Written by: YBB Capital Researcher Ac-Core Source: medium

1. Preface:

MicroStrategy was originally an enterprise software company focusing on business intelligence solutions, but since 20 years, its focus has significantly shifted to Bitcoin investment. The company raises funds to purchase Bitcoin by issuing stocks and convertible bonds, making it the focus of the US stock market. On February 6, 2025, MicroStrategy, the listed company that holds the most Bitcoins in the world, announced its official name to Strategy (hereinafter referred to as MicroStrategy for the sake of reading). At that time, data showed that Strategy held 471,107 Bitcoins on its balance sheet, accounting for about 2% of the global total Bitcoin supply. By February 21, 2025, MicroStrategy had hoarded nearly 500,000 Bitcoins, worth more than US$40 billion.

Micro strategy essentially turns the stock market into a Bitcoin ATM through capital structure design - raising funds to increase positions in Bitcoin by issuing new shares/convertible bonds, and then feeding back the stock price valuation with Bitcoin holdings, forming a capital closed loop deeply bound to crypto assets. With this high premium financing mechanism unique to the US stock market, micro-strategy not only prevails among Bitcoin concept stocks, but also uses equity issuance and currency price manipulation to develop a "alchemy" certified by the US stock market.

2. What is the "magnet" for stock price speculation?

Source: abmedia.io

The financing method of micro-strategy is very smart. It mainly completes fundraising through the combination of stocks and bonds. In its initial stages, it relies on bond issuance and its own cash reserves, and even some common stocks and convertible bonds. But the disadvantage of issuing ordinary bonds is that they have to pay interest, but at that time its cash flow was still good, and the software business brought tens of millions of dollars of positive cash flow, enough to pay interest on these debts.

Time has come to this cycle, and it uses a large-scale stock issuance mechanism called ATM (At-the-market), that is, selling stocks directly in the secondary market. Micro-strategy plays the "alchemy" of the capital market through a strategy of combining stock issuance and bond issuance. In leverage ratioAt low, it quickly raises funds to buy Bitcoin by issuing additional stocks, thereby increasing leverage and increasing its valuation premium as Bitcoin rises. During the bull market, its premium was as high as 300%. However, as time goes by, the market gradually realized that micro-strategy is selling stocks in large quantities, causing the stock price to begin to fall and the premium also narrowed. At the same time, the leverage ratio has declined, and the company has gradually turned to a financing method that is mainly based on bond issuance. With this change, the pace of micro-strategy buying Bitcoin slowed down, causing demand for Bitcoin in the market to begin to weaken.

So, MicroStrategy played a game of "premium hedging". It raises funds to buy Bitcoin by selling stocks at a high premium, and when the premium falls, the company turns to issuing bonds. This model provides companies with enough funds to operate Bitcoin buying, although the market's enthusiasm for its stocks has diminished as it gradually realizes these operations.

Overall, micro-strategy uses different financing strategies in different cycles, which not only takes advantage of the high premium advantages of the stock market, but also steadily increases leverage through bonds. For Bitcoin, a slower pace of micro-strategy may mean that the momentum of Bitcoin's rise will be weakened in the short term; for micro-strategy, this diversified financing method allows it to respond flexibly in different market environments.

The reasons behind the sharp rise and fall of micro-strategy stock prices, and how they attracted a large number of speculators through Bitcoin investment. What is the highlight of the "point coins to make gold" technique with a market value of 10 billion US dollars? Simply put, there are several key points:

The nonlinear relationship between stock price and Bitcoin: Many people think that the stock price of micro-strategy should rise and fall simultaneously with Bitcoin, but this is not exactly the case. For example, in November and December last year, when Bitcoin was still rising, the stock price of MicroStrategies had actually begun to fall. Therefore, its stock price fluctuations are not just directly linked to the price of Bitcoin.

Reactions and long-term effects of narrowing premiums: Micro-strategy is gradually shrinking compared to previous premiums. Michael J. Saylor's selling focus is not the value of the stock itself, but its volatility. In other words, he is selling micro-strategy as a highly volatile speculative tool, especially attracting institutional investors who cannot directly purchase Bitcoin ETFs.

Bitcoin's "agent investment": Many institutions cannot directly purchase Bitcoin or Bitcoin ETFs due to regulatory restrictions or internal regulations, especially in some, such as South Korea and Germany. soMicro-strategy has become an alternative for these institutions to invest in Bitcoin. If they can't buy ETFs, they will buy stocks of Micro Strategy because they are highly related to Bitcoin.

Michael J. Saylor's genius marketing and "self-fulfilling prophecy" of micro-strategy: Michael J. Saylor's marketing is very powerful. He not only sells stocks of micro-strategy, but also emphasizes its leverage effect. What it means is that if you are optimistic about the increase in Bitcoin, then the stocks of Micro Strategy will have a greater increase. Moreover, buying a micro strategy is safer than buying options with leverage, because you don’t have to worry about the issue of liquidation.

The uniqueness of micro-strategy: The success of micro-strategy depends heavily on their strong financing capabilities, and Saylor continues to raise money for the company to buy more Bitcoin. Moreover, Saylor is also very good at "selling". He gives speeches everywhere and goes on YouTube to promote, packaging micro-strategy into a "super leverage tool", attracting speculators around the world.

3. "Hold Bitcoin, never sell it": Michael J. Saylor's crypto jihad

Source: blocktempo

Michael J. Saylor's past wave of Bitcoin promotion actually had a very far-reaching impact on the entire Bitcoin industry. By constantly appearing in front of the public, accepting interviews, and delivering speeches, he not only made Bitcoin go out of the circle, but also attracted a large number of institutional investors to enter the market. It can even be said that micro-strategy and ETF are the two major buyers in the Bitcoin market at present. The interesting thing is that although ETFs are very important, in comparison, the operation of micro-strategy is more eye-catching because micro-strategy is only bought but not sold, and ETFs will sell from time to time.

In terms of marketing, the most impressive thing is that Saylor also said that he had made a will to destroy his personal Bitcoin private keys after his death and completely erase these Bitcoins from circulation. His "leader-level" operation seems to show that he has made an eternal contribution to the Bitcoin industry. Although no one knows whether he will really fulfill his promise in the future, he said so, more or less a shot of stimulant to the market.

In addition, the Bitcoin of Micro-Strategies is not controlled by Saylor himself and Micro-Strategy Company. These Bitcoins areIt is escrowed in two trusted third-party custodians, Fidelity and Coinbase Custody, meet the audit and regulatory requirements of listed companies, so those who are worried about what Bitcoin will do after his personal death can rest assured.

Michael J. Saylor is not only a big promoter of Bitcoin, but to some extent, he is even more extreme than some early Bitcoin investors. Long before the emergence of ETFs, he built micro-strategy into a similar existence to Bitcoin ETFs, and the dialogue between him and Musk brought a key boost to Bitcoin investment. According to market rumors, Musk decided to let Tesla buy Bitcoin in large part because of Saylor's advice.

Saylor is not limited to Bitcoin. Some people in the market believe that his latest remarks show that he supports the development of the entire digital economy, proposing that the United States should become the leader of the global digital economy, and promote all assets to be chained and tokenized. He is no longer just a Bitcoin extremist, but he sees the potential of blockchain technology in a wide range of fields. This open attitude also made him gain more recognition in the blockchain industry.

Sight comes to the United States' future digital economy layout. Saylor even proposed the idea of ​​incorporating Bitcoin into its strategic reserves to further expand the United States' leadership in the global digital economy. He not only promoted Bitcoin, but also proposed a vision of a global on-chain economy, which allowed us to see that the global economy may move towards a more decentralized financial landscape in the future, and even a cyber financial system that transcends sovereignty.

However, under this future pattern, capital flows and regulation will also face new challenges. Especially if the United States dominates the economy in this chain, other global organizations, such as the EU or South Korea, will face greater pressure on capital outflows. Even if national regulators try to control capital flows through traditional means, these means will become powerless in the face of decentralized on-chain economy. On March 25, World Liberty Financial Inc. (WLFI), a Trump family crypto project, officially announced plans to launch the stablecoin USD1. The stablecoin business is too profitable, and USD1 will be 100% supported by short-term US Treasury bonds, US dollar deposits and other cash equivalents. This seems that in Ming Card, the United States will ease the US debt crisis more through stablecoin issuance in the future.

IV. Mobiusian cycle, Michael J. Saylor's asset game

Source: thepaper

Now the high price of Bitcoin has fallen to around $87,000, and the holding cost of MicroStrategy is about $66,000. This makes people wonder: What will happen to the market if the price of Bitcoin falls below the cost price of MicroStrategy to buy Bitcoin?

In the last bear market, MicroStrategies was even worse than they are now. At that time, their net assets had already negative, which is extremely rare for any company. Although some companies had negative net assets under special circumstances (such as the issuance of large amounts of stock options), generally speaking, negative net assets could easily cause market panic. However, MicroStrategies did not liquidate at that time and were not forced to sell Bitcoin, mainly because their debts were still far from maturity and no one could force them to liquidate immediately.

The interesting thing here is that Michael J. Saylor, the founder of MicroStrategies, has almost 48% voting rights, which also makes it very difficult for any proposal to initiate a liquidation. So even when the company's financial situation is tight, creditors and shareholders cannot easily make liquidation requests.

So, if Bitcoin really falls below the average cost of holdings, will micro-strategy stocks fall into the so-called "death spiral"? In fact, this question was raised during the last bear market. At that time, the net assets of MicroStrategies were negative, and the market was very panic, but the current market should be more experienced. Investors have experienced these volatility, so they will not be as panic as they were at that time.

In addition, Michael J. Saylor and his team actually have some flexible means to deal with market volatility. For example, they can choose to issue bonds, issue additional stocks, and even use the Bitcoin they hold as collateral to borrow money. MicroStrategies currently owns about $40 billion in Bitcoin, which means they can stake these Bitcoins to get funds, and even if the price drops, they can supplement collateral to avoid being forced to sell.

And their main debt will not expire until 2028 at the earliest, and no one can force them to make adverse decisions before that. For the time being, even if the price of Bitcoin fluctuates, micro-strategy will not immediately face huge financial pressure and will not be forced to be released.Sell ​​Bitcoin. More importantly, more and more sovereign funds and institutions around the world have begun to regard Bitcoin as a reserve asset, which is also a big trend. Against this background, Bitcoin’s long-term prospects are still optimistic. As market rumored, like Abu Dhabi, there have been a trend that has led to more and institutions entering the Bitcoin market in the future. Although there may be some fluctuations in the short term, the strategy of micro-strategy and the general market trend in the long run seem to be consistent. Although their financial situation may face challenges in the coming months or even years.

So we look at the overall situation that while volatility in Bitcoin prices may indeed put some short-term pressure on micro-strategy, they currently have no risk of liquidation or being forced to sell Bitcoin, given their debt maturity and market trends. Instead, they may take advantage of the current market environment to continue to increase their holdings of Bitcoin, further consolidating their position in the cryptocurrency space. Behind this series, there are several questions worth thinking about further discussion:

Does the volatility performance of the Bitcoin market maintain the current level?

Micro strategy is essentially providing itself with a high leverage investment tool through the high volatility of Bitcoin. But if Bitcoin is gradually accepted by institutional investors and volatility declines, can the company maintain its existing high-return strategy? With the launch of Bitcoin ETFs, the long-term Bitcoin price cyclicality has been broken, and the Bitcoin spot price has become flattened due to decentralized financial derivatives such as ETFs. After gold passed the ETF, its price trend has provided us with a reference answer. The high volatility of Bitcoin in the past period will no longer exist, and the overall change will move from radical to gentle.

How long can the financing methods of micro-strategy last?

At present, this financing and buying model is based on the premise that the market is bullish on Bitcoin for a long time, but if the price of Bitcoin enters a long-term fluctuation or even decline range in the future, will the financial situation of the micro-strategy be able to withstand it? If a company continues to raise funds to buy Bitcoin by issuing bonds and issuing additional shares, the market's premium to its stock will further narrow, and the financing methods of micro-strategy are essentially highly dependent on market optimism. Once the price of Bitcoin enters a long-term fluctuation or decline range, in terms of financial pressure, existing debts need to pay interest, and the company also needs to deal with shareholders' equity diluted by the additional issuance of shares. Specific environments may also affect micro-strategy financing models, some of the Trump era mayIt provides enterprises with a relatively relaxed financing environment and promotes the establishment of strategic reserves. But if these positive factors gradually fade, the financing conditions of micro-strategy may be worse than before.

Michael J. Saylor is an idealist who supports Bitcoin or arbitrageur who supports Bitcoin?

Saylor's role is actually a combination of idealist and arbitrageurs, deeply understanding and agreeing with the long-term potential of Bitcoin, and is also very good at using market mechanisms to profit companies and individuals. Taking advantage of the high volatility of Bitcoin, micro-strategy stocks are marketed as a "leveraged Bitcoin investment tool". This approach attracts institutional investors who cannot directly invest in Bitcoin or Bitcoin ETFs, which indirectly gain Bitcoin exposure by purchasing micro-strategy stocks. Rather than saying that Michael J. Saylor is a firm believer in Bitcoin, it is better to say that Michael J. Saylor is an arbitrageur for volatility opportunities in the Bitcoin market. The essence of a series of operations of micro-strategy is to use Bitcoin to earn the "volatility" returns in the stock market. In the end, the micro-strategy itself may rely more on market sentiment and Bitcoin's price performance rather than the long-term value of Bitcoin itself.

5. Wealth Engine Or Encryption Frost?

Source: X@MicroStrategy

The capital operation model of micro-strategy is right at the right time, but can MSTR's stocks participate? Personally, for crypto industry insiders, the odds of MSTR are greater than those who directly participate in Bitcoin, and MSTR is more like the accelerator version of Bitcoin as a whole.

Micro Strategy is an ostensibly software company focusing on commercial data analysis, but in fact its operating model has completely shifted to Bitcoin asset hoarding. MSTR has a leverage effect. Because the company holds a large amount of BTC and may increase its holdings by borrowing or issuing bonds, this amplifies the sensitivity of its stock price to changes in Bitcoin price. When BTC rises, MSTR may rise more, and vice versa.

Its stock soared from $68 at the beginning of the year to about $400 now, a gain that even surpassed many well-known companies such as NVIDIA, Palantir and Coinbase. What exactly makes MicroStrategic Stock perform so amazingly? Some people think it isFounder Michael J. Saylor successfully pushed up the stock price through an "unlimited fund plug-in" operation model; some criticized this as a Ponzi scheme and were concerned that it might trigger the next cryptocurrency market crash.

Micro Strategy's current Bitcoin investment returns significantly exceed the revenue of its traditional businesses. Although its software business revenue has basically not grown or even declined in the past few years, MicroStrategy has achieved an overall increase in the company's profits by continuously issuing bonds and diluting equity, raising funds to buy more Bitcoins. Micro-strategy deeply binds stocks to Bitcoin. This operation is beneficial but also brings certain risks to the company, because the company's core business cannot bring significant profits to it, and all prospects are weighing on the rise in Bitcoin's price. In fact, no one knows that in the future, the price trend of Bitcoin will achieve a steady increase through more financial derivatives + ETFs + strategic reserves, or will it usher in a wave of "big liquidation".

The company further pushed up its financing capabilities by issuing interest-free Convertible Notes. These notes allow investors to convert them into corporate equity in the future, but the conversion price is much higher than the current share price. On the surface, this seems to be a transaction that is unfavorable to investors, but in fact, note holders enjoy priority liquidation rights, which can reduce risks. Micro-strategy can continue to hoard Bitcoin through this financing method, driving the double rise in its stock and Bitcoin price.

The very clever thing about this gameplay is that it successfully transfers risks from the company itself to the stock market, raises funds by issuing convertible bonds, and then uses the money to buy Bitcoin. When the debt matures, if the company's stock price is high enough, the creditor will choose to convert the debt into stock instead of asking the company to repay the money. In this way, the debt problem can be completely transferred to the stock market, so the long and short odds in the stock market are generally greater than those in the crypto market.