Author: YBB Capital Researcher Ac-Core

I. Introduction:

MicroStrategy was originally an enterprise software company focused on business intelligence solutions, but since 2020, its focus has significantly shifted to Bitcoin investment. The company raised funds to purchase Bitcoin by issuing stocks and convertible bonds, making it a focal point in the U.S. stock market. On February 6, 2025, MicroStrategy, the publicly traded company with the largest Bitcoin holdings globally, officially announced its name change to Strategy (for ease of reading, it will still be referred to as MicroStrategy hereafter). At that time, data showed that Strategy held 471,107 Bitcoins on its balance sheet, accounting for about 2% of the total global Bitcoin supply. By February 21, 2025, MicroStrategy had accumulated nearly 500,000 Bitcoins, valued at over $40 billion.

Essentially, MicroStrategy has designed its capital structure to turn the stock market into a Bitcoin ATM—raising funds through the issuance of new shares or convertible bonds to increase Bitcoin holdings, and then using Bitcoin holdings to support stock price valuation, forming a capital closed loop deeply tied to crypto assets. With this unique high-premium financing mechanism in the U.S. stock market, MicroStrategy not only stands out among Bitcoin concept stocks but has also mastered a set of "alchemy" recognized by the U.S. stock market through equity issuance and price manipulation.

II. What is the "magnet" for MSTR stock price speculation?

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MicroStrategy's financing method is very clever, primarily combining stocks and bonds to complete fundraising. In the initial stages, it relied on bond issuance and its own cash reserves, along with some common stock and convertible bonds. However, the downside of issuing ordinary bonds is the need to pay interest, but at that time, its cash flow was good, with the software business generating tens of millions of dollars in positive cash flow, sufficient to cover these debt interests.

As time progressed, it began to use a large-scale stock issuance mechanism called ATM (At-the-market), which involves directly selling stocks in the secondary market. MicroStrategy played the "alchemy" of the capital market through a strategy combining stock issuance and bond issuance. When leverage was low, it quickly raised funds to buy Bitcoin through stock issuance, thereby increasing leverage and enhancing its valuation premium when Bitcoin prices rose. During the bull market, its premium once reached as high as 300%.

However, over time, the market gradually noticed that MicroStrategy was selling a large amount of stock, leading to a decline in stock prices and a corresponding reduction in premium. At the same time, leverage decreased, and the company gradually shifted to a bond-centric financing approach. With this change, MicroStrategy's pace of Bitcoin purchases slowed down, resulting in a weakening demand for Bitcoin in the market.

Thus, MicroStrategy played a game of "premium hedging." It raised funds to purchase Bitcoin by selling stocks at high premiums, and when the premium fell, the company turned to bond issuance. This model provided the company with sufficient funds to operate Bitcoin purchases, although the market's enthusiasm for its stock waned as it gradually became aware of these operations.

Overall, MicroStrategy employed different financing strategies in different cycles, leveraging the high premium advantages of the stock market while steadily increasing leverage through bonds. For Bitcoin, MicroStrategy's slowed pace may indicate a weakening of the upward momentum in the short term; for MicroStrategy, this diversified financing approach allows it to respond flexibly to different market environments.

The reasons behind the significant fluctuations in MicroStrategy's stock price and how they attracted a large number of speculators through Bitcoin investment are noteworthy. The "turning coins into gold" technique with a market value of billions of dollars is highlighted in several key points:

1. The nonlinear relationship between stock prices and Bitcoin: Many people believe that MicroStrategy's stock price should rise and fall in sync with Bitcoin, but this is not entirely true. For example, in November and December of last year, while Bitcoin was still rising, MicroStrategy's stock price had already begun to decline. Therefore, its stock price fluctuations are not solely tied to Bitcoin prices.

2. The reaction and long-term impact of narrowing premiums: MicroStrategy's premium has gradually decreased compared to before. Michael J. Saylor's focus is not on the intrinsic value of the stock itself but on its volatility. In other words, he markets MicroStrategy as a high-volatility speculative tool, particularly attracting institutional investors who cannot directly purchase Bitcoin ETFs.

3. Bitcoin as "proxy investment": Many institutions cannot directly purchase Bitcoin or Bitcoin ETFs due to regulatory restrictions or internal policies, especially in countries like South Korea and Germany. Therefore, MicroStrategy has become an alternative choice for these institutions to invest in Bitcoin. Unable to buy ETFs, they turn to buy MicroStrategy's stock because it is highly correlated with Bitcoin.

4. Michael J. Saylor's genius marketing and MicroStrategy's "self-fulfilling prophecy": Michael J. Saylor is an exceptional marketer; he not only promotes MicroStrategy's stock but also emphasizes its leverage effect. This means that if you are optimistic about Bitcoin's rise, MicroStrategy's stock will rise even more. Moreover, buying MicroStrategy is safer than leveraging to buy options because you don't have to worry about liquidation issues.

5. The uniqueness of MicroStrategy: MicroStrategy's success largely depends on its strong financing capabilities, with Saylor continuously raising funds for the company to purchase more Bitcoin. Additionally, Saylor is very skilled at "selling," giving speeches everywhere and promoting on YouTube, packaging MicroStrategy as a "super leverage tool," attracting speculators from around the world.

III. "Hold Bitcoin, never sell": Michael J. Saylor's crypto crusade

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Michael J. Saylor's recent promotion of Bitcoin has had a profound impact on the entire Bitcoin industry. By constantly appearing in public, accepting interviews, and giving speeches, he has not only brought Bitcoin into the mainstream but also attracted a large number of institutional investors into the market. It can even be said that MicroStrategy and ETFs are currently the two main buyers in the Bitcoin market. Interestingly, while ETFs are very important, MicroStrategy's operations are more eye-catching because MicroStrategy only buys and never sells, while ETFs occasionally sell some.

In terms of marketing, the most impressive aspect is that Saylor has claimed he has set up a will intending to destroy the private keys of his personally held Bitcoin after his death, completely erasing these Bitcoins from circulation. His "cult-like" actions seem to demonstrate a kind of eternal contribution to the Bitcoin industry. Although no one knows if he will truly fulfill his promise in the future, his statement has, to some extent, injected excitement into the market.

Moreover, MicroStrategy's Bitcoin is not controlled by Saylor himself or the MicroStrategy company; these Bitcoins are held in custody by two trusted third-party custodians, Fidelity and Coinbase Custody, complying with the audit and regulatory requirements for publicly traded companies. Therefore, those worried about how Bitcoin will be handled after his death can rest assured.

Michael J. Saylor is not only a strong proponent of Bitcoin; to some extent, he is even more extreme than some early Bitcoin investors. Long before ETFs appeared, he had positioned MicroStrategy as a Bitcoin ETF-like entity. His dialogue with Elon Musk has also provided a crucial push for Bitcoin investment. Market rumors suggest that Musk's decision to have Tesla purchase Bitcoin was largely influenced by Saylor's advice.

Saylor's vision is not limited to Bitcoin. Some in the market believe that his latest statements indicate his support for the development of the entire digital economy, proposing that the U.S. should become a global leader in the digital economy and promote the tokenization of all assets. He is no longer just a Bitcoin extremist but has recognized the potential of blockchain technology across a wide range of fields. This open attitude has also earned him more recognition in the blockchain industry.

Looking at the U.S. layout for the future digital economy, Saylor even proposed incorporating Bitcoin into the national strategic reserve to further expand the U.S.'s leadership in the global digital economy. He not only promotes Bitcoin but also presents a vision of a global on-chain economy, suggesting that the future global economy may move towards a more decentralized financial structure, potentially leading to a cyber financial system that transcends sovereign nations.

However, in this future landscape, capital flows and regulation will face new challenges. Especially if the U.S. leads this on-chain economy, other countries or organizations, such as China, the European Union, or South Korea, will face greater capital outflow pressures. Even if regulatory agencies in various countries attempt to control capital flows through traditional means, these methods will become ineffective in the face of a decentralized on-chain economy. On March 25, the Trump family's crypto project World Liberty Financial Inc. (WLFI) officially announced plans to launch the stablecoin USD1, as the stablecoin business is incredibly profitable, and USD1 will be 100% backed by short-term U.S. government bonds, dollar deposits, and other cash equivalents, which seems to indicate that the U.S. will increasingly use stablecoin issuance to alleviate the U.S. debt crisis.

IV. Möbius Loop: Michael J. Saylor's Asset Game

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Currently, Bitcoin's price has dropped to around $87,000 from its high, while MicroStrategy's holding cost is approximately $66,000. This raises the question: What will happen if Bitcoin's price falls below MicroStrategy's cost of purchasing Bitcoin?

During the last bear market, MicroStrategy's situation was even worse than it is now. At that time, their net assets were already negative, which is an extremely rare situation for any company. Although some companies may have negative net assets under special circumstances (such as issuing a large number of stock options), generally speaking, negative net assets can easily trigger market panic. However, MicroStrategy did not go bankrupt at that time, nor were they forced to sell Bitcoin, mainly because their debt maturity dates were still far off, and no one could force them to liquidate immediately.

Interestingly, MicroStrategy's founder, Michael J. Saylor, holds nearly 48% of the voting rights, making any attempts to initiate a liquidation proposal very difficult. So even in a tight financial situation, creditors and shareholders cannot easily demand liquidation.

So, if Bitcoin really falls below the average holding cost, will MicroStrategy's stock fall into a so-called "death spiral"? In fact, this question was raised during the last bear market. At that time, MicroStrategy's net assets were negative, and market panic was severe, but the current market should be more experienced; investors have gone through these fluctuations, so they are less likely to panic as they did then.

Additionally, Michael J. Saylor and his team actually have some flexible means to respond to market fluctuations. For example, they can choose to issue bonds, increase stock issuance, or even use their held Bitcoins as collateral to borrow money. MicroStrategy currently holds about $40 billion worth of Bitcoin, which means they can use these Bitcoins as collateral to obtain funds. Even if prices drop, they can avoid being forced to sell by supplementing collateral.

Moreover, their main debts are not due until 2028 at the earliest, meaning no one can force them to make unfavorable decisions before then. For the time being, even if Bitcoin's price fluctuates, MicroStrategy will not immediately face significant financial pressure and is unlikely to be forced to sell Bitcoin.

More importantly, an increasing number of sovereign funds and institutions worldwide have begun to view Bitcoin as a reserve asset, which is a major trend. In this context, Bitcoin's long-term prospects remain optimistic. As market rumors suggest, countries like Abu Dhabi have begun purchasing large amounts of Bitcoin ETFs, indicating that more countries and institutions will enter the Bitcoin market in the future. Although Bitcoin prices may still experience some fluctuations in the short term, MicroStrategy's strategy seems to align with market trends in the long run, even if their financial situation may face challenges in the coming months or years.

Therefore, upon overall observation, while the volatility of Bitcoin prices may indeed bring some short-term pressure to MicroStrategy, considering their debt maturity and market trends, they currently do not face the risk of liquidation or being forced to sell Bitcoin. On the contrary, they may take advantage of the current market environment to continue increasing their Bitcoin holdings, further solidifying their position in the cryptocurrency space. Behind this series of actions, there are several questions worth further exploration:

Can the volatility of the Bitcoin market maintain its current level?

MicroStrategy essentially provides itself with a high-leverage investment tool through Bitcoin's high volatility. But if Bitcoin is gradually accepted by institutional investors and its volatility decreases, can the company maintain its current high-return strategy? With the launch of Bitcoin ETFs, the long-term cyclical nature of Bitcoin prices has been disrupted, and the spot price of Bitcoin has become more stable due to diversified financial derivatives like ETFs. Gold's price trend after the introduction of ETFs has provided us with a reference answer; the previous high volatility of Bitcoin may no longer exist, with overall changes shifting from aggressive to moderate.

How long can MicroStrategy's financing methods last?

At this stage, this financing model for buying Bitcoin is based on the premise of the market's long-term bullish outlook on Bitcoin. However, if Bitcoin's price enters a long-term range of fluctuations or even declines in the future, can MicroStrategy's financial situation withstand it? If the company continues to raise funds by issuing bonds and increasing stock issuance to buy Bitcoin, the market's premium on its stock will further shrink, and MicroStrategy's financing methods are highly dependent on market optimism. Once Bitcoin's price enters a long-term range of fluctuations or declines, in terms of financial pressure, existing debts need to pay interest, and the company must also deal with diluted shareholder equity due to stock issuance. Specific policy environments may also affect MicroStrategy's financing model; certain policies during the Trump administration may have provided a relatively loose financing environment for companies, facilitating the establishment of strategic reserves. However, if these favorable factors gradually fade, MicroStrategy's financing conditions may not be as favorable as before.

Is Michael J. Saylor an idealist supporting Bitcoin or an arbitrageur of Bitcoin?

Saylor's role is actually a combination of an idealist and an arbitrageur; he deeply understands and recognizes Bitcoin's long-term potential while also being very adept at leveraging market mechanisms for the benefit of the company and himself. By utilizing Bitcoin's high volatility, he promotes MicroStrategy's stock as a "leveraged Bitcoin investment tool." This approach attracts institutional investors who cannot directly invest in Bitcoin or Bitcoin ETFs, allowing these institutions to gain indirect exposure to Bitcoin by purchasing MicroStrategy's stock. Rather than saying Michael J. Saylor is a staunch believer in Bitcoin, it is more accurate to say he is an arbitrageur of the volatility opportunities in the Bitcoin market. MicroStrategy's series of operations essentially rely on Bitcoin to earn profits from the "volatile market" of the stock market, and ultimately, MicroStrategy itself may depend more on market sentiment and Bitcoin's price performance rather than Bitcoin's long-term value.

V. Wealth Engine Or Crypto Frost?

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MicroStrategy's capital operation model is timely, but can MSTR's stock participate? In my personal opinion, for those in the crypto industry, the odds of MSTR are greater than directly participating in Bitcoin; MSTR is more like an accelerated version of Bitcoin.

On the surface, MicroStrategy is a software company focused on business data analysis, but in reality, its operating model has completely shifted to accumulating Bitcoin assets. MSTR has a leverage effect. Because the company holds a large amount of BTC and may increase its holdings through borrowing or issuing bonds, this amplifies its stock price's sensitivity to Bitcoin price changes. When BTC rises, MSTR may rise even more, and vice versa.

Its stock has soared from $68 at the beginning of the year to around $400 now, a rise that even surpasses many well-known companies like NVIDIA, Palantir, and Coinbase. What exactly has driven MicroStrategy's stock performance to be so remarkable? Some believe it is due to founder Michael J. Saylor successfully boosting the stock price through a model of "infinite funding"; others criticize it as resembling a Ponzi scheme and worry it may trigger the next collapse of the cryptocurrency market.

MicroStrategy's current Bitcoin investment returns far exceed its traditional business income. Although its software business revenue has seen little growth over the past few years, and even declined, MicroStrategy has achieved an overall profit increase by continuously issuing bonds and diluting equity to raise funds for purchasing more Bitcoin. MicroStrategy has deeply tied its stock to Bitcoin, which has benefits but also brings certain risks to the company, as its core business does not generate significant profits, and all prospects rely on the rise in Bitcoin prices. In fact, no one knows whether Bitcoin's price will achieve stable growth through more financial derivatives + ETFs + strategic reserves, or whether it will face a "major liquidation."

The company has further boosted its financing capacity by issuing interest-free convertible notes. These notes allow investors to convert them into company equity in the future, but the conversion price is far above the current stock price. On the surface, this seems like an unfavorable deal for investors, but in reality, noteholders enjoy priority liquidation rights, which can reduce risk. Meanwhile, MicroStrategy can continue to accumulate Bitcoin through this financing method, driving the dual rise of its stock and Bitcoin prices.

The clever aspect of this play is that it successfully shifts the risk from the company itself to the stock market. By issuing convertible bonds for financing and then using that money to buy Bitcoin, if the company's stock price is high enough when the debt matures, creditors will choose to convert the debt into stock rather than demand repayment, thus completely transferring the debt issue to the stock market. Therefore, the overall odds of long and short positions in the stock market are greater than those in the crypto market.