The Virtuous Cycle
Since 2020, MicroStrategy has been on a roll, accumulating an impressive amount of Bitcoin (BTC) while minting an attractive "Bitcoin yield" for its shareholders. The company’s virtuous cycle has sent its stock price soaring, attracting copycats from various industries who are attempting to replicate the same strategy.
A House of Cards Built on Cheap Financing
MicroStrategy’s success can be attributed to its ability to tap into cheap financing, which has enabled it to accumulate a significant amount of BTC. However, this house of cards is built on shaky ground, and the good times won’t last forever. When cheap financing dries up, MicroStrategy’s stock price will wither.
Copycats Risk Similar Fates
Other companies are following in MicroStrategy’s footsteps, attempting to replicate its treasury strategy. These copycats risk similar fates, as they are also built on a foundation of cheap financing that may not last.
Corporate BTC Treasuries Are Inflation Hedges, Not Share Price Drivers
Corporate treasuries hold more than $52 billion in BTC as of Dec. 7, according to Bitcointreasuries.net. While these treasuries provide an inflation hedge for companies, they don’t justify lofty stock premiums.
The Cycle Will Eventually Reverse Course
In 2025, investors should skip MSTR and opt for plain spot BTC exposure instead. The cycle that sent MicroStrategy’s shares skyward will eventually reverse course, leaving investors with a significant loss.
Saylor’s Vision: A $13 Million Bitcoin Price by 2045
Founder Michael Saylor’s bet on Bitcoin has paid off spectacularly, but his vision of a $13 million BTC price by 2045 is ambitious. While some investors may share this optimism, others should be cautious and consider the risks involved.
MicroStrategy’s Performance vs. Benchmarks
MicroStrategy’s performance has been impressive, outpacing practically every sizeable public company except Nvidia. However, its stock trades at a premium to its BTC treasury, which could evaporate overnight if noteholders seek redemptions.
Brace for an Unraveling
If MicroStrategy doesn’t hit the price of $672.40 per share by June 1, 2028, noteholders can demand repayment in cash. This scenario is practically inevitable, and a cash crunch will send shockwaves through cryptocurrency markets.
A Cautionary Tale
For most investors, vanilla spot BTC exposure presents more than enough volatility. If you’re a "triple maxi" Bitcoin bull like Saylor, then by all means, bet big on MSTR. However, more cautious investors should stay away from this speculative investment.
Conclusion
MicroStrategy’s multibillion-dollar Bitcoin bet is a speculative house of cards built on cheap financing that may not last. While the company’s virtuous cycle has been impressive, it will eventually reverse course, leaving investors with significant losses. Investors should be cautious and consider opting for plain spot BTC exposure instead.
About the Author
Alex O’Donnell is a senior writer for Cointelegraph. He previously founded DeFi developer Umami Labs and worked for seven years as a financial journalist at Reuters, where he covered M&A and IPOs.
