The cloned version of “MicroStrategy” entered the market in batches. Has BTC's “lying and winning strategy” been confirmed?
Author: flowie, ChainCatcher
Editor: Nian Qing, ChainCatcher
Last week, after founder Michael Saylor announced that Microstrategy (NASDAQ: MSTR)'s ultimate goal was to become the leading “Bitcoin bank,” MSTR surged nearly 16% last Friday, breaking through $212 (temporarily falling back to $194), and its market capitalization soared to 43 billion US dollars, a record high.
Since Microstrategy launched its Bitcoin investment strategy in August 2020, MSTR has increased by more than 1,600%, outperforming BTC and NvidiaOf the major S&P 500 technology stocksincrease。
It is even more obvious that MSTR outperformed BTC by a large margin this year. According to market data:
Since the beginning of the year, BTC has risen 52%, MSTR has risen 180%,
In the past 30 days, BTC has risen by around 7.41%, while MSTR has risen 44%.
MicroStrategy's “lay back and forth” model is also attracting more imitators. Since the launch of the Bitcoin investment strategy in April, the Japanese listed company Metaplanet's stock price has risen 480%. Recently, German listed company Samara Asset Group will also issue 30 million euro bonds, partly to buy Bitcoin.
Why can a listed company “lie back and win” by simply holding a large amount of BTC? Are there any risks with the MicroStrategy model?
Borrow money to buy Bitcoin, MicroStrategy's “lay back and forth” model
MicroStrategy's original main business was enterprise-grade AI software, contributing around 100 million US dollars in revenue every quarter. As a US listed company, this part of the business is very mediocre.
It wasn't until August 2020, when MicroStrategy launched a Bitcoin investment strategy and bought Bitcoin, that the myth of a sharp rise in MicroStrategy's stock price began. MicroStrategy's market capitalization grew from $600 million to over $40 billion.
As a result, many people, especially users in the crypto community, have the impression that MicroStrategy is just a publicly traded company that is constantly increasing its Bitcoin holdings. Investing in MicroStrategy is also indirectly equivalent to investing in BTC.
But MicroStrategy co-founder Michael Saylor believes that the market is misunderstood about MicroStrategy, and most people actually don't know what they do?
Last week, MicroStrategy co-founder Michael Saylor and Bernstein analystsIn, the logic of thought behind MicroStrategy's Bitcoin strategy was restored. He clearly defined MicroStrategy's model and positioning, and why it can outperform BTC and beat major S&P 500 tech stocks including Nvidia.
Simply put, MicroStrategy's Bitcoin investment strategy is not simply to buy bitcoins to store coins, but to borrow money to buy bitcoins by issuing bonds and creating a leverage effect.
Michael Saylor said that MicroStrategy currently buys Bitcoin with almost zero interest (0.625% interest last two times), or issues shares at a 60% or 100% Bitcoin premium before buying back Bitcoin.
For example, in September of this year, MicroStrategy completed a $1.01 billion convertible note offering with 0.625% coupon interest and a 40% conversion premium.
The cost of debt is relatively fixed, and the value of Bitcoin assets has increased, and MicroStrategy has arbitraged between the fiat capital market and digital capital market by investing in digital capital with returns many times higher than the cost of capital. Michael Saylor This is why MicroStrategy's performance surpassed all 500 companies in the S&P Index, and is also superior to Bitcoin.
This arbitrage model has also increased net profit and increased the value of stocks. According to MicroStrategy's Q2 earnings report, MicroStrategy introduced a new accounting standard, the BTC yield, to describe the investment value of MSTR. MicroStrategy's BTC yield has reached 17.8% this year, which means that 1 BTC invested through MicroStrategy has reached 1.178 BTC. That's why MSTR's share price growth outperformed Bitcoin.
Show Michael SaylorMicroStrategy has now grown into a Bitcoin securitization company。
In addition to MicroStrategy's stock providing 1.5 times the volatility exposure of Bitcoin, MicroStrategy also has various derivatives, such as MSTX and MSTU, which provide 3x leverage, and MSTR options markets that provide 10x or 20x leverage.
MicroStrategy will also explore the fixed income market in the future and consider issuing preferred shares. To some extent, MicroStrategy is eating away at the stock market, options market, convertible notes market, fixed income market, etc.
Is it perpetual motion for growth or US stocks”Luna”?
MicroStrategy's model seems simple. However, for a listed company, by holding BTC and clever mathematical calculations, the stock price can rise faster than technology companies that sell software, data, AI, etc., without having to maintain a huge team. Whether there are any loopholes and risks behind this has also become the focus of debate in the crypto community.
Overseas KOL Glenn Hodl believes that MicroStrategy has found a “perpetual motion machine” version of the upward model.
Gelnn said that even when the price of Bitcoin stops growing, Microstrategy can use differences in the market's valuation models for products and companies to create a “perpetual engine” that can continuously drive up its own market capitalization, which will eventually make Microstrategy the company with the largest market capitalization in the world.Recommended reading:
encryptionI also think that the current model of MicroStrategy can indeed be called an “infinite funding loophole.” “If the market value of MSTR were to increase by 10 times, then theoretically, it would be possible to simultaneously raise its stock price to infinity with the price of BTC... If its stock market value is very high, it will receive a lot of capital every time the stock expansion is financed, achieving permanent motivation in the true sense of the word.”
But can MicroStrategy really borrow indefinitely to buy Bitcoin with unlimited ammo? Is there a risk that Bitcoin will burst after falling?
Michael Saylor said that MicroStrategy has no restrictions, can borrow indefinitely, and that it is not a problem to refinance 100 billion US dollars, 200 billion US dollars, or even trillions of dollars.
And when the capital market cools down in the future, does MicroStrategy have enough cash to pay interest and repay debts to prevent the risk of bursting out? Michael Saylor is also extremely optimistic.
On the one hand, based on confidence in Bitcoin, Michael Saylor believes that the MicroStrategy model will not work unless Bitcoin's yield is always 0 and the volatility must also be 0.
On the other hand, MicroStrategy now has minimal interest expenses, and MicroStrategy can be continuously deleveraged by establishing permanent Bitcoin capital. Michael Saylor said, “We're not doing one thing overnight; we're gradually deleveraging back and forth.”
According to MicroStrategy's Q2 earnings report, the amount of BTC held by MicroStrategy was 226,500, worth about US$15 billion, while the debt borrowed was around US$1.45 billion, and the debt ratio was 10%.
Michael Saylor also mentioned that MSTR's liquidation line is BTC below $700. At present, it is unlikely that this will happen.
crypto analystI also think that the loan ratio is relatively low, there is not much capital leverage, and there is no risk that MSTR's BTC will collapse. “MSTR has many ways to pay back these loans without closing positions, even if it's under $700.”
But cryptographic KOLsDoubts about this.It believes that MicroStrategy is similar to the LUNA model and will also have the dilemma of falling into a death spiral. “If the price of BTC falls sharply, it becomes less valuable as collateral for MSTR. Then MSTR's stock price and bond price will fall; in extreme cases, when the old bonds expire, buyers will no longer buy new bonds and will not have new liquidity to enter the market; moreover, the company may not have enough money to pay off the old debt, which will cause the stock price to drop further. ”
@CryptoPainter_X也认为这个世界没有真正意义上的 “Spiral Ascension” and “Step on your left foot on your right foot.” “If you Google the “Enron” financial fraud incident, you'll find that the Ponzi cycle will end one day.”
It is worth mentioning that MicroStrategy was also fined 8.5 million US dollars by the SEC in 2000 for financial fraud. As a result, the stock price plummeted 62%, and Saylor personally lost 6 billion US dollars of net worth in one day.
Furthermore, even without the risk of a liquidation, MicroStrategy offers 1.5 times the volatility exposure of Bitcoin. When BTC rises, MSTR is much higher than BTC, but when BTC falls, MSTR also falls even more.Holding MSTR is still risky.
What impact will the cloned version of “MicroStrategy” enter the market in batches?
MicroStrategy's strategy is that there are no barriers. Michael Saylor also said that any listed company can replicate this strategy — first buy Bitcoin, then issue shares at Bitcoin's premium, and then issue bonds using Bitcoin as collateral.
Michael Saylor also believes that “buying bitcoin will eventually become a basic strategy for all other companies.”
In fact, the sharp rise in MicroStrategy's stock price this year has indeed made listed companies follow FOMO's lead. Many companies, including Japan-listed Metaplanet, US-listed medical company Semler Scientific, and German listed company Samara Asset Group, have launched the “MicroStrategy” Bitcoin investment model。
Furthermore, according to Blockworks statistics, the frequency of companies buying bitcoins has increased markedly since this year, reaching 32 times as of September 30, far exceeding 9 times last year; MicroStrategy, Block, Metaplanet, Semler Scientific, OneMednet, and the English soccer club Real Bedford FC have purchased nearly 50,000 bitcoins in total.
The clone version of “MicroStrategy” enters the market to buy BTC in batches, which should boost BTC's rise in the short term. Cryptographic KOLsI think, “If too many listed companies use the Microstrategy model in this round, the second wave of BTC will reach a new high sooner and rise higher, but it will also go faster and fall more miserably.”
As mentioned earlier, the MicroStrategy model is still risky, dangerous, and may be on the way to arriving at an accelerated pace. Although the MicroStrategy model seems to have no threshold, it is much more expensive for listed companies that have entered the market to buy BTC than MicroStrategy, and they may also lack the ability to manage the risk of this model.
@lindazhengzheng分析道, what's scary is that listed companies exploded in a row, making it difficult for the Bitcoin price to support, and there was a Lehman moment where the bull turned bearish.
