Author: YBB Capital Researcher Ac-Core

1. Introduction:

MicroStrategy, initially a business software company focused on business intelligence solutions, shifted its focus dramatically towards Bitcoin investment starting in 2020. The company raised funds through stock issuance and convertible bonds to purchase Bitcoin, making it the center of attention in the US stock market. On February 6, 2025, the company, now renamed Strategy (referred to as MicroStrategy for ease of reading in the text), announced that it held 471,107 Bitcoin on its balance sheet, accounting for approximately 2% of the global Bitcoin supply. By February 21, 2025, MicroStrategy had accumulated nearly 500,000 Bitcoin, worth over $40 billion.

MicroStrategy essentially uses its capital structure to transform the stock market into a Bitcoin ATM — raising funds by issuing new stocks and convertible bonds, buying Bitcoin, and using Bitcoin holdings to drive up stock price valuations. This creates a capital loop deeply bound with crypto assets. Thanks to this high-premium financing mechanism unique to the US stock market, MicroStrategy not only dominates the Bitcoin concept stocks but also has perfected a “alchemy” using stock issuance and price manipulation, gaining approval in the US stock market.

2. What is the “Magnet” Behind MSTR Stock Speculation?

MicroStrategy’s financing method is quite clever. It mainly combines stocks and bonds to raise capital. In its early stages, it relied on issuing bonds and its own cash reserves, along with some common stocks and convertible bonds. However, the downside of issuing common bonds was the need to pay interest, but at the time, its positive cash flow from the software business was enough to cover the debt interest.

As time went on, in this market cycle, MicroStrategy massively used a mechanism called ATM (At-the-Market) stock issuance, directly selling stock on the secondary market. MicroStrategy combined stock issuance and bond issuance strategies to play the capital market “alchemy.” With a low leverage ratio, it rapidly raised funds by issuing new stocks to buy Bitcoin, thereby increasing leverage, and when Bitcoin prices rose, it raised its own valuation premium. During the bull market, its premium once reached as high as 300%.

However, over time, the market gradually realized that MicroStrategy was selling large amounts of stock, causing stock prices to start falling, and the premium subsequently narrowed. At the same time, the leverage ratio decreased, and the company gradually shifted to a more bond-centric financing strategy. As this change occurred, MicroStrategy slowed its pace of Bitcoin purchases, leading to weaker demand for Bitcoin in the market.

Therefore, MicroStrategy played a game of “premium hedging.” It raised funds through high-premium stock sales to buy Bitcoin, and when the premium dropped, the company turned to issuing bonds. This model provided the company with enough funds to operate Bitcoin purchases, though the market’s enthusiasm for its stock waned as these operations became more apparent.

In general, MicroStrategy used different financing strategies in different market cycles, leveraging the stock market’s high-premium advantages and using bonds to steadily increase leverage. For Bitcoin, MicroStrategy’s slower pace could mean less momentum for Bitcoin’s short-term price increase; for MicroStrategy, this diversified financing approach allowed it to flexibly respond to different market conditions.

The rapid rise and fall of MicroStrategy’s stock price, as well as its ability to attract a large group of speculators through Bitcoin investments, point out several key elements that define its value proposition:

1. Non-linear Relationship Between Stock Price and Bitcoin Price: Many people think that MicroStrategy’s stock price should rise and fall in sync with Bitcoin, but this is not entirely the case. For example, in November and December last year, while Bitcoin was still rising, MicroStrategy’s stock actually started to fall. So, its stock price movements are not solely tied to Bitcoin price fluctuations.

2. The Response to Narrowing Premiums and Long-Term Impact: The premium on MicroStrategy’s stock compared to Bitcoin is gradually shrinking. Michael J. Saylor’s pitch wasn’t focused on the intrinsic value of the stock itself, but rather on its volatility. In other words, he marketed MicroStrategy as a high-volatility speculative tool, especially appealing to institutional investors who cannot directly buy Bitcoin ETFs.

3. Bitcoin as “Proxy Investment”: Many institutions, due to regulatory restrictions or internal policies, cannot directly purchase Bitcoin or Bitcoin ETFs, especially in countries like South Korea and Germany. Therefore, MicroStrategy became an alternative for these institutions to invest in Bitcoin. Unable to buy ETFs, they would buy MicroStrategy stock instead, as it is highly correlated with Bitcoin.

4. Michael J. Saylor’s Genius Marketing and MicroStrategy’s “Self-fulfilling Prophecy”: Michael J. Saylor is a brilliant marketer. He didn’t just promote MicroStrategy’s stock, but emphasized its leverage effect. The idea was that if you expect Bitcoin to rise, MicroStrategy’s stock would rise even more. And buying MicroStrategy’s stock was safer than leveraging to buy options because you wouldn’t have to worry about a margin call.

5. MicroStrategy’s Uniqueness: The success of MicroStrategy largely depends on its powerful financing capabilities, with Saylor continually raising funds for the company to buy more Bitcoin. Saylor personally excels at “selling” his vision, delivering speeches and promoting the company on YouTube, presenting MicroStrategy as a “super-leverage tool,” which attracts speculators from around the world.

3. “Hold Bitcoin, Never Sell”: Michael J. Saylor’s Crypto Crusade

Michael J. Saylor’s recent push for Bitcoin has had a profound impact on the entire industry. Through relentless public appearances, interviews, and speeches, he not only brought Bitcoin into mainstream awareness but also attracted a wave of institutional investors to the market. In fact, MicroStrategy and ETFs have become the two largest buyers in the Bitcoin market today. Interestingly, while ETFs are undeniably significant, MicroStrategy’s approach is far more eye-catching — because unlike ETFs, which occasionally sell off assets, MicroStrategy strictly buys and never sells.

From a marketing standpoint, one of the most memorable moments was when Saylor claimed he had already included in his will that his personal Bitcoin private keys would be destroyed upon his death — permanently removing those coins from circulation. This kind of “cult-leader level” declaration symbolized a seemingly eternal contribution to the Bitcoin ecosystem. While no one can confirm if he will truly follow through, the statement alone injected a dose of euphoria into the market.

Importantly, the Bitcoin held by MicroStrategy is not directly controlled by Saylor or the company itself. These assets are securely custodied by two trusted third-party institutions, Fidelity and Coinbase Custody, in compliance with public company audit and regulatory standards. So, concerns about what happens to the coins if Saylor passes away are largely unfounded.

Michael J. Saylor isn’t just a vocal proponent of Bitcoin — he’s arguably more extreme than many early Bitcoin investors. Even before the launch of Bitcoin ETFs, he had already positioned MicroStrategy as a de facto Bitcoin ETF. His dialogue with Elon Musk was also instrumental in pushing Bitcoin adoption; market rumors suggest that it was Saylor’s advice that convinced Musk to have Tesla purchase Bitcoin in the first place.

Moreover, Saylor is no longer focused solely on Bitcoin. Some in the market believe that his recent comments show support for the broader digital economy. He has advocated for the U.S. to take the lead in becoming a global digital economy powerhouse and for the tokenization of all assets. This evolving stance — from being a Bitcoin maximalist to recognizing blockchain’s broader potential — has earned him increasing respect within the Web3 and crypto space.

Looking at America’s digital economy blueprint, Saylor has even proposed integrating Bitcoin into national strategic reserves to solidify U.S. leadership in the global digital economy. He envisions a future where a chain-based global economy redefines financial systems, potentially giving rise to a cyber-financial order that transcends sovereign nations.

However, this new paradigm will also bring significant regulatory and capital flow challenges. If the U.S. dominates this on-chain economy, other major regions — like China, the EU, or South Korea — will likely face increased capital flight pressures. Traditional mechanisms used by regulators to control financial flows may prove ineffective against the decentralized nature of on-chain systems.

On March 25, the Trump family-backed crypto project World Liberty Financial Inc. (WLFI) officially announced the launch of its stablecoin USD1. The stablecoin business is simply too profitable to ignore, and USD1 is expected to be 100% backed by short-term U.S. Treasury bills, cash deposits, and other equivalents. This move signals America’s clear intention to increasingly rely on stablecoin issuance to ease its debt burden — an overt declaration of financial strategy through blockchain rails.

4. A Möbius Loop: Michael J. Saylor’s Asset Gambit

Bitcoin has now dropped from its peak to around $87,000, while MicroStrategy’s average acquisition cost sits at roughly $66,000. This raises an important question: what happens if Bitcoin’s price falls below the company’s cost basis?

In the previous bear market, MicroStrategy’s situation was arguably worse. At one point, the company’s net assets were in the negative — a rare and alarming condition for any publicly traded company. While some firms may briefly dip into negative equity due to unique scenarios like massive stock option issuances, a sustained negative balance typically sparks panic. However, MicroStrategy didn’t go bankrupt or get forced to liquidate. The reason? Most of its debt maturities were still years away, giving creditors no leverage to demand immediate liquidation.

One key detail is that Michael J. Saylor, MicroStrategy’s founder, holds nearly 48% of the voting power. This makes any shareholder push for liquidation extremely difficult. So even when the company’s balance sheet looked dire, there was no practical way to force the sale of its Bitcoin reserves.

If Bitcoin’s price does drop below MicroStrategy’s average cost, would its stock spiral into a so-called “death spiral”? That fear was also present during the last bear cycle. Back then, the company’s negative equity created a panic — but this time around, the market is more experienced. Investors have already endured similar volatility, making them less likely to overreact.

Moreover, Saylor and his team have several tools to weather downturns: they can issue debt, sell more stock, or even borrow against their Bitcoin holdings. With nearly $40 billion in Bitcoin assets, MicroStrategy has ample collateral — even if prices fall, they can add more to avoid forced liquidations.

Their major debt doesn’t mature until 2028, giving the company breathing room. In the meantime, even price volatility won’t immediately endanger MicroStrategy’s financial position. In fact, they could use the current environment as an opportunity to expand their Bitcoin holdings and further strengthen their position in the crypto space.

What’s more, sovereign wealth funds and institutional investors globally are beginning to view Bitcoin as a reserve asset. Countries like the UAE are rumored to have started buying Bitcoin ETFs, signaling a broader trend of governmental and institutional adoption. Despite short-term price fluctuations, the long-term outlook for MicroStrategy’s Bitcoin-centric strategy appears aligned with the market’s macro trajectory.

In this broader context, MicroStrategy’s situation raises several critical questions:

Can Bitcoin’s volatility remain at current levels?
 MicroStrategy’s strategy relies on Bitcoin’s high volatility as a leveraged investment tool. But as institutional adoption grows, volatility is expected to diminish. The introduction of spot Bitcoin ETFs is already making price movements more subdued — similar to how gold’s volatility decreased after ETF adoption. If Bitcoin begins to behave more like gold, with slow, steady price changes, MicroStrategy’s strategy of using it as a high-volatility asset may lose steam.

How long can MicroStrategy sustain its financing model?
 Right now, the company’s capital-raising model depends on a bullish long-term outlook for Bitcoin. But if prices enter a prolonged period of stagnation or decline, will MicroStrategy’s financials hold up? Their approach — issuing debt and selling equity to buy Bitcoin — is highly dependent on investor optimism. If Bitcoin flattens or drops, equity dilution and debt servicing could weigh heavily on the company. Additionally, political shifts could remove favorable policy tailwinds that have supported this model thus far.

Is Michael J. Saylor a Bitcoin idealist or a sophisticated arbitrageur?
 In truth, Saylor is both. He passionately believes in Bitcoin’s long-term value while simultaneously mastering the use of market mechanisms to generate profit. His positioning of MicroStrategy stock as a “leveraged Bitcoin play” makes it attractive to institutional investors who are unable to buy BTC or ETFs directly. Rather than being a pure believer in Bitcoin’s intrinsic value, Saylor appears to be a master of riding the asset’s volatility for strategic financial gains. MicroStrategy, under his guidance, acts less like a blockchain evangelist and more like a volatility trader dressed in corporate robes — turning Bitcoin’s speculative waves into equity market returns.

5. Wealth Engine or Crypto Chill?

MicroStrategy’s capital maneuvering arrived at a fortuitous time — but should one actually invest in MSTR? From a personal standpoint, for those within the crypto industry, MSTR offers greater upside potential than directly investing in Bitcoin. It acts more like a leveraged version of Bitcoin — a kind of price accelerator.

Though MicroStrategy presents itself as a business intelligence software company, its operational model has entirely shifted toward Bitcoin accumulation. MSTR stock inherently carries a leverage effect. Because the company holds a vast amount of BTC and continues acquiring more through debt issuance and bond sales, its stock price reacts to Bitcoin’s price swings with amplified volatility. When BTC rises, MSTR often outpaces it — and the reverse is just as true.

MSTR’s stock has skyrocketed from $68 at the beginning of the year to around $400, outperforming major names like NVIDIA, Palantir, and Coinbase. The reason behind this dramatic rise? Some argue that founder Michael J. Saylor engineered a kind of “infinite funding exploit” that propels the stock; critics, on the other hand, compare it to a Ponzi scheme and warn it could trigger the next crypto crash.

Currently, MicroStrategy’s profits from Bitcoin investments far surpass revenue from its traditional software business. While software revenue has stagnated or even declined over the years, the company has boosted overall profit by continuously issuing bonds and diluting equity to raise funds for Bitcoin purchases. This deep coupling of the company’s stock with Bitcoin’s performance has both advantages and significant risks — because MicroStrategy’s core business contributes little to its profitability, everything hinges on Bitcoin’s continued price appreciation. No one can predict whether BTC’s trajectory will stabilize via financial instruments like ETFs and strategic reserves — or face a massive liquidation event.

Further boosting its financing power, the company has issued zero-interest convertible notes. These allow investors to convert the notes into equity at a predetermined price far above the current stock value. On the surface, this appears unfavorable for investors — but in reality, they enjoy seniority in liquidation claims, reducing their downside risk. Meanwhile, MicroStrategy continues using the raised funds to accumulate Bitcoin, effectively driving up both its stock and BTC prices in tandem.

The brilliance of this strategy lies in its successful transfer of risk from the company to the stock market. By issuing convertible debt and purchasing Bitcoin, MicroStrategy delays any cash repayment obligation. If the stock performs well by the time the debt matures, bondholders are more likely to convert their debt into equity instead of demanding repayment — eliminating the debt from the balance sheet. This means the risk is absorbed by the equity market, making MSTR’s long/short payoff ratio more appealing than Bitcoin’s itself.

About YBB

YBB is a web3 fund dedicating itself to identify Web3-defining projects with a vision to create a better online habitat for all internet residents. Founded by a group of blockchain believers who have been actively participated in this industry since 2013, YBB is always willing to help early-stage projects to evolve from 0 to 1.We value innovation, self-driven passion, and user-oriented products while recognizing the potential of cryptos and blockchain applications.

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