Author: HighFreedom, Source: Author’s Twitter @highFree2028

Is the biggest variable micro-strategy (hereinafter collectively referred to as MSTR) in this bull market a LUNA-like left-foot-on-right Ponzi MLM operating model? What is the nature of MSTR as a company? Why is the MSTR model a "catalyst" for the growth of BTC? Will the MSTR model break the four-year cycle or even the eternal bull market in the currency circle? Through which dimensions can we observe the MSTR pattern or even the end of this cycle?

Remark 1: The article involves a lot of charts and is divided into 7 chapters. Since Twitter does not support long articles, it is forced to be divided into 7 threads

Remark 2: 1. Points 2 and 3 are mainly basic information. Friends who have basically zero knowledge of MSTR can start from 1

Note 2: All contents in 4, 5 and 6 are in-depth thinking and analysis. Friends who know MSTR very well can start from 4

Basic content

1. MSTR fundamentals introduction: the company's original main business, shareholder structure, and revenue.

2. Analysis of the core strategy of buying coins: sorting out the history of buying coins, the cost and amount of holding coins, the company's debt situation, and the core KPI of the strategy of buying coins (Bitcoin per share).

3. Sorting out the sources of funds for the crazy currency buying: 21/21 PLAN is the US$42 billion currency buying plan "ATM market price selling stocks" and "Convertible bonds issuance of convertible bonds (hereinafter commonly known as CB)".

“Convertible bonds” is one of the essential operations and is also the core observation object for whether there will be a subsequent spiral collapse. This content will be analyzed in detail below.

In-depth analysis

4. The core of the game: basic knowledge of CB, why MSTR’s CB is so popular, who is buying MSTR’s CB, and what is the essence of CB.

5. Discussion of the MSTR model: What does MSTR’s premium to BTC represent, and what is the nature of MSTR as a company? What does the MSTR premium mean? When should I buy or sell MSTR stock?

6. When will the game stop: Will the dusk of the MSTR model and the end of BTC appear? Through what dimensions can it be observed? What would happen if unfortunately there were a downward spiral?

Key time point

7. MSTR enters the key timetable of Nasdaq NQ100 this month.

(The picture shows a page from the 2024Q3 MSTR financial report. MSTR currently holds 386,800 BTC)

1. MSTR fundamentals introduction:

The company’s original main business: BI software, classified as “technology” on Bloomberg, softwareAnnual revenue is approximately US$400 million.

The company’s shareholder structure: According to data disclosed at the end of Q3 2024, boss Saylor is the largest shareholder, holding 9.75% of the shares; the other top ten shareholders are basically from various asset management companies It is held with customers or asset managers’ own money (but please note that for ordinary A shares, Saylor’s holdings are B shares, and each B share has ten times the voting rights of A shares, so the company currently Saylor still says Have the final say).

The company's existing financial situation: there should be about 3 billion US dollars in cash on the account (just announced last Friday); liabilities (mostly convertible bonds) are about 7 billion.

2. Core strategy analysis of currency buying:

Be bullish on BTC/USD in the long term and continue to buy BTC. Using internal cash accruals, equity and debt, 386,700 Bitcoins were acquired for approximately US$22 billion (cost approximately 56,849 USD), which is currently worth approximately US$36 billion based on the BTC price of 95,000 USD. Reference: https:// saylortracker.com.

Be bullish on BTC/USD in the long term and continue to buy BTC. The company started its first currency purchase in September 2020 during the last bull market. At that time, the average price was 10,419 USD and 16,796 BTC were purchased.

Used internal cash accruals, equity and debt to acquire 386,700 Bitcoins for approximately $22 billion (cost approximately $56,849 USD), currently priced at 95,000 USD in BTC Calculated, the value is about US$36 billion.

The core of the company's KPI: Bitcoin per share (called BTC Yield in the financial report). The core meaning is that shareholders should not let me issue additional shares to dilute everyone's interests. Or use debt to buy coins, as long as the share of BTC corresponding to each share in your hands continues to increase (please don't care about the rise or fall of my stock price in the short term, I just want to buy coins everywhere).

Note: How MSTR continues to increase BTC Yield will be discussed next.

3. Sorting out the sources of funds for crazy coin buying: 21/21 PLAN is a US$42 billion coin buying plan in the next three years

There are usually two methods of financing for a listed company: 1. One is to issue additional shares to bring in more shareholders (equity financing); the other is to issue bonds and make an IOU to borrow money from others (debt financing).

MSTR’s ATM market price selling shares: MSTR will issue a one-time additional stock worth 21 billion on October 30, 2024. Please note here that he is issuing a large number of additional shares at one time, and then can issue shares in the next three years. When trading intraday,Sell ​​stocks at any time, and no announcement is required before selling stocks (so-called At the market "ATM).

MSTR's Convertible bonds issue convertible bonds (hereinafter usually CB)": by selling CB Debt financing, CB is different from ordinary bonds, it has both equity and debt characteristics. This will be discussed in detail below. I think this is also the core of MSTR’s game.

According to the latest regulatory filings: 8.2 billion of the 21 billion ATM stock quota has been used, and 3 billion of the 21 billion CB quota has been used.

4. The core of the game: through channels like CB, funds that are optimistic about BTC but unable to participate have the opportunity to enter

Basic knowledge of Convertible bonds (CB): convertible bonds themselves It is a debt that can be converted into shares after certain agreed conditions are met. It is essentially a call option of corporate bonds + company stocks. But note that if the company goes bankrupt and liquidates, the order of repayment is ordinary bonds > convertible bonds > shareholders, so the order of repayment of CB should be lower (there is no free lunch in the world).

Take the US$3 billion issued on November 21, 2024 as an example: 0 interest, guaranteed capital (to some extent), 5 years, bonus call options, and 55% premium.

In lay terms

Scenario 1 (good situation): Creditors can convert bonds into stocks only if the stock price reaches $672 within five years. If the stock price rises to $700, Then the profit ratio is (700 - 627) / 672 = 4.2%.

Scenario 2 (bad situation): If the company’s stock price has never reached $672 within five years, the creditor can only wait until the end of five years for MSTR to return the cash (for example, if it bought $100 million CB, creditors will have no choice but to recover the principal of US$100 million at that time).

Who helps MSTR issue CB: major traditional investment banks such as Barclays.

Who is buying CB: hedge funds that do volatility strategies and long-only debt insurance funds that are optimistic about BTC but cannot buy coins directly.

To be honest, hedge funds that do volatility strategies don’t excite me. These people may not have any faith in the pie. For example, the volatility of the pie is at a high level recently, so they short vol. In turn, go long vol.

What excites me most here is that Germany’s largest insurance company, Aliianz, with an insurance capital of 2 trillion euros, has begun to participate in BTC, and it is likely to be a net long position in BTC.

Why does Aliianz not buy coins directly: Because the nature of many funds makes it impossible to buy BTC.

Imagine you are a person managing 100 billionAs a US dollar-sized bond fund manager, you are also very optimistic about BTC. However, the nature of bond funds can only invest in treasury bonds and corporate bonds. Such nature of funds means that you cannot buy BTC spot, nor can you buy BTC call options. In addition, you will find that the target return of your fund may be 6% or 7%, and most of it is treasury bonds. For MSTR bonds, they are basically super alpha in your position.

At this time, MSTR said, brother, buy my company’s convertible bonds. This product is highly linked to the rise and fall of BTC. Moreover, this product of mine guarantees your capital. As long as the company does not go bankrupt and cannot be beaten, I will return the money to you in five years; if BTC doubles and reaches your exercise price, for example, I will take 70% and you will take 30%. (To some extent, it’s like an industrial boss in real life who said: “Brother, I heard that your level of currency speculation is not bad. How about you look at this, I will give you 20 million, you help me speculate in currency, and we will make a profit of 55 But there is a requirement, I want to protect the capital).

Such a product is very attractive to funds that are optimistic about BTC but cannot participate at the moment. Products like CB provide insurance funds and bond funds. It opened a channel to participate in the rise and fall of the BTC market. There is currently a lack of such products in the market, which is why CB’s subscription of unusual currencies (it was initially planned to issue 1.75 billion US dollars of CB last month, but the result was too hot, and finally two days later 3 billion were issued directly).

The essence of CB: essentially speeding up the level of BTC participation funds.

For hedge. For fund, it is a good leg in the long-short volatility strategy. To be honest, these people are not friends of us old leeks.

For bond funds and insurance funds, it is equivalent to using CB. Products, make BTC long with us only’s net long family

CB stock situation: There are currently six issues of CB in the market. Investors in the first five issues have made a lot of money with the rise in currency prices and MSTR stock prices (this The thread can’t fit the picture. For details, you can look at the market prices of convertible bonds in each period. The latest market price for the 2028 period is 224, and the holder’s return rate is 124%)

5. Discussion of the MSTR model:

What does the premium of MSTR to BTC represent? When should I buy and sell shares of this company?

The premium of MSTR:

< p>I think it represents the acceleration of BTC’s rise in the coming period (the historical average premium is 75%. The premium is now from the high of the past few days 3 has fallen back to around 2.5 currently)

When to buy and sell MSTR stocks:

If you think BTC will accelerate its rise in the next period of time, Then buy MSTR directly; conversely, if you think the price of BTC will be flat in the future, then sell MSTR.

MSTR.The essence:

Use BTC as the underlying asset to issue financial products that meet the needs of funds with different returns and risks (much like the work of traditional investment banks, helping with stock issuance, IPO, etc.).

6. When does the game stop: Migration of BTC ownership and the catalyst role of MSTR

Accelerating migration of BTC ownership:

To be honest, I have been speculating in currencies for 8 years. My solid belief in BTC comes from two points:

1. A good tool to hedge against excessive money printing by human sovereignty: QE was introduced in Japan in the 1990s and the United States in 2008. After the emergence of unconventional currencies, the sovereign will print a large amount of money when it encounters problems. This thing is the same as drug gambling. Once you get involved, it is difficult to quit. In the end, it will inevitably lead to a large amount of over-issuance of currency. The underlying attributes of BTC determine that it is the best tool available on the market to handle excess currency.

2. Accompany the growth of BTC: I think that on the one hand, the market value of BTC is getting larger and larger, and on the other hand, the circle of funds participating in BTC is getting larger and larger. The so-called migration of BTC ownership:

Hacker IT man->High net worth individual->Technology company->Fund institution->Small->Large

MSTR uses various financial instruments to introduce funds in advance that may not be able to participate in BTC many years in the future. To a certain extent, it is an overdraft on the price of BTC.

For example, in the next cycle of 2028, insurance funds and bond funds may be able to participate in BTC. However, through tools such as CB and in the form of approximate capital guarantee, funds that want to participate but cannot directly buy coins will be able to participate, such as Insurance funds have been converted into spot bull power on the market, and they will now be on the market in 2024.

To put it in layman’s terms, it may take the end of 2025 for the currency price to rise to 150,000, but companies like MSTR may raise the currency price to 150,000 within 3 months.

When will the game come to an end:

But what if MSTR’s leveraged currency speculation method comes to an end one day? I think it is like this:

If the subsequent MSTR bond issuance and other products cannot be issued, and the future currency price increase has been greatly overdrawn, but at the same time there is no larger funds. If you take over and buy BTC, BTC may usher in a terrifying downward spiral like LUNA.

For example, MSTR brought the currency price to 250,000 within a year. At this time, bonds could not be issued and no one bought them; however, companies such as American pension funds and small sovereigns with greater financial strength did not take over. , it’s troublesome.

So, if one day I can give Saylor some advice: don’t front run too fast, don’t increase leverage too much, otherwise the terrifying downward spiral will cut off the ownership migration path of BTC. Serious injury.

Finally, I would like to list my observation dimensions for you:

The dusk of the MSTR model and the top observation dimensions of BTC:

1. The first level of CB and other subsequent products The popularity of market subscription (if the subsequent primary market subscription for CB issuance is not so popular, you may start to worry; it is best to find an investment bank that helps MSTR issue CB, they are the first to know the situation).

2. The premium level and financing cost of CB issuance: CB is essentially a financing tool and has financing costs. MSTR is essentially a call to sell one's own stock, which is a behavior of shorting BTC at a high level. ; The funds used to buy CB are essentially buying this call. As you can see, CB in November was issued at an exaggerated 55% premium. If the subsequent premium gets lower and lower, it actually means that the call value given to investors is getting higher and higher, which means that the financing cost is getting lower and lower. .

3. The entry progress of larger funds: If CB gradually becomes unable to generate funds, then larger funds such as pensions will be needed to take over. At this time, it is necessary to closely observe the response of these big brothers. BTC’s attitude and trends.

Note: I originally thought that the top of this market, on the one hand, combined with the external currency cycle, and on the other hand, combined with the internal OG shipment situation, is basically the same; but as the MSTR model gradually matures, I think When the MSTR model will come to an end needs to be included in the analysis framework and system.

7. Entering the Nasdaq Timeline in December

The Nasdaq will adjust its constituent stocks at the end of each year, and MSTR currently meets all requirements.

Key time 1:

After the U.S. stock market closes on December 13: The Nasdaq Compilation Committee will announce the adjustment of constituent stocks.

Key time 2:

December 23, the opening day of US stocks: MSTR was officially included in the index and started trading.

Finally, I would like to talk about the significance of MSTR’s inclusion in the Nasdaq:

1. Passive allocation of funds: The radical scale of the Nasdaq is about 300 billion U.S. dollars, and the proportional allocation is based on market weighting, which may be 1.5-2 billion funds will passively buy MSTR.

2. Expand the consensus on BTC funds: Imagine that you can open Alipay and buy some Nasdaq funds. Essentially, you are passively allocating a little bit of MSTR stocks, and more essentially, you are passively allocating a little bit of BTC. . In fact, I think this is as important to BTC in the long run as the US BTC SPOT ETF was listed for trading on January 10 this year.

Finally:

Please protect the BTC in your hand and welcome the bigger main wave in 2025. Don’t wait until the game is about to stop. Hand over your precious chips.