Will Bitcoin/MSTR be the next Luna? Why does the market have this view?

If Bitcoin breaks 100,000, everyone should thank MicroStrategy (MSTR is their stock). It is their personal investment that guarantees off-exchange bond funding, addressing concerns about Bitcoin's volatility, packaging the unruly Bitcoin into a form acceptable to traditional markets, using their own stock as a buffer to welcome traditional funds. Their self-sacrificing act to illuminate others is admirable.

While everyone cheers for Bitcoin's new milestone, there are doubts in the market that MSTR/Bitcoin is the next LUNA/UST. Soon after, Citron Research, a major firm, shorted MSTR, causing MicroStrategy's stock price to drop more than 20% at one point. Strangely, Citron shorted MicroStrategy's stock while being bullish on Bitcoin, creating a long-short hedge between MSTR and Bitcoin. However, MicroStrategy firmly holds Bitcoin, so how deep is this situation? We won't dig deep, but MicroStrategy's maneuver of stepping on the left foot while climbing with the right: Buy Bitcoin → Stock price rises → Borrow to buy more Bitcoin → Bitcoin rises → Stock price further rises → Take on more debt → Buy more Bitcoin → Stock price continues to rise → Issue more shares to sell for cash → Buy more Bitcoin → Stock price continues to rise, does it not smell like "big thunder"? Let's look at two different viewpoints.

Bullish on MSTR/Bitcoin, it won't be the next LUNA

Viewpoint 1: MicroStrategy is not LUNA; its safety cushion is thick enough, and the debt repayment date is far in 2027, with the biggest threat being the ancient Bitcoin whales' sell-off.

The contributors to the 40K-70K range are Bitcoin ETFs, while the contributors to the 70K-100K range are MicroStrategy. MicroStrategy was originally a software company with a lot of unrealized gains and did not want to invest in production anymore, so it began to shift from real to virtual, starting to buy Bitcoin out of its own pocket since 2020. Later, MicroStrategy bought up all the cash on its balance sheet and began to leverage. Its method of leveraging is through off-exchange leverage, determined to borrow money to buy Bitcoin by issuing corporate bonds.

The essential difference from Luna is that Luna and UST printed each other; essentially, UST is meaningless unanchored printing, barely maintained by a 20% fake interest rate. However, MicroStrategy is essentially dollar-cost averaging + leverage, which is standard borrowing to go long, and it has bet in the right direction.

The adoption of Bitcoin far exceeds that of UST, and MicroStrategy's impact on Bitcoin is significantly lower than Luna's impact on UST. It's a simple principle: a daily interest rate of 2% is a Ponzi scheme, while an annualized rate of 2% 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 increases its Bitcoin holdings through bonds and stock sales, with almost all the money used to continuously increase its Bitcoin position, which is also the biggest driving force behind Bitcoin's price rising from 70,000 to 100,000. MicroStrategy's average cost for Bitcoin is $49,874, meaning it is now close to a nearly 100% unrealized gain, which is a super thick safety cushion. MicroStrategy borrows through off-exchange leverage, with no liquidation mechanism. Angry creditors can only convert their bonds into MSTR stock at a specified time and then angrily sell it into the market. Even if MSTR falls to zero, it still does not need to be forced to sell these Bitcoins because the earliest debt repayment date for MicroStrategy is February 2027, which is more than two years away (by then, the bull market is likely over). The biggest variable may be those large amounts of ancient whales or state-level entities cashing out to crash the market; otherwise, this momentum will be hard to stop.

Viewpoint 2: MSTR is a safe Bitcoin super bull built with real business + clever financial tools.

First, buying and holding BTC creates volatility in the stock price, allowing for the issuance of convertible bonds (large stock price fluctuations are needed to issue convertible bonds, which are essentially bonds + call options). Next: Bitcoin rises → stock price rises → can finance at low interest (0.7%) → buy more Bitcoin in a cycle. Each time, MSTR can raise a lot of money, and it keeps increasing. Why? Because it promises a bottom line to borrowers (receiving principal and 0.7% annual interest), while also having a huge upside (stock price rises and can convert to shares). The funds are not collateralized, and there are no forced liquidation clauses. There is software business support to pay interest (traditional business cash flow of $75 million). The worst-case scenario is a Bitcoin crash, in which case they just wait for BTC to recover. Will there be a blow-up? It's hard; the software business can pay interest, and now BTC has nearly $15 billion in unrealized gains. The debt is all long-term convertible bonds, and no one can force a liquidation on them. Isn't that great? Think about every time Michael Saylor boosts the price; at least everyone in the crypto circle should thank this super bull. Michael Saylor sacrifices his own interests to attract a large amount of traditional external funds, using their money to forcefully lock in Bitcoin holdings (once in, there's no easy way out, binding them to the crypto circle), which is far superior to the frequent inflows and outflows of spot ETFs. Therefore, the more MSTR rises, the more traditional financial money it attracts, and the more funds are reserved for Bitcoin's future pump at critical points! If you've made money on BTC, be sure to thank Michael Saylor.

Viewpoint 3: The Trump effect driving a raging bull market will trigger a new asset flywheel.

Those who understand the trend will naturally not short MicroStrategy, especially as the raging bull market is about to begin. Citron probably missed the boat; money borrowed at nearly zero interest to buy Bitcoin, which is expected to appreciate significantly, is a no-brainer. Moreover, with Trump being pro-crypto, pressuring the Democrats to force their funds back! No matter how you look at dollar-denominated assets, they will rise!

Viewpoint 4: MSTR opens the channel between bonds and Bitcoin, with call options.

MSTR has opened the channel for the bond market to connect with Bitcoin. The bond attributes give holders guaranteed returns, while the convertibility of stocks provides them with long-term call options on MSTR.

Doubts/Bearish on MSTR/Bitcoin, lessons from LUNA's past.

Viewpoint 1: MSTR is the bond version of LUNA.

Every bull market has a Terra $Luna; this cycle is called MicroStrategy $MSTR. They make money, issue stocks to buy Bitcoin; when Bitcoin's price rises, they issue more stocks to finance, and when they raise money, they continue to buy Bitcoin. Stepping on the left foot while climbing with the right in a spiral.

Viewpoint 2: The collapse of the Hunt family silver is a lesson.

I think MicroStrategy's approach is very similar to the Hunt family in the 1970s and 1980s.

The Hunt family was a wealthy American family that, upon reading a book by Bunker Hunt, decided to go all-in on silver, believing it was worth more than gold. They borrowed money from Wall Street to buy silver, purchasing both spot and futures. They accumulated 1.2 billion ounces of spot silver and 50 million ounces of futures, while the global annual production was only 20 million ounces. The supply-demand distortion caused silver prices to rise 25 times.

The Hunt family became the world's largest borrower and the largest holder of silver. The Federal Reserve could not tolerate this and began to raise margin requirements for silver futures fivefold, increasing borrowing thresholds. The Hunt family's funding chain broke, and they had to sell assets to raise margin, ultimately leading to forced liquidation and bankruptcy. Now MicroStrategy is following the same script; if things go smoothly, it will inevitably clash with the Federal Reserve in the end, and the arm cannot twist the thigh, leading to a price collapse. Blowing bubbles, it's better to burst early than late.

Viewpoint 3: Buying MSTR at a high is unwise; Bitcoin spot is of higher quality.

At this point in time, whether to participate in MSTR, I would not buy it. It's simple: even if BTC reaches $1 million after several cycles, and MSTR can acquire 1 million Bitcoins, without considering the discount rate, the value would be $1 trillion. In the meantime, they would have to continuously finance and dilute shares. Currently, MSTR's market value is already approaching $90 billion. If we compare the $90 billion to the $1 trillion potential, the space is the same as Bitcoin rising from $90,000 to $1 million. Therefore, I would rather buy Bitcoin at $90,000. Of course, MSTR might outperform BTC in the upcoming bull market, but when BTC enters a bear market, MSTR will definitely be squeezed. Since I feel I can't buy MSTR at a low, I also won't have the ability to exit at a high, so I might as well stick with BTC.

Viewpoint 4: The Federal Reserve's tightening policy may lead to a double decline in MSTR/Bitcoin.

If the Federal Reserve tightens liquidity in the future, and financing and bond issuance encounter problems, creditors will concentrate on converting to equity and then massively sell to obtain cash to supplement liquidity, which will inevitably lower stock prices. Insufficient funds flowing into BTC will lead to a decline in its price, returning to a downward spiral.

Moreover, some have already fantasized about conspiracy groups selling at relatively high points, such as Bitcoin at $150,000 or $200,000, and shorting MSTR to achieve a double kill, similar to the traditional financial institutions' attack on LUNA in the last cycle. Capital knows no justice or evil, only profit; for sufficient profit, it dares to take risks, even waging war.

Indecision is the nature of ordinary people. If there is certainty, where would the crowd on the rooftop be? Whether Bitcoin can break $100,000 is no longer the focus of discussion. More expectations may still revolve around Trump's formal inauguration and his lenient policies towards crypto, allowing more traditional institutions or off-exchange users to participate in crypto trading liquidity through formal channels. Just a bull run in Bitcoin is not what crypto users hope for; what they want is a massive explosion of Web3 ecological applications driven by liquidity incentives to truly change traditional productivity and financial direction, making crypto a legitimate new technology industrial park, realizing the beautiful vision of a new Web3 world.