy is due in February 2027.
You better watch closely; this is not 2025, nor 2026; it is Tom's 2027.
That is to say, we have to wait until February 2027, and Bitcoin plummets; if no one wants MicroStrategy's stock anymore, then MicroStrategy needs to sell part of its Bitcoin only in February.
All things considered, there are still more than 2 years left to continue the music and dance.
This is the magic of off-exchange leverage.
---- Divider ----
You may ask, is it possible that MicroStrategy will be forced to sell Bitcoin due to interest?
The answer is still negative.
Due to MicroStrategy's convertible bonds, creditors generally make a guaranteed profit, so its interest rates are relatively low. For example, for the bond maturing in February 2027, the interest is actually 0%.
Creditors are purely interested in MSTR shares.
Moreover, the subsequent debts issued by MicroStrategy have interest rates like 0.625% and 0.825%, with only one being 2.25%, which has little impact, so there is no need to worry about its interest.
MicroStrategy's main bond interest, source: bitmex
[MicroStrategy's only soft threat is Bitcoin whales.]
At this point, MicroStrategy and Bitcoin have become mutually causal.
More companies are preparing to start learning — the great operation of Bitcoin's David Copperfield (Saylor).
For example, a listed Bitcoin mining company, MARA, has just issued 1 billion USD worth of convertible bonds for Bitcoin, specifically for bottom fishing.
So I think short sellers should be cautious; if more people start to imitate MicroStrategy, Bitcoin's momentum will run wild, as there is a complete vacuum above.
So, now MicroStrategy's biggest opponent is only those ancient Bitcoin whales.
As many predicted earlier, retail holders have already sold off their Bitcoin; after all, there are simply too many opportunities, such as the meme trend; I don't believe everyone is empty-handed.
So, there are only these whales in the market; as long as these whales do not move, this momentum is hard to stop. If they are even luckier, the whales and MicroStrategy form a small tacit understanding, enough to push Bitcoin towards a greater future.
This is also a major difference between Bitcoin and Ethereum: Satoshi theoretically owns nearly 1 million early-mined Bitcoins, yet has been silent to this day; while the Ethereum Foundation, for some reason, sometimes particularly wants to sell 100 ETH to test liquidity.
As of today, MicroStrategy has already reached a floating profit of 15 billion USD, relying on loyalty and faith.
Since it is making money, it will increase its investment; it cannot turn back and more people will imitate it. According to the current momentum, 170K is the mid-term target for Bitcoin (not financial advice).
Of course, we are used to seeing conspiracy groups design conspiracies in memes every day; seeing a real top-level strategy occasionally is truly admirable.
