Author: 0x Todd (@0x_Todd)
First, I'm excited that the beloved Bitcoin has reached $98,000!
Without a doubt, the heroes behind the 40K-70K range are the Bitcoin ETFs, and the heroes behind the 70K-100K range are MicroStrategy.
Now, many people are comparing MicroStrategy to the Luna of BTC, which makes me a bit uncomfortable, as Bitcoin is my favorite cryptocurrency, while Luna happens to be the one I dislike the most.
I hope this post can help everyone better understand the relationship between MicroStrategy and Bitcoin.
First, a few conclusions at the beginning:
MicroStrategy is not Luna, it has a much thicker safety cushion.
MicroStrategy is increasing its Bitcoin holdings through bonds and stock sales.
MicroStrategy's latest debt repayment date is in February 2027, more than 2 years away from us.
MicroStrategy's only soft threat is the Bitcoin whales.
MicroStrategy is not Luna, it has a much thicker safety cushion than Luna
MSTR Net Value vs. Bitcoin Price
MicroStrategy 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 Bitcoin with its own money from 2020.
Later, MicroStrategy exhausted the money on its books and started to leverage up. Its way of leveraging is off-exchange leverage, determined to borrow money through corporate bonds to buy more Bitcoin.
The fundamental difference between it and Luna is that Luna and UST printed each other, and essentially UST was a meaningless unanchored currency printing, barely maintained by a 20% fake interest rate.
But MicroStrategy is equivalent to bottom-feeding + leverage, which is the standard of borrowing money to go long, and it has bet the right direction.
The penetration of Bitcoin is far beyond UST, and MicroStrategy's impact on Bitcoin is significantly lower than Luna on UST. It's a simple logic, as the saying goes, 2% daily is a Ponzi scheme, 2% annually is a bank, quantitative change leads to qualitative change, and MicroStrategy is not the only factor determining Bitcoin, so MicroStrategy is definitely not Luna.
MicroStrategy is increasing its Bitcoin holdings through bonds and stock sales
In order to quickly raise funds, MicroStrategy 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 Bitcoin holdings.
On-exchange leverage everyone has used before, you have to put Bitcoin as collateral, and the exchange (and other users) 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 off-exchange to MicroStrategy?
MicroStrategy'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 rising, 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 creditors.
If Bitcoin falls and MSTR has money, the creditors can get the cash back
If Bitcoin falls and MSTR has no money, the creditors can still have the final bottom line, which is to convert to shares and realize the principal;
If Bitcoin rises, MSTR will rise, and the creditors can give up the cash and get more share returns.
In short, this is a transaction with a high floor and a very high ceiling, so naturally MicroStrategy was able to successfully raise the funds.
Fortunately, or rather, loyally, MicroStrategy chose Bitcoin.
And Bitcoin has not let it down.
2024 MicroStrategy Stock Price Trend
With Bitcoin's steady rise, MicroStrategy's early accumulated Bitcoin 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 MicroStrategy's stock price has also soared to the sky.
MicroStrategy's daily trading volume now exceeds that of the absolute blue-chip Nvidia this year. So MicroStrategy now has more choices.
Now MicroStrategy can not only rely on issuing bonds, but also directly issue and sell new shares to raise money.
Unlike many meme coins or Bitcoin developers who have no minting rights, traditional companies can issue new shares after following the relevant procedures.
Last week, Bitcoin was able to rise from just over $80K to the current $98K, which could not be done without the help of MicroStrategy. Yes, MicroStrategy issued new shares and sold them for $4.6 billion.
PS: A company that exceeds Nvidia's trading volume 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, MicroStrategy, as always, has a grand vision. MicroStrategy used the money from the share sale to fully reinvest in Bitcoin, pushing Bitcoin to $98K.
By now, you should have understood MicroStrategy's magic trick:
Buy Bitcoin → Stock price rises → Borrow to buy more Bitcoin → Bitcoin rises → Stock price rises further → Borrow more debt → Buy more Bitcoin → Stock price continues to rise → Issue and sell shares to buy more Bitcoin → Stock price continues to rise...
Presented by the great magician MicroStrategy.
MicroStrategy'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, MicroStrategy's average Bitcoin cost is $49,874, which means it is now close to 100% in unrealized gains. This is an extremely thick safety cushion.
Let's assume the worst case scenario, even if Bitcoin plummets 75% (which is almost impossible) to $25,000, so what?
MicroStrategy's debt is off-exchange leverage, and there is no margin call mechanism at all. The 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 does not need to be forced to sell these Bitcoins, because the earliest debt MicroStrategy borrowed needs to be repaid - surprisingly, not until 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 Bitcoin has to crash, and if no one wants MicroStrategy's shares anymore, then MicroStrategy needs to sell some of its Bitcoin in February.
All in all, we still have more than 2 years to play the music and dance.
This is the magic of off-exchange leverage.
You may ask, can MicroStrategy be forced to sell Bitcoin due to interest payments?
The answer is still no.
Due to MicroStrategy's convertible bonds, creditors are generally risk-free, so its interest rates are quite low. For example, the one due in February 2027, the interest rate is actually 0%.
Creditors are purely greedy for MSTR's stocks.
And the several debts it issued later, the interest rates are also around 0.625%, 0.825%, only one is 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 the Bitcoin whale
At this point, MicroStrategy has become intertwined with Bitcoin.
More companies are preparing to learn - the great manipulator (Saylor) of the Bitcoin world.
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 market, 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 push 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 wants to sell 100 ETH to test the liquidity.
Until the writing day of this article, MicroStrategy has already made 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, I'm truly in awe.
