Original Title: "The $15 Billion Sun Tzu Strategy: Where Will MicroStrategy Send Bitcoin Next?"

Original Author: 0xTodd, Co-founder of Ebunker

First and foremost, we are excited to see Bitcoin reach $98,000, a price we all love!

Undoubtedly, the hero of the $40-70K range was Bitcoin's ETF, and the hero of the $70-100K range was MicroStrategy.

Nowadays, many people liken MicroStrategy to the BTC version of Luna, which makes me a bit embarrassed because Bitcoin is my favorite cryptocurrency, while Luna happens to be my least favorite.

Hopefully, this post will help everyone better understand the relationship between MicroStrategy and Bitcoin.

First, a few key points upfront:

· MicroStrategy is not Luna; its safety net is much thicker.

· MicroStrategy acquires Bitcoin through bonds and stock sales.

· MicroStrategy's most recent debt repayment is due in 2027, over 2 years away.

· MicroStrategy's only soft threat is the Bitcoin whale.

【MicroStrategy is Not Luna; Its Safety Net is Much Thicker Than Luna】

MSTR Net Worth vs. Bitcoin Price

MicroStrategy was originally a software company with a lot of unrealized gains on its balance sheet. Unwilling to invest further in production, it transitioned from the real world to the virtual world, starting to use its own funds to buy Bitcoin since 2020.

Subsequently, MicroStrategy depleted all its available funds and began leveraging. Its way of leveraging was through over-the-counter leverage, determined to borrow money to buy Bitcoin through issuing corporate bonds.

The fundamental difference between it and Luna is that Luna and UST are printed to each other, with UST essentially being meaningless unbacked paper money solely relying on a 20% fake interest rate to barely sustain itself.

However, MicroStrategy is equivalent to dollar-cost averaging + leverage, essentially a standard borrowing to go long, and it bet in the right direction.

Bitcoin's adoption far exceeds that of UST, and MicroStrategy's impact on Bitcoin is significantly lower than Luna's impact on UST. The reason is straightforward: daily 2% growth is a Ponzi scheme, annual 2% growth is a bank; quantitative changes lead to qualitative changes. MicroStrategy is also not the sole determinant of Bitcoin; therefore, MicroStrategy is by no means Luna.

【MicroStrategy Increases Bitcoin Holdings through Bonds and Stock Sales】

In order to quickly raise funds, MicroStrategy has successively issued multiple rounds of debt totaling $5.7 billion (for a more intuitive understanding, this is equivalent to 1/15 of Microsoft's debt).

Almost all of this money has been continuously used to buy more Bitcoin.

We are all familiar with on-exchange leverage, where you use Bitcoin as collateral and the exchange (as well as other users on the platform) lends you money. However, off-exchange leverage is different.

All creditors in the world only worry about one thing: debt default. Without collateral, why are people willing to lend money to MicroStrategy off-exchange?

MicroStrategy's bond issuance is quite interesting. In recent years, it has issued a type of convertible bond.

This convertible bond is quite interesting; let's take an example:

Bondholders have the right to convert their bonds into MSTR's stock, divided into two stages:

1. Initial Stage:

1.1 If the bond's market price falls>2%, the bondholder can exercise the option, convert the bond into MSTR shares, and sell them to break even;

1.2 If the bond's market price remains stable or even rises, bondholders can resell the bond on the secondary market at any time to break even.

2. Later Stage: When the bond is about to mature, the 2% rule no longer applies. Bondholders can either cash out and exit or directly convert the bond into MSTR stock.

Let's analyze, overall, this is a risk-free deal for bondholders.

· If Bitcoin drops and MSTR has money, bondholders can cash out

· If Bitcoin drops and MSTR doesn't have money, bondholders still have a final backstop, i.e., convert to stock and liquidate to break even;

· If Bitcoin rises, MSTR will rise, and bondholders can forgo cash to receive more stock returns.

In summary, this is a trade with a high floor and a very high ceiling, allowing MicroStrategy to smoothly raise funds.

Fortunately, or rather, it should be said, faithfully, MicroStrategy has chosen Bitcoin.

Bitcoin has also not let us down.

2024 MicroStrategy Stock Price Trend

As Bitcoin soared, MicroStrategy's early accumulation of Bitcoin paid off handsomely. According to the simple and classic stock principle, the more assets a company has, the higher its market value should be.

Therefore, MicroStrategy's stock price also skyrocketed.

MicroStrategy's current daily trading volume has exceeded that of this year's absolute behemoth NVIDIA. As a result, MicroStrategy now has more options available.

MicroStrategy can now not only rely on issuing debt but also directly issue more shares to raise money.

Unlike many meme coins or Bitcoin whose developers do not have minting permission, traditional companies can issue more shares after following the relevant processes.

Last week, Bitcoin was able to climb from above 80K to today's 98K, thanks in part to MicroStrategy's support. That's right, MicroStrategy issued more shares, sold them, and raised $4.6 billion.

PS: A company with a trading volume surpassing NVIDIA naturally comes with this liquidity.

Sometimes, when you admire a company for earning great profits, you need to admire its great courage.

Unlike many companies in the crypto world that sell assets for quick cash, MicroStrategy played the long game as usual. MicroStrategy reinvested all the money raised from selling these shares back into Bitcoin, driving Bitcoin to 98K.

By now, you should understand MicroStrategy's magic:

Buy Bitcoin → Stock price rises → Take on debt to buy more Bitcoin → Bitcoin rises → Stock price rises further → Take on more debt → Buy more Bitcoin → Stock price continues to rise → Issue more shares, sell them, and raise money → Buy more Bitcoin → Stock price keeps rising...

Presented by the great magician, MicroStrategy.

【MicroStrategy's next debt repayment date is in 2027, so we have at least 3 more years】

As long as there is a magician, there comes a time to reveal the trick.

Many MSTR short sellers believe that we are now at the standard left side, even suspecting that we are at the Luna moment.

However, is this really the case?

According to recent statistics, MicroStrategy's average bitcoin cost is $49,874, meaning it is now close to a 100% unrealized gain, which is a super thick safety cushion.

Let's assume the worst-case scenario, even if bitcoin were to plummet 75% from here (almost impossible), dropping to $25,000, what then?

MicroStrategy borrowed over-the-counter leverage without a liquidation mechanism. Angry creditors can at most convert their bonds into MSTR stock at a designated time and then aggressively dump it on the market.

Even if MSTR were to be dumped to zero, it still would not need to liquidate those bitcoins forcefully because the earliest due date for the debt MicroStrategy borrowed is in February 2027.

Mark your calendars, this is not 2025, not 2026, but Tom's 2027.

In other words, MicroStrategy would have to wait until February 2027, even if bitcoin crashes, if no one else wants MicroStrategy's stock, then MicroStrategy would only need to sell a portion of its bitcoin in February.

All in all, there is more than 2 years left to keep playing music and dancing.

That's the magic of over-the-counter leverage.

---- Divider ----

You might ask, could MicroStrategy be forced to sell bitcoin due to interest?

The answer is still no.

Due to MicroStrategy's convertible bonds, the creditors are basically guaranteed not to lose money, so its interest rate is quite low. For example, the debt expiring in February 2027 has a 0% interest rate.

The creditors are purely interested in MSTR's stock.

And the subsequent debt issuances also have interest rates of around 0.625% to 0.825%, with only one at 2.25%, which has a minimal impact, so there is no need to worry about its interest.

MicroStrategy's main bond interest, source: bitmex

【MicroStrategy's Sole Soft Threat is the Bitcoin Whale】

At this point, MicroStrategy and Bitcoin have become interdependent.

More companies are getting ready to start learning—the great maneuver of David Saylor in the Bitcoin world.

For example, a publicly traded Bitcoin mining company, MARA, has also just issued a $1 billion Bitcoin convertible bond, earmarked to buy the dip.

So I think the bears had better proceed with caution. If more people start to emulate MicroStrategy, Bitcoin's momentum will be like a runaway horse, after all, it is all a vacuum above.

So now, MicroStrategy's biggest opponent is only those ancient Bitcoin whales.

As many people predicted before, the Bitcoin held by retail investors has all been given up. There are just too many opportunities, such as the meme trend. I refuse to believe everyone is left empty-handed.

So in the field, there are only these whales. As long as these whales do not move, it is difficult to stop this momentum. If they are even luckier, the whales and MicroStrategy will form some subtle understanding, enough to push Bitcoin towards a bigger future.

This is also a major difference between Bitcoin and Ethereum: Satoshi theoretically owns nearly 1 million early-mined Bitcoins, but has been silent to this day; whereas the Ethereum Foundation, for some reason, sometimes really wants to sell 100 ETH to test liquidity.

As of the writing date today, MicroStrategy's unrealized gains have reached $15 billion, relying on loyalty and faith.

Because it is making money, it will increase its investment, it can no longer turn back, and more people will emulate. At the current rate, 170K is the mid-term target for Bitcoin (not financial advice).

Of course, we are used to seeing conspiracy theories in memes every day, so when we occasionally see a real top-notch conspiracy, we sincerely admire it.

Original Article Link

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