MicroStrategy is not only a massive Bitcoin bet, but also a revolution in corporate financing.

Author: Nina Bambysheva, Forbes

Translator: Liam

Most people see billionaire Michael Saylor's public company MicroStrategy as a huge and risky bet on Bitcoin. But a closer look reveals it is a masterpiece, a blueprint for manipulating traditional finance to harness the magic dust of the crypto frenzy.

The New Year's Eve scene at Villa Vecchia is a dazzling display of orange and gold, straight out of Fitzgerald's grandest fantasies. Over 500 people are crammed onto the manicured lawn of this century-old mansion, its Versailles-style ballroom having once hosted the likes of Margaret Thatcher, Henry Kissinger and Mikhail Gorbachev.

But the real reason for this party is Bitcoin's recent breach of $100,000 (not the arrival of 2025). Waiters circulate with silver trays of champagne, canapés are emblazoned with the ubiquitous B, gold-clad dancers wave glittering orange orbs in homage to Bitcoin's signature hue. In the center of the garden, a giant playing card is dimly visible, the king's face replaced by an unabashed B.

The water party continues aboard the Usher, a 154-foot superyacht that glittered in the Miami skyline in the 2015 film "Entourage." Shuttle buses ferry a constant flow of Bitcoin executives, thought leaders, and most importantly, institutional investors, all decked out in "Bitcoin fashion" (orange suits, B-logo accessories). Two giant projectors play clips predicting Bitcoin will reach the millions, while a DJ in a spacesuit helmet conducts a bass-heavy set between swaying palm trees.

"I'm a little tired of the feeling of victory," quips one reveler wearing a black cap emblazoned with Satoshi Nakamoto. The party-goers all have crypto cred: the Satoshi-capped man is David Bailey, the 34-year-old CEO of BTC Inc. and publisher of Bitcoin Magazine, who hosted the Bitcoin Conference in July where Donald Trump vowed to make America the "crypto capital of the world" and establish a national Bitcoin reserve.

Mingling through the revelry is Michael Saylor, the 59-year-old owner and host of Villa Vecchia, in his signature black blazer, blue jeans and a t-shirt (with a B. on the front). He graciously accepts handshakes and selfie requests. Here, Bitcoin is God, and Saylor is its prophet.

Crypto is Saylor's second coming, after he made and lost over $100 billion in the original internet bubble. That was when, fresh out of MIT in 1989, he co-founded the software company MicroStrategy in Tysons Corner, Virginia. The company initially focused on data mining and business intelligence software, later clashing with the SEC over accounting practices. In 2000, the company paid a fine and settled with the federal government, restating its financials for prior years.

For the next two decades, MicroStrategy's sales performance was lackluster, with a market cap hovering around $1 billion. That all changed in 2020 when Saylor decided to make Bitcoin MicroStrategy's core strategy.

Last year, as the SEC approved Bitcoin ETFs from giants like BlackRock and Fidelity, crypto prices soared, more than doubling in 12 months and breaching $100,000 in early December. Just before Christmas, MicroStrategy joined the Nasdaq-100, spurring further demand for its stock, which surged over 700% last year as it issued debt and accumulated more Bitcoin (it now holds 471,107). Saylor's company is now the largest institutional holder of the digital asset, second only to the elusive Satoshi Nakamoto, rumored to hold 1 million Bitcoins. Over 2024, Saylor's net worth has rocketed from $1.9 billion to $7.6 billion. Within a month into the new year, it reached $9.4 billion.

MicroStrategy's astounding gains have sparked a backlash from critics and short-sellers who can't fathom how a small software company holding just $480 million in Bitcoin can be worth $84 billion. But what Saylor's critics fail to grasp is that MicroStrategy has cleverly straddled two realms - one constrained by traditional finance rules, where the company issues debt and equity traded by hedge funds, traders and other institutions; and another ruled by true, steadfast believers who think Bitcoin will bring them a better world.

The driving force behind MicroStrategy's success is embracing and cultivating volatility, a hallmark of its core asset. Volatility is the enemy of traditional investors, but the friend of options traders, hedge funds and retail speculators, making MicroStrategy one of the most actively traded stocks. While its annual revenue is relatively modest at $496 million, its daily trading volume rivals the seven tech giants (Meta, Apple, Alphabet, Microsoft, Amazon, Tesla and Nvidia).

"People think it's crazy, how can such a small company have such high liquidity?" Saylor says. "It's because we've placed a crypto reactor at the center of the company, attracting capital and then spinning it. This increases the stock's volatility, making our options and convertible bonds the most interesting and best-performing products in the market."

Michael Saylor is 100% right about the popularity of the $7.3 billion in convertible bonds the company has issued since 2021. On every trading day, MicroStrategy's stock price is amplified in real-time by Bitcoin's constant fluctuations, increasing the implied volatility of the call options embedded in its convertible bonds. Unlike regular bonds, convertibles offer debt holders the security to choose to convert their bonds into MicroStrategy stock at a predetermined price before maturity. Every trader trained in the Black-Scholes option pricing formula knows that higher implied volatility increases the value of options. So Saylor can issue convertible bonds with virtually no interest cost.

So far, MicroStrategy has issued 6 convertible bonds maturing from 2027 to 2032, with rates ranging from 0% to 2.25%. In the public bond market, liquidity has been drying up due to the private credit boom, with institutional investors hungry for outsized returns. MicroStrategy's bonds are not only one of the only ways for giant investors like Germany's Allianz and US Bank of America to gain exposure to digital assets, but also some of the best-performing bonds, returning over 250% since issuance. Even MicroStrategy's $3 billion 5-year 0% coupon bond issued in November, with a conversion price of $672 (80% above the current stock price), has already surged 89% in just a few months.

Volatility is Vitality

These were the three words MicroStrategy co-founder Michael Saylor tweeted last March, revealing the elixir driving the outperformance of its stock and bonds: the implied volatility of the company's options, fueled by the Bitcoin he has amassed. Many traders crave volatility, expecting MicroStrategy's stock to fluctuate over 90% in the next month, compared to 60% for Tesla and 30% for Amazon.

He Yi understood that institutional investors who measure performance on a quarterly basis would continue to buy his high-risk stocks in order to boost the returns of their investment portfolios. Companies like MicroStrategy that issue large amounts of convertible bonds often dilute the company's stock, but in this case, the convertible bonds had a bullish effect because they represented demand for increasingly valuable stocks in the future. Through secondary offerings and convertible bond issuances, MicroStrategy's outstanding shares have grown from 97 million to 246 million since 2020. During the same period, its stock price has surged 2666%. At the end of January, its shareholders voted to significantly increase the company's authorized shares to 10.3 billion. This self-perpetuating cycle: issuing tens of billions in low-cost or no-cost debt and equity, driving up the price of Bit through massive purchases, and fueling wild swings in MicroStrategy's stock. Rinse and repeat.

"They found a monetary loophole in the financial markets and exploited it," marveled Richard Byworth, a former convertible bond trader at Nomura Securities and managing partner at Syz Capital, an alternative investment firm in Zurich.

He Yi makes no secret of his reverence for Bit. Last August, he invented a novel financial metric called Bit Yield or BTC Yield. This "yield" is unrelated to any income generated, but rather measures the percentage change over time of the company's Bit holdings relative to its fully diluted share count. His initial target was 4% to 8% annual growth, but MicroStrategy's data released in January showed a Bit Yield of 48% in the fourth quarter and 74.3% for the full year 2024 - staggering numbers that are meaningless, which he dangled like bait to his worshipful followers.

Ben Werkman, a former commercial banker, consultant and early investor in the company's Bit strategy, said trying to value MicroStrategy using old-fashioned methods would drive you insane. He Yi "turned off the profit and loss mindset and said, 'We're going to look at the company's net assets, focus on leveraging our advantage on the balance sheet,' and in this case, that means acquiring more Bit."

That's exactly what MicroStrategy is doing. In October, He Yi announced a plan called "21/21" to raise up to $42 billion over the next three years (half through equity financing, half through debt financing) to buy more Bit. In November and December alone, the company acquired nearly 200,000 Bit worth about $18 billion.

As long as the price of Bit keeps rising, this will all go swimmingly, but what if Bit crashes like it has many times before?

"Scale is everything, because liquidity is everything. MicroStrategy is the single largest source of liquidity for trading Bit-related risks, both in the spot market and the options market, the latter being more important."

Unless the apocalypse truly comes, MicroStrategy should be fine. Bit would need to drop more than 80% from its current over $100,000 level and stay there for at least two years for MicroStrategy to be unable to service its current debt. He Yi has once again demonstrated his talent for leveraging capital markets and bond investors' behavior.

MicroStrategy's $7 billion in debt is all unsecured, and technically none of the Bit in its treasury can be used as collateral. Moreover, at the company's current stock price of $373, its over $4 billion in debt is already "in the money," or effectively equity.

"Effectively, MicroStrategy has very little debt on its balance sheet," said Jeff Park, head of alpha strategies at the San Francisco-based crypto asset manager Bitwise, noting that MicroStrategy's Bit holdings are unlikely to be forcibly liquidated because institutional bond holders have a high tolerance for refinancing, even in a worst-case bankruptcy scenario.

What's stopping other companies from replicating He Yi's Bit financial engineering? Nothing. Many companies have already started to follow suit. According to Park, Bitwise has tracked around 90 publicly traded companies, including well-known firms like Tesla and Block, that have added Bit to their balance sheets. In March, his firm will launch the Bitwise Bit Standard Companies ETF, an index that will track the Bit holdings of 35 publicly traded companies that hold at least 1,000 Bit (about $100 million). MicroStrategy will dominate that index.

The imitators are providing ammunition for MicroStrategy's detractors. Miami-based investment firm Kerrisdale Capital released a short report on the stock in March, arguing that MicroStrategy stock represents a rare and unique way to gain exposure to Bit, but that ship has sailed. But Park believes, like Netflix in streaming, MicroStrategy's first-mover advantage and scale make it stand out.

"Scale is everything, because liquidity is everything. Whether it's the spot market or the options market, they are the most liquid sources for trading Bit-related risks," Park said, "MicroStrategy's options market is the deepest single-name options market in the world so far." MicroStrategy's frenetic options activity has even spawned a fund called the YieldMax MSTR Option Income Strategy ETF, which generates income by selling call options. The one-year-old fund has a 106% annual return and has amassed $1.9 billion in assets.

Sitting poolside at his villa in Wikia, with his three parrots Hodl, Satoshi and Max squawking in the background, He Yi brushes off his critics. "The conventional business wisdom of the past 40 years has been that capital is a liability and volatility is bad. The Bit standard says capital is an asset and volatility is good - it's a feature," he insists, "They live in a flat world, a pre-Copernican era. We're sitting on a 60-mile-an-hour train, spinning a gyroscope with 30 tons of mass on top of it, while the rest of the world stands still on the tracks."

This is not the first time Michael Saylor has flown close to the sun.

Born in 1965 on an Air Force base in Lincoln, Nebraska, he was steeped in military discipline from an early age. His father was a chief master sergeant, and the family bounced between Air Force bases around the world, eventually settling near Wright-Patterson in Ohio - home of the Wright Brothers' aviation school.

He earned a full ROTC scholarship to study aerospace engineering at MIT, writing a paper on computer simulations of Renaissance city-states. In his spare time, he played guitar in a rock band and piloted gliders. He graduated with highest honors in 1987 and was commissioned as an Air Force lieutenant, but his fighter pilot dreams were grounded by a heart murmur that turned out to be a misdiagnosis.

When 1 + 1 = 3, by doubling down on Bit, even in the face of Bit price doldrums, MicroStrategy's market cap grew 60-fold in 4 years.



At age 24, he co-founded MicroStrategy with MIT fraternity brother Sanju Bansal. At the time, few understood the potential of data analytics, but the company was an early mover in the field. Riding the internet boom, the company went public in 1998, and by 2000 its market cap had soared to over $24 billion. He Yi's net worth peaked at nearly $14 billion, and he became a tech evangelist, prophesying a world where data would flow like water. "We're going to use our technology to eliminate the entire supply chain," He Yi told Forbes magazine in late 1998, "We're going to fight to the death to win permanent global dominance in our entire industry."

Then the company faced a collapse. On March 10, 2000, MicroStrategy's stock price reached a peak of $313 per share, more than 60 times higher than the initial public offering price. Two weeks later, the company announced that it needed to restate its financial results, and the stock price immediately plummeted to $72. The U.S. Securities and Exchange Commission accused Saylor and others of accounting fraud, and MicroStrategy later settled these charges for $11 million. Within two years, the company's stock price fell below $1. Saylor's $13 billion fortune evaporated.

"This was the darkest moment of my life, when people lost money because they trusted you, that was really terrible," he said.

In 2020, after the government had implemented quantitative easing policies and invested trillions of dollars in COVID-19 stimulus measures for several consecutive years, Saylor was convinced that the $530 million in cash and short-term investments remaining on MicroStrategy's balance sheet would be best used to invest in Bitcoin. The U.S. government can print dollars at will - and it is trying to do so - but Bitcoin's design has a hard cap: the number of Bitcoins will never exceed 21 million.

If the Bitcoin price crashes, the decline in MicroStrategy's stock price will be more severe and faster than Bitcoin itself. But don't overlook Saylor just because he's too smart. Many other companies are also following MicroStrategy - the company now calls itself "the world's first and largest Bitcoin treasury".

Some public companies, such as Metaplanet, even rely on Bitcoin to survive. This Tokyo-based hotel chain faced an existential crisis during the pandemic when Japan closed its borders to tourists. The small hotel company sold 9 of its 10 hotels and issued stocks and bonds to buy $70 million worth of Bitcoin. Metaplanet's stock is traded on the Tokyo Stock Exchange and over-the-counter, and has surged 2,600% by 2024, although the Bitcoin it holds is worth only $183 million, its market capitalization is now $1 billion. The company's website now reads "Securing the Future with Bitcoin," barely mentioning hotels. "We are very grateful to Michael Saylor for designing a business plan for us to emulate worldwide," said Metaplanet CEO Simon Gerovich, who was a guest at Saylor's New Year's party.

"I invented 20 things, worked hard to make them successful, but none of them changed the world. Satoshi Nakamoto created one thing, gave it to the world, and then disappeared. It made me more successful than any of my own ideas."

Although many companies are unlikely to go to the extreme like Metaplanet, Bitcoin holders will certainly become more numerous. In January this year, the Financial Accounting Standards Board amended a rule that previously only allowed companies to record declines in the value of cryptocurrencies as losses in quarterly reports, and now holding cryptocurrencies will be marked to market, allowing for offsetting gains and losses. For MicroStrategy, which lobbied to change the rule, this could mean profitability for multiple quarters and potential inclusion in the S&P 500 index.

According to YCharts data, today there are hundreds of large publicly traded companies globally that hold cash more than twice their current operating and debt needs. The most famous of these is Berkshire Hathaway, which currently holds $320 billion in cash.

Given the $35 trillion (and growing) national debt, Saylor's mantra has been "cash is trash." "Financial repression is a permanent phenomenon," Bitwise's Park insists, which is the inevitable result of governments lowering interest rates. We live in a highly financialized world where the real economy and the financial economy have become largely disconnected. If you don't print more money, you can't actually pay off the debt. If you think you have to keep printing more money, then you'd better believe the yield curve will be suppressed.

In Saylor's view, the Venetian Villa itself is the best example. This 18,000-square-foot mansion on "Millionaire's Row" in Miami, built in 1928 for the president of the Woolworth department store chain, was purchased by Saylor in 2012 for $13 million. "This house was worth $100,000 in 1930," Saylor said in a 2023 podcast interview. "A few years ago it was valued at $460 million," he said in the 2023 podcast interview, "Do the math - it's on its way to being worth $100 million, which means the dollar has depreciated 99.9% in 100 years. The most important thing is: the money in the bank is not money."

A Trump presidency in the coming years could be good for MicroStrategy and Bitcoin. Although Trump has loudly touted "government efficiency," he was a big spender during his first term as president: according to data from the Committee for a Responsible Federal Budget, the national debt increased by $8.4 trillion during Trump 1.0's four-year term. Although he once publicly called Bitcoin a "scam" and said it would compete with the dollar in 2021, Trump is now fully immersed in cryptocurrencies. In fact, his son Eric recently posted a photo with Saylor at Mar-a-Lago, captioning it "Two friends, one passion: Bitcoin."

Not only is the value of the dollar likely to further depreciate over the next four years, Saylor's relentless promotion and the anti-utopian MAGA worldview are a perfect match. "The human condition has always been plagued by toxicity: toxic food, toxic liquids, the human economy has always been plagued by toxic capital. My mission is to evangelize non-toxic capital to the world," he preaches.

But even Michael Saylor occasionally steps down from his pulpit to reflect on his corporate journey. He says, "We adopted Bitcoin out of necessity and desperation, then it became an opportunity, then a strategy, then an identity, and finally a mission. The irony of my career is that I invented 20 things and tried to make them successful, but I really didn't use any of them to change the world. Satoshi created something, gave it to the world, and then disappeared, and now we're just carrying on that spirit. Ironically, that makes me more successful than anyone who tried to commercialize every one of their own ideas. It's a lesson in humility."

This also reminds us that lightning can indeed strike the same place twice, especially when there is a savvy and opportunistic manager at the helm.