Mobius Loop: The Asset Game of Michael J. Saylor
Author: YBB Capital Researcher Ac-Core
I. Introduction:
MicroStrategy was originally a corporate 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, announced its official 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 turned the stock market into a Bitcoin ATM through capital structure design—raising funds to increase Bitcoin holdings by issuing new shares or convertible bonds, 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 leads the 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" of MSTR Stock Price Speculation?
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MicroStrategy's financing method is very clever; it mainly combines stocks and bonds to complete fundraising. In the initial stage, it relied on bond issuance and its own cash reserves, along with some common stocks and convertible bonds. However, the downside of issuing common bonds is the need to pay interest, but at that time, its cash flow was still good, with the software business generating tens of millions of dollars in positive cash flow, sufficient to cover the interest on these debts.
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 capital market's "alchemy" by combining stock issuance and bond issuance strategies. When leverage was low, it quickly raised funds to buy Bitcoin through stock issuance, thereby increasing leverage and enhancing its valuation premium as 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-focused financing method. With this change, MicroStrategy's pace of Bitcoin purchases slowed, leading to 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 a high premium, and when the premium fell, the company turned to bond issuance. This model provided the company with sufficient funds to operate Bitcoin purchases, even though the market's enthusiasm for its stock diminished as it became increasingly 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 momentum for Bitcoin price increases in the short term; for MicroStrategy, this diversified financing approach allows it to respond flexibly in 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, highlight the "alchemy" of turning points into gold with a market value of billions. In simple terms, there are several key points:
Non-linear Relationship Between Stock Price 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.
Response to Narrowing Premium and Long-term Impact: MicroStrategy's premium compared to previous levels is gradually shrinking. 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, especially attracting institutional investors who cannot directly purchase Bitcoin ETFs.
"Proxy Investment" in Bitcoin: Many institutions, due to regulatory restrictions or internal policies, cannot directly purchase Bitcoin or Bitcoin ETFs, especially in countries like South Korea and Germany. Thus, MicroStrategy has become an alternative for these institutions to invest in Bitcoin. Unable to buy ETFs, they turn to buy MicroStrategy's stock, as it is highly correlated with Bitcoin.
Michael J. Saylor's Genius Marketing and MicroStrategy's "Self-fulfilling Prophecy": Michael J. Saylor is an excellent marketer; he not only promotes MicroStrategy's stock but also emphasizes its leverage effect. This means that if you are optimistic about Bitcoin's price increase, MicroStrategy's stock will rise even more. Moreover, buying MicroStrategy is safer than leveraging to buy options, as you don't have to worry about liquidation issues.
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 adept at "selling"; he speaks everywhere, promotes on YouTube, and packages 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 wave of Bitcoin promotion has had a profound impact on the entire Bitcoin industry. By continuously 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, whereas ETFs occasionally sell some.
In terms of marketing, the most impressive aspect is that Saylor has stated he has made a will to destroy the private keys of his personally held Bitcoins after his death, completely erasing these Bitcoins from circulation. His "cult-like" operation seems to show that he has made an eternal contribution to the Bitcoin industry. Although no one knows if he will truly fulfill this promise in the future, his statement has, to some extent, injected excitement into the market.
Moreover, MicroStrategy's Bitcoins are 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 auditing and regulatory requirements of publicly traded companies. Therefore, those worried about how the Bitcoins will be handled after his death can rest assured.
Michael J. Saylor is not only a strong promoter 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 is not limited to Bitcoin. Some in the market believe that his latest remarks 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 various fields. This open attitude has also earned him more recognition in the blockchain industry.
Looking at the U.S. future digital economy layout, Saylor even proposed incorporating Bitcoin into the national strategic reserve, further expanding 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, which suggests 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 flow 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 pressure from capital outflows. 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 a stablecoin, USD1. 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 rely on stablecoin issuance to alleviate the U.S. debt crisis.
IV. Mobius Loop: The Asset Game of Michael J. Saylor
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Currently, Bitcoin's price has dropped to around $87,000 from its high, while MicroStrategy's acquisition cost is approximately $66,000. This raises the question: What will happen in the market if Bitcoin's price falls below MicroStrategy's purchase cost?
During the last bear market, MicroStrategy's situation was even worse than it is now. At that time, their net assets had already turned 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 was it forced to sell Bitcoin, mainly because their debt maturity was 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 it very difficult for anyone to propose a liquidation. Therefore, 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 the 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 unlikely to panic as they did back then.
Moreover, 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 in 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.
Additionally, their main debts are not due until at least 2028, 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, nor is it likely 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. Against this backdrop, the long-term outlook for Bitcoin remains optimistic. As market rumors suggest, countries like Abu Dhabi have started purchasing large amounts of Bitcoin ETFs, indicating that more countries and institutions will enter the Bitcoin market in the future. Although Bitcoin's price may still experience some fluctuations in the short term, MicroStrategy's strategy seems to align with the overall market trend in the long run, even though their financial situation may face challenges in the coming months or even 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 events, 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 existing 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 the diversified financial derivatives like ETFs. The price trend of gold after the introduction of ETFs provides a reference answer; the previous high volatility of Bitcoin may no longer exist, with the overall change 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 market's long-term bullish outlook for Bitcoin. However, if Bitcoin's price enters a long-term consolidation or even a downward trend in the future, can MicroStrategy's financial situation withstand it? If the company continues to raise funds to buy Bitcoin through bond issuance and stock dilution, the market's premium on its stock will further shrink. MicroStrategy's financing methods are highly dependent on market optimism. Once Bitcoin's price enters a long-term consolidation or downward trend, financial pressure will arise, as existing debts need to pay interest, and the company must deal with the dilution of 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 skilled at leveraging market mechanisms for profit for both the company and himself. By utilizing Bitcoin's high volatility, he markets MicroStrategy's stock as a "leveraged Bitcoin investment tool." This approach attracts institutional investors who cannot directly invest in Bitcoin or Bitcoin ETFs, allowing them to gain indirect exposure to Bitcoin by purchasing MicroStrategy's stock. Rather than being a staunch believer in Bitcoin, Michael J. Saylor is more of an arbitrageur of the volatility opportunities in the Bitcoin market. The series of operations by MicroStrategy essentially relies on Bitcoin to earn profits from the "volatile market" of stocks, ultimately making MicroStrategy more dependent on market sentiment and Bitcoin's price performance rather than Bitcoin's long-term value itself.
V. Wealth Engine or Crypto Frost?
Image Source: X@MicroStrategy
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 overall resembles an accelerated version of Bitcoin.
On the surface, MicroStrategy is a software company focused on business data analysis, but in reality, its operational 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 bond issuance, 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 about $400 now, a rise that even surpasses many well-known companies like NVIDIA, Palantir, and Coinbase. What exactly is behind the impressive performance of MicroStrategy's stock? Some believe it is due to founder Michael J. Saylor successfully driving up 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 investment returns in Bitcoin currently 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 overall profit growth 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 cannot generate significant profits, and all prospects hinge 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 face a wave of "great liquidation."
The company has further enhanced its financing capability by issuing interest-free convertible notes. These notes allow investors to convert them into company equity in the future, but the conversion price is much higher than the current stock price. On the surface, this seems like an unfavorable deal for investors, but in reality, note holders enjoy priority liquidation rights, which can reduce risk. Meanwhile, MicroStrategy can continue to accumulate Bitcoin through this financing method, driving up both its stock and Bitcoin prices.
The clever aspect of this approach 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, when the debt matures, if the company's stock price is high enough, creditors will choose to convert the debt into equity 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 in the crypto market.
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