Introduction: From Business Data Analysis to Bitcoin Accumulation

MicroStrategy, a company once renowned for its business data analysis software, has now become one of the most prominent giants in the Bitcoin market. From its founding as a startup in 1989 to its current status as a "Bitcoin accumulation empire," its stock price has skyrocketed several times this year, far outpacing the S&P 500 and other peers. The reasons behind this include the aggressive strategies of founder Michael Saylor and the volatility of the Bitcoin market.

However, this is not without controversy. Some call Michael Saylor a "pioneer of the crypto market," while others criticize MicroStrategy's strategy as a "Ponzi scheme." What exactly are the company's operational methods? What impact does its Bitcoin investment strategy have on the market? Today, we will delve into an in-depth analysis to uncover the story behind MicroStrategy.

1. From Consulting Firm to Crypto Market "Whale"

From Business Data to Blockchain Revolution
MicroStrategy was founded in 1989, initially focusing on consulting services, and gradually evolved into a business data analysis software company. However, the company's development has not been smooth. From its IPO in 1998 to the internet bubble in 2000, the company's stock price experienced dramatic fluctuations from peak to trough. A financial reporting scandal once damaged its reputation, but it ultimately continued operations through a settlement.

Turning Point: Bitcoin Investment Opens a New Chapter
The real turning point for MicroStrategy occurred in 2020. In August of that year, the company announced its first purchase of 21,454 Bitcoins at an average price of $11,652, totaling an investment of approximately $250 million. This move transformed the company from a traditional software firm into a significant player in the Bitcoin market. As shown in the chart below, MicroStrategy's total Bitcoin holdings have exceeded 450,000, with a return rate of 51.98%, making it one of the publicly traded companies with the most Bitcoin globally. (Data source: BITCOINTREASURIES)

2. MicroStrategy's Ultimate Strategy: Endless Capital Cycle

"Marginalization" of Software Business
Although MicroStrategy continues to operate its business data analysis services, its revenue has been declining year by year since 2014, and its return on assets (ROA), return on equity (ROE), and return on invested capital (ROIC) are significantly lower than competitors. In contrast, Bitcoin investment has become the core driving force behind the company's market value. On paper, the company's losses from Bitcoin investments are significant, but its average purchase price is below the current market price, making the apparent losses more a result of accounting standards.

Core Funding Sources: Bonds and Equity Dilution
MicroStrategy funds its Bitcoin investments through two main avenues:

Issuing zero-coupon convertible notes: These bonds allow investors to convert them into stock at a fixed price above the current market price in the future. This design reduces debt costs while providing the company with substantial liquidity.
Equity dilution: By issuing additional shares, the company continuously raises funds to purchase more Bitcoin.
This strategy allows MicroStrategy to expand its Bitcoin holdings without significantly increasing debt pressure. However, the risk lies in this cycle's dependence on the continuous rise in Bitcoin prices; if market sentiment reverses, it could trigger a series of chain reactions.

3. The "Amplifier" of the Bitcoin Market

Changes in Accounting Standards and Market Volatility
According to U.S. accounting standards, Bitcoin is classified as an intangible asset, and companies must account for impairment losses when market prices fall below purchase costs, but gains cannot be directly reflected in financial reports. This makes MicroStrategy's financial reports appear to show losses, but in reality, its average Bitcoin holding price is low. The introduction of new standards will change this situation, allowing the value fluctuations of crypto assets to be more accurately reflected in financial reports.

High Leverage Risks and Opportunities
MicroStrategy's strategy is undoubtedly a high-risk, high-reward gamble. By leveraging to continuously increase Bitcoin holdings, the company profits handsomely during market upswings, but if prices fall, its stock price and Bitcoin price may create a negative feedback loop, leading to a "death spiral." The success or failure of this model entirely depends on the long-term trend of Bitcoin prices.

4. MicroStrategy's Impact on the Market

Decentralization's Centralization Trend
MicroStrategy's Bitcoin holdings have surpassed 2.5% of the global circulating supply. This centralization trend may alter the original decentralized concept of Bitcoin while enhancing MicroStrategy's influence over market prices.

Driving Bull Markets or Triggering Bear Markets?
In a bull market, MicroStrategy's strategy may drive Bitcoin prices further up, boosting market sentiment. However, in a bear market, high leverage and asset sell-offs could become the "trigger" for market declines. This double-edged sword effect makes MicroStrategy both a market booster and a potential "risk point."

5. Investor Choices: Stocks or Bitcoin?

The Uniqueness of MicroStrategy Stock
Buying MicroStrategy stock is essentially an indirect investment in Bitcoin. This investment method is influenced not only by Bitcoin price fluctuations but also by the company's management strategies and market confidence. Compared to directly holding Bitcoin, investing in MicroStrategy stock entails higher uncertainty.

Notable Risks
Bitcoin liquidation risk: MicroStrategy has the right to sell its held Bitcoins at any time, which may lead to a decline in investor confidence in its stock.
Extreme market sentiment: In the highly volatile crypto market, emotional investing may further amplify market fluctuations.

6. Looking Ahead: Opportunities and Challenges Coexist

Potential of Accounting Standard Reforms
New accounting standards provide motivation for more companies to invest in Bitcoin. As a pioneer, MicroStrategy's success or failure will offer important references for other enterprises. If its strategy succeeds, it may encourage more companies to follow suit, further driving the development of the cryptocurrency market.

Sustainability of Long-Term Strategies
MicroStrategy's future depends on Bitcoin's long-term performance and the market's acceptance of its strategy. In the capital market, the company needs to continuously balance risks and returns while addressing the challenges posed by market volatility.

Conclusion: A High-Risk Bitcoin Experiment

MicroStrategy's success is inseparable from its founder Michael Saylor's aggressive strategy and firm belief in Bitcoin. This "infinite capital plug-in" has not only garnered significant market attention for the company but also made it an important force in the Bitcoin market. However, the dual risks of high leverage and market volatility also render this strategy fraught with uncertainty.

For investors, MicroStrategy stock may represent a high-risk, high-reward choice. For the crypto market, MicroStrategy's success or failure will have profound implications for the industry's future. In this Bitcoin experiment, market participants will collectively witness the writing of history.

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