Author: 0xTodd
First of all, I'm excited that BTC has reached $98,000!
Undoubtedly, the heroes of 40K-70K are the BTC ETFs, and the heroes of 70K-100K are MicroStrategy (MSTR).
Now many people are comparing MSTR to the Luna of BTC, which makes me a bit embarrassed, because BTC is my favorite crypto, while Luna happens to be my least favorite crypto.
I hope this post can help everyone better understand the relationship between MSTR and BTC.
First, a few conclusions at the beginning:
MSTR is not Luna, it has a much thicker safety cushion.
MSTR increases its BTC holdings through bonds and stock sales.
MSTR's latest debt repayment date is in February 2027, more than 2 years from now.
The only soft threat to MSTR is the BTC whale.
MSTR is not Luna, it has a much thicker safety cushion than Luna
MSTR net worth vs BTC price
MSTR was originally a software company with a lot of unrealized gains on its books and no desire to invest in production, so it started to move away from the real to the virtual, starting to buy BTC with its own money from 2020.
Later, MSTR spent all the money on its books to buy BTC, and then started to leverage up. Its way of leveraging is off-exchange leverage, determined to borrow money through the issuance of corporate bonds to buy more BTC.
The fundamental difference between it and Luna is that Luna and UST were printing each other, and essentially UST was meaningless unbacked printing, barely maintained by a 20% fake interest rate.
But MSTR is equivalent to bottom-feeding + leverage, which is the standard of borrowing money to long, and it has bet the right direction.
The penetration of BTC is far beyond UST, and MSTR's impact on BTC is significantly lower than Luna's on UST. It's a simple logic, as the saying goes, 2% daily is a Ponzi, 2% annually is a bank, quantitative change leads to qualitative change, and MSTR is not the only factor determining BTC, so MSTR is definitely not Luna.
MSTR increases its BTC holdings through bonds and stock sales
In order to quickly raise funds, MSTR has issued multiple debts in succession, totaling $5.7 billion (for everyone's intuitive understanding, this is equivalent to 1/15 of Microsoft's debt).
And almost all of this money has been used to continuously increase its BTC holdings.
Everyone has used on-exchange leverage before, you have to put BTC as collateral, and the exchange (and other users on the platform) will lend you money. But off-exchange leverage is different.
All creditors in the world are only worried about one thing, which is not repaying the debt. Without collateral, why are people willing to lend money to MSTR off-exchange?
MSTR's bond issuance is very interesting, over the past few years, it has issued a type of convertible debt.
This convertible bond is very interesting, let's give an example:
1. Initial stage:
If the trading price of the bond falls >2%, the bondholder can exercise the right to convert the bond into MSTR shares and sell them to recoup the principal;
If the trading price of the bond is normal or even up, the bondholder can sell the bond on the secondary market at any time to recoup the principal.
2. Later stage: When the bond is about to mature, the 2% rule no longer applies, and the bondholders can either take the cash and leave, or directly convert the bond into MSTR shares.
Let's analyze this further, this is essentially a risk-free business for the bondholders.
If BTC drops and MSTR has money, the bondholders can get the cash back
If BTC drops and MSTR has no money, the bondholders can still have the final bottom line, which is to convert to shares and realize the principal;
If BTC goes up, MSTR will go up, and the bondholders can give up the cash and get more stock returns.
In a word, this is a buy with a high floor and high ceiling, so MSTR has successfully raised the money.
Fortunately, or rather, loyally, MSTR has chosen BTC.
And BTC has not let it down.
MSTR stock price trend in 2024
With BTC's steady rise, the BTC that MSTR accumulated early has risen with the tide. According to the classic stock principle, the more assets a company has, the higher its market value should be.
So MSTR's stock price has also soared to the sky.
MSTR's daily trading volume now exceeds that of the absolute blue-chip Nvidia this year. So MSTR now has more choices.
Now MSTR not only relies on issuing bonds, but can also directly issue and sell stocks to raise money.
Unlike many meme coins or BTC developers who have no minting authority, traditional companies can issue additional shares after going through the relevant procedures.
Last week's BTC rise from over $80K to the current $98K is inseparable from MSTR's help. Yes, MSTR issued additional shares and sold them for $4.6 billion.
PS: A company with trading volume exceeding Nvidia naturally has this liquidity.
Sometimes, you admire a company for making great profits, you need to respect its great ambition.
Unlike many crypto companies that sell and cash out immediately, MSTR has a grand vision as always. MSTR used the money raised from the stock sale to fully reinvest in BTC, pushing BTC to $98K.
By now, you should have understood MSTR's magic trick:
Buy BTC → Stock price goes up → Borrow to buy more BTC → BTC goes up → Stock price goes up further → Borrow more debt → Buy more BTC → Stock price continues to rise → Issue and sell shares to buy more BTC → Stock price continues to rise...
Presented by the great magician MSTR.
MSTR's latest debt repayment date is in February 2027, we have at least 3 more years
Whenever there is a magician, there is a time when the magic is exposed.
Many MSTR shorts believe that the standard left side has already arrived, and even suspect that it has reached the Luna moment.
But is that really the case?
According to the latest statistics, MSTR's average cost of BTC is $49,874, which means it is now close to 100% in unrealized gains, which is an extremely thick safety cushion.
Let's assume the worst case scenario, even if BTC now plummets 75% (which is almost impossible), dropping to $25,000, so what?
MSTR's debt is off-exchange leverage, which has no margin call mechanism. Angry creditors can only convert their bonds into MSTR shares at the designated time, and then angrily dump them into the market.
Even if MSTR is dumped to zero, it still doesn't need to be forced to sell these BTC, because the earliest maturity date of the debt MSTR borrowed - is actually in February 2027.
You see, this is not 2025, nor 2026, but Tom's 2027.
That is to say, we have to wait until February 2027, and BTC has to crash, and if no one wants MSTR's stock anymore, then MSTR needs to sell some of its BTC in February.
All in all, we still have more than 2 years to keep playing and dancing.
This is the magic of off-exchange leverage.
You may ask, can MSTR be forced to sell BTC due to interest pressure?
The answer is still no.
Due to MSTR's convertible bonds, bondholders are essentially risk-free, so its interest is quite low. For example, the one due in February 2027, the interest is actually 0%.
Bondholders are purely greedy for MSTR's shares.
And the interest rates on the several debts it subsequently issued are also around 0.625%, 0.825%, with only one at 2.25%, which has a very small impact, so there is no need to worry about its interest.
The main bond interest of Microstrategy, source: BitMEX
Microstrategy's only soft threat is the Bitcoin whale
At this point, Microstrategy has become intertwined with Bitcoin.
More companies are preparing to start learning - the great orchestration of David Saylor, the "Bitcoin Messiah".
For example, a listed Bitcoin mining company MARA has just issued $1 billion in Bitcoin convertible bonds, specifically to buy the dips.
So I think the shorts had better be cautious, if more people start to emulate Microstrategy, the momentum of Bitcoin will be like an unruly horse, after all, the upside is a complete vacuum.
So, now Microstrategy's biggest opponent is only those ancient Bitcoin whales.
As many people predicted before, the retail Bitcoin has already been handed over, after all, there are too many opportunities, such as the MEME trend, I don't believe everyone is empty-handed.
So there are only these whales in the arena, as long as these whales don't move, this momentum will be hard to stop. If we're lucky enough, the whales and Microstrategy may form some subtle tacit understanding, enough to propel Bitcoin to an even greater future.
This is also a big difference between Bitcoin and Ethereum: Satoshi Nakamoto theoretically owns nearly 1 million early mined Bitcoins, but has been silent to this day; while the Ethereum Foundation, for some reason, sometimes just feels like selling 100 ETH to test the liquidity.
Until the writing date of this article, Microstrategy has already achieved a floating profit of $15 billion, relying on loyalty and faith.
Because it is making money, it will increase its investment, it can no longer turn back, and more people will emulate it. According to the current momentum, 170K is the medium-term target for Bitcoin (not financial advice).
Of course, we see conspiracy groups designing conspiracies in MEME every day, occasionally seeing a real top-level positive conspiracy, we truly admire it.
