Unorthodox ways to start an article will come with research. In this case, that’s one question. What is the strategy (formerly known as MicroStrategy)?
There’s something interesting about it. Certainly, the answer lies in the background before another reality. His name is synonymous with the massive purchase of Bitcoin (BTC), except that he is actually a company dedicated to providing software solutions.
And the best response is that of Nikou Asgari, the correspondent in the digital market for the Financial Times, who said, “No one cares about the business software part. This all depends on the price of BTC.
As Cryptonoticias reports, the company led by Michael Saylor, a recognized maximalist from Bitcoin, is Get more BTC as the basis for your strategy to demand money on 0% convertible bonds. They then try to raise prices, issue new shares at premiums, fund more purchases of Bitcoin, and repeat the cycle.
In this way, it became the most BTC-accumulating public contributor in the Ministry of Finance. Currently he has 576.230 BTC in his hand.
The strategy promoted by Saylor has sparked praise and criticism. It combines the vision of currencies created by Nakamoto At with some degree of vision of financial leverage, which can be extremely dangerous if market conditions change.
Craig Coven, former chief of Global Capital Markets Bank of Americaclarifies: “When a strategy buys BTC, BTC is actually buying at a 50% discount. So you’re buying more as a BTC upload price.” In this regard, “If the price of BTC drops and you’re a cousin about the net asset value of the Strategic stock, a noble yen can become a vicious circle. After that, the purchase of BTC will dilute for shareholders.”
So, it works, but strategic strategies seem ideal. Buy BTC using the extra value (premium) their actions give to the actual value of the asset. This premium reflects the market’s trust in the company and its ability to continue to generate value from its exposure to Bitcoin.
Every time BTC prices rise, the premium will be maintained or even grown, allowing access to cheap capital and expanding its shares.
But here is what Coben raises, the mechanisms have risks. If BTC prices fall and premiums disappear, the company could no longer fund its purchases with the same advantage.
When buying more BTC means issuing more shares for less value than it actually is, it’s there. In this way, shareholder assets are diluted and a negative spiral is generated. Or rather, what appears to be a noble circle becomes a vicious cycle of increased financial stability of the strategy and the risk of its investors.
In this regard, Asgari points out: “In that case, this infinite money wheel will probably be quite slow if it doesn’t stop completely.
The next graphics in Financial Times let you see how your company’s business cycle works.I’ll collect money), buy BTC (Buy Bitcoin) and that investment drives the price of the stock (Stock prices will rise).
For financial market analyst Max Molter, Strategy’s Action (MSTR) is “one of the weakest and overvalued bets within the sector” of digital assets. His analysis points out that despite the fact that some investors “celebrate an aggressive BTC accumulation strategy,” their financial foundations do not justify their current valuation.
The specialists argue that the strategy position is specific and offers sectoral companies such as Coinbase (Coin) and Robinhood (Food) as examples of exchanges where operating volumes generate revenue, regardless of whether the price of assets rises or is low. Digital Holdings Marathon (Mara) on the other hand is dedicated to BTC Mine and operates at various margins. In the case of Saylor, which was overseen by the company, You only benefit if the price of an asset increases.
Cryptocurrency market analyst Jacob King has made some criticisms about strategy because of this absolute reliance on BTC’s appreciation. In his opinion there is a considerable structural risk This is an accumulation model that operates as a closed cycle. Compare it to the logic of the Ponzi scheme.
In his paper, King uses a wheel scheme divided into six steps to feed back to each other. It all starts when the company issues debt or new actions to raise funds. This is used directly to buy more BTC units. This additional demand will help raise the price of the asset.
As Bitcoin increases, the company’s actions are also being valued, attracting attention from new investors, especially the retail segment. This new enthusiasm will allow the company to issue more actions, acquire new funds and resume the cycle.
The problem is that all of this mechanisms are maintained and each piece is fully functional. If the price of an asset stagnates or falls, if the market profits run out, or if capital issuance becomes viable, the cycle can suddenly break.
“I prefer that they have a strategy for them and not that they’re at home.”
Plus, there are some difficulties to justify. If investors want to be exposed to BTC, it is much cheaper to purchase BTC directly without paying excessive premiums and without assuming the risk of MSTR’s corporate liability.
The answer to this suspicion is from the same investors. Strategic investor and researcher Jeff Walter emphasized: “I think something in BTC has to break to break the strategy. And if something breaks Bitcoin that hasn’t happened in 15 years, it’s the largest distributed computer network on the planet.
On that line, he is willing to take on the downward risk, as he believes this risk is “zero.” He further explains: “In November 2024, the company raised $12000 million in capital, and you can buy BTC with that capital. That’s crazy.”
Meanwhile, Michael Saylor believes that BTC’s risks are existential, saying, “When aliens land a cybervirus, everything reaches zero and reaches zero and reach global consensus, our business fails.”
This is an interesting issue for market columnist Katie Martin for the Financial Times. That means that business owners are not allowed to promote their actions. But what happens is that Saylor spreads BTC. “Why the price of what you’re buying is going to rise, all cuts down to cousins that investors are willing to pay strategic stocks, in addition to the price of Bitcoin.”
Specifically, according to investors’ expectations, Saylor’s strategy will generate greater returns in the future, so they will pay more for strategic actions. Above all, given that the company’s own president predicted that assets would reach $1 million and $13 million by 2035, as reported by encryption.
These forecasts begin with the assumption that supply with BTC limited to 21 million units is rare and that broadcasts will be cut every four years at an event known as half. This is a factor that affects medium and long-term prices. Unlike Fíat Money, it is not devalued by central bank issuance or financial policies.
For many investors, BTC is considered “digital gold” due to its properties shared with precious metals. It is a decentralized asset that resists censorship and is valued as a reserve of value in the context of uncertainty. And for those investors, like Walter’s case, Saylor’s strategy is a genius.
However, it is clear that it is not infinite as it relies on the market sense and the premium that can disappear if BTC drops.
If that happens, issuing shares to buy more BTC is no longer sustainable. So what looks like today’s financial genius is the next Black Swan in the ecosystem if the cycle breaks. Additionally, another issue follows here as if the price of BTC falls below $19,000, as it could be forced to sell some of its holdings to avoid breach of its financial obligations. This creates strong sales pressure and the possibility of price collapse.
It seems unlikely, but company drops are not impossible. And if that happens, The bitcoin blow could be even more devastating Terraft Labs stablocoin rather than collapse like Mt.Gox, FTX or UST.