Author: 0xTodd
First of all, I'm excited that the beloved Bitcoin has reached $98,000!
Without a doubt, the heroes of the $40K-$70K range are the Bitcoin ETFs, and the heroes of the $70K-$100K range are MicroStrategy (MicroStrategy).
Now, many people are comparing MicroStrategy to the Luna of the BTC world, which makes me a bit embarrassed, because 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, let's start with a few conclusions:
- 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, which is still more than 2 years away from us.
- The only soft threat to MicroStrategy is the Bitcoin whales.
MicroStrategy is not Luna, it has a much thicker safety cushion than Luna
MSTR net worth 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 from the real to the virtual, and began buying Bitcoin with its own money starting in 2020.
Later, MicroStrategy exhausted the money on its books and started leveraging up. Its way of leveraging is through off-exchange leverage, determined to borrow money through the issuance of corporate bonds to buy more Bitcoin.
The fundamental difference between it and Luna is that Luna and UST were printing each other, and essentially UST was a meaningless, unanchored money printing, barely maintained by a 20% fake interest rate.
But MicroStrategy is essentially bottom-feeding + leveraging, which is the standard of borrowing money to go long, and it has bet the right direction.
The reach of Bitcoin is far beyond UST, and MicroStrategy's impact on Bitcoin is significantly lower than Luna's 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 easy 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.
Everyone has used on-exchange leverage before, you have to put Bitcoin 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 MicroStrategy off-exchange?
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 bond's trading price drops >2%, the bondholder can exercise the right to convert the bond into MSTR shares and sell them to recoup the principal;
- If the bond's trading price 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 win-win business for the creditors.
- If Bitcoin drops and MSTR has money, the creditors can get the cash back
- If Bitcoin drops and MSTR has no money, the creditors can still have the final bottom line, which is to convert to shares and cash out;
- If Bitcoin goes up, MSTR will go up, and the creditors can give up the cash and get more stock returns.
In a nutshell, this is a buy with a high floor and high ceiling, so naturally MicroStrategy was able to successfully raise the money.
Fortunately, or rather, loyally, MicroStrategy chose Bitcoin.
And Bitcoin has not let it down.
MSTR stock price trend in 2024
As BTC has been on a steady rise, the Bitcoin that MicroStrategy accumulated early on has seen its value skyrocket. 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 not only relies on issuing bonds, but can also directly issue and sell new shares to raise money.
Unlike many meme coins or Bitcoin developers who don't have the right to mint coins, traditional companies can issue new shares after following the relevant procedures.
Last week, Bitcoin's rise from just over $80K to the current $98K was inseparable from MicroStrategy's support. Yes, MicroStrategy issued new 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, MicroStrategy, as always, has a grand vision. MicroStrategy used the money raised from the stock sale to fully reinvest in Bitcoin, pushing Bitcoin to $98K.
By now, you should have understood MicroStrategy's magic trick:
Buy Bitcoin → Stock price goes up → Borrow to buy more Bitcoin → Bitcoin goes up → Stock price goes up 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 cost of Bitcoin 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 Bitcoin crashes 75% from here (which is almost impossible) and drops to $25,000, so what?
MicroStrategy's leverage is off-exchange, so there is no margin call mechanism. 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 doesn't need to be forced to sell those 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 stock anymore, then MicroStrategy needs to sell some of its Bitcoin in February.
All in all, we still have more than 2 years to keep playing the music and dancing.
This is the magic of off-exchange leverage.
You may ask, is there a chance that MicroStrategy will be forced to sell Bitcoin due to interest payments?
The answer is still no.
Due to Microstrategy's convertible bonds, creditors are generally making a risk-free profit, so its interest rate is 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 interest rates of its subsequent bonds 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.
Microstrategy's main bond interest rates, source: BitMEX
Microstrategy's only soft threat is the Bitcoin whales
By now, Microstrategy has become intertwined with Bitcoin.
More companies are preparing to learn - the great manipulation of David Saylor, the "Bitcoin Whale" of the crypto 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 unrestrained wild 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 Bitcoin in the hands of retail investors has all 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 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 date 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're used to seeing conspiracy groups designing conspiracies in memes every day, occasionally seeing a real top-level master plan, I'm truly in awe.
