By Eric, Foresight News
Original title: The company Wall Street is most pessimistic about is actually a leading cryptocurrency stock.
The Financial Times' Alphaville column published an article on February 24th titled "Mirror mirror on the wall, what is the most shorted stock of them all?", which provided some interesting data.
The article shows that the median short position in S&P 500 constituent stocks has climbed to 2.7%, one of the highest levels in nearly a decade. Among all constituent stocks, Strategy has the highest short position at 14% of its market capitalization, followed by Coinbase at 11%. This means that among all companies with a market capitalization exceeding $25 billion in the US stock market, Strategy is the least favored.
The articles published in the Alphaville column do not represent the views of the Financial Times, and are characterized by their sharp and unsparing criticism. Even as cryptocurrencies have gradually become mainstream, the articles in the Alphaville column continue to relentlessly criticize them. Whether Bitcoin is at $10 or $100,000, they consistently maintain that cryptocurrencies are meaningless.
On February 2, Craig Coben, a veteran investment banker who previously served as Vice Chairman of Global Capital Markets and Head of Global Equity Capital Markets at Merrill Lynch, also published an article criticizing the Strategy model in his Alphaville column.
Craig Coben's view is not extreme; he also believes that Strategy faces no risk of a "bank run" in the short term and currently has no liquidity crisis. However, he points out some core issues, such as the fact that the Bitcoin hoarding model does not generate cash flow, thus requiring continuous financing and diluting the equity of common shareholders. Furthermore, Strategy's strategy tends to buy when market sentiment is high and Bitcoin prices are high, which is a systemic and unsolvable problem.
Regarding Strategy's high short position, some analysts believe that not all short positions are "naked short" Strategy, and some may be used by hedge funds to hedge their Bitcoin spot holdings. Nevertheless, this indicates that there are quite a few people bearish on Strategy, at least many believe that if Bitcoin falls, Strategy will not be immune.
In Craig Coben's article, he mentions that Strategy calls its five perpetual preferred shares " digital credit ," a concept that Michael Saylor has been emphasizing since the end of last year.
In this concept, the first layer, "digital capital," is Bitcoin. The second layer, "digital credit (or digital lending)," consists of various perpetual preferred shares issued by Strategy. These preferred shares come with high yields, and Strategy is required to pay corresponding interest to the holders annually.
The third layer is "digital currency," which refers to currencies issued based on the financial products of the second layer, including stablecoins, used for transactions. Saturn, shown in the image above, plans to issue USDat, a stablecoin based on SRC and US Treasury bonds. This project has also received investment from YZi Labs.
If you don't understand this logic, you can use the United States as an analogy. The US, based on its influence, continuously issues US Treasury bonds, only needing to pay interest before maturity and then using new bonds to repay old ones. As long as the US's international influence and the dollar's status don't weaken, this game can continue indefinitely. For Strategy, Bitcoin represents US influence, and digital credit represents US Treasury bonds. Strategy also needs to borrow new debt to pay annual preferred stock interest, but as long as the price of Bitcoin continues to rise in the long run, driving up Strategy's stock price, the company can continuously issue new shares to raise funds to buy more Bitcoin and pay interest, continuing indefinitely.
Michael Saylor is a firm believer that Bitcoin will change everything. In his view, the unlimited rise of Bitcoin is a more reliable thing than the United States winning forever. Therefore, he is more willing to issue currency based on an asset that is "destined" to continuously appreciate, just like the early days when the US dollar was pegged to gold.
Strategy's strategy isn't new; it simply needs enough cash to pay interest and can continuously raise funds to buy Bitcoin. Like US Treasury bonds, this is a game everyone knows will eventually run out of steam, but how long it can last is uncertain. Strategy currently has ample cash reserves, and its CEO has stated that Strategy will only be forced to sell its coins if Bitcoin remains below $8,000 for four to five consecutive years.
If this extreme condition were to actually occur, not only Strategy, but the entire Web3 industry might disappear.
Even a banker as old-school as Craig Coben must admit that Strategy won't encounter financial problems anytime soon. However, for hedge funds, Strategy is a good tool for hedging against Bitcoin's decline; for short sellers, shorting a system that short on Bitcoin's rise to function properly during a cryptocurrency downturn is also reasonable—at least for now, there aren't many reasons to be bullish on Strategy.
Michael Saylor's idea of launching a new currency using Bitcoin is intriguing in itself. He buys Bitcoin in US dollars, pays interest in US dollars, and builds a system with billions of dollars, yet his ultimate goal is to destroy the very foundation upon which it's built. Perhaps the Wall Street elites are secretly laughing; they have no interest in whether Strategy can truly become a century-old company, they only care about when your stock price will rise and when it will fall.
Michael Saylor believes Bitcoin will continue to reach new highs, thus making it the cornerstone of everything; holders and users of the US dollar believe the US will continue to prosper, thus tacitly accepting the ever-increasing US debt ceiling. Both hold similar beliefs, but which is more superior?
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