The Capital Operation Strategies of Bitcoin Investment Giants

MicroStrategy was originally an enterprise software company focused on business intelligence solutions, but since 2020, its focus has significantly shifted towards Bitcoin investment. The company raised funds by issuing stock and convertible debt to purchase Bitcoin, making it a focal point in the U.S. stock market. On February 6, 2025, the company announced its official name change to Strategy, at which time data indicated that it held 471,107 Bitcoins on its balance sheet, accounting for approximately 2% of the global Bitcoin supply. By February 21, the company had accumulated nearly 500,000 Bitcoins, valued at over $40 billion.

MicroStrategy essentially transforms the stock market into a Bitcoin ATM through capital structure design—raising funds to increase Bitcoin holdings by issuing new shares or convertible bonds, and then using the Bitcoin holdings to enhance stock price valuations, creating a capital closed loop deeply bound to crypto assets. With the unique high-premium financing mechanism of the US stock market, MicroStrategy not only stands out among Bitcoin concept stocks but has also developed a "alchemy" certified by the US stock market through equity issuance and coin price manipulation.

The Driving Force Behind Stock Price Speculation

MicroStrategy's financing method mainly involves a combination of stocks and bonds to raise funds. In the initial stage, it relied on issuing bonds and its own cash reserves, as well as some common stocks and convertible bonds. Issuing ordinary bonds requires interest payments, but at that time the company's software business generated tens of millions of dollars in positive cash flow, sufficient to cover the interest on these debts.

In this cycle, the company has extensively utilized the ATM( at-the-market) stock issuance mechanism, selling stocks directly in the secondary market. MicroStrategy plays the "alchemy" of the capital market through a strategy combining stock issuance and bond issuance. When the leverage ratio is low, it quickly raises funds by issuing stocks to buy Bitcoin, thereby increasing leverage and enhancing its valuation premium when Bitcoin rises. During the bull market, its premium once reached as high as 300%.

As time goes by, the market gradually realizes that MicroStrategy is selling off a large amount of stock, causing stock prices to start to decline and premiums to shrink accordingly. At the same time, leverage is decreasing, and the company is gradually shifting to a bond issuance-based financing method. This change has slowed down the pace at which MicroStrategy buys Bitcoin, and the demand for Bitcoin in the market has also begun to weaken.

MicroStrategy is essentially playing a "premium hedging" game. It raises funds by selling stocks at a high premium to purchase Bitcoin, and when the premium falls, it turns to issuing bonds. This model provides the company with sufficient funds to operate Bitcoin purchases, although the market's enthusiasm for its stocks has weakened as it gradually becomes aware of these operations.

Overall, MicroStrategy uses different financing strategies over various cycles, taking advantage of the high premium in the stock market while steadily leveraging through bonds. For Bitcoin, the slower pace of MicroStrategy may indicate a weakening momentum for Bitcoin's rise in the short term; whereas for MicroStrategy, this diversified financing approach allows it to respond flexibly to different market environments.

"Holding Bitcoin, Never Selling": The Founder's Crypto Crusade

Michael J. Saylor's past promotion of Bitcoin has had a profound impact on the entire Bitcoin industry. By frequently appearing, giving interviews, and delivering speeches, he not only brought Bitcoin into the spotlight but also attracted a large number of institutional investors into the market. Currently, MicroStrategy and ETFs are the two major buyers in the Bitcoin market, with MicroStrategy's operations being more noteworthy as it adopts a strategy of only buying and not selling.

Saylor's marketing tactics are impressive; he has stated that he has made a will intending to destroy the private keys of his personally held Bitcoin after his death, completely erasing these Bitcoins from circulation. This "cult leader-level" operation seems to show that he has made an eternal contribution to the Bitcoin industry. Although it is uncertain whether he will fulfill this promise in the future, this statement undoubtedly has a positive impact on the market.

In fact, MicroStrategy's Bitcoin is not directly controlled by Saylor himself or the company; these assets are custodial at two trusted third-party institutions, Fidelity and Coinbase Custody, in compliance with the auditing and regulatory requirements for publicly traded companies.

Saylor is not only a strong advocate for Bitcoin, but to some extent, his position is even more extreme than some early investors. Before the appearance of ETFs, he had transformed MicroStrategy into an entity similar to a Bitcoin ETF. It is said that Tesla's decision to purchase Bitcoin was largely influenced by Saylor's advice.

Recently, Saylor's remarks indicate his support for the development of the entire digital economy, suggesting that the United States should become a global leader in the digital economy and promote the on-chain and tokenization of all assets. He is no longer limited to Bitcoin but sees the potential of blockchain technology in a wide range of fields. This open attitude has also earned him greater recognition in the blockchain industry.

Saylor even proposed the idea of incorporating Bitcoin into the national strategic reserves to expand the United States' leadership in the global digital economy. He envisioned a global on-chain economy, foreseeing a future global economy that may head towards a more decentralized financial landscape, and there could even be a cyber financial system that transcends sovereign nations.

In this future landscape, capital flows and regulation will face new challenges. Especially if the United States dominates this on-chain economy, other countries or organizations around the world will face greater pressures of capital outflow. Even if regulatory authorities in various countries attempt to control capital flows through traditional means, these methods may become ineffective in the face of a decentralized on-chain economy.

The Möbius Loop of Asset Games

Currently, the price of Bitcoin has dropped to around $87,000 from its high, while MicroStrategy's holding cost is approximately $66,000. What will happen in the market if the price of Bitcoin falls below MicroStrategy's purchase cost?

In the previous bear market, MicroStrategy's situation was worse than it is now, with net assets once showing negative numbers. Although this situation is extremely rare for any company, MicroStrategy did not go bankrupt or was forced to sell Bitcoin, mainly because their debt maturity dates are still far away.

MicroStrategy founder Saylor holds nearly 48% of the voting rights, making it very difficult for anyone to propose a liquidation. Even when the company's financial situation is tight, creditors and shareholders find it challenging to easily make liquidation requests.

If Bitcoin really falls below the average cost of holding, will MicroStrategy's stock fall into a "death spiral"? In fact, this question was raised during the last bear market. At that time, MicroStrategy's net assets were negative, and market panic was severe, but today's investors should be more experienced and won't panic as they did then.

Saylor and his team actually have some flexible means to cope with market fluctuations. They can choose to issue bonds, increase stock issuance, or even use the Bitcoin they hold as collateral to borrow money. MicroStrategy currently holds about $40 billion in Bitcoin, which means they can collateralize these assets to obtain funds, and even if the price drops, they can avoid being forced to sell by supplementing the collateral.

Moreover, their main debts are not due until 2028 at the earliest, and no one can force them to make unfavorable decisions before that. For the time being, even if the Bitcoin price fluctuates, MicroStrategy will not immediately face significant financial pressure, nor is it likely to be forced to sell Bitcoin.

Moreover, an increasing number of sovereign funds and institutions around the world have begun to view Bitcoin as a reserve asset, which is a significant trend. Against this backdrop, the long-term outlook for Bitcoin remains positive. It is reported that countries like Abu Dhabi have already started purchasing large amounts of Bitcoin ETFs, indicating that more countries and institutions will enter the Bitcoin market in the future. Although Bitcoin's price may still fluctuate in the short term, MicroStrategy's strategy seems to align with the overall market trend in the long run.

Overall, although the price fluctuations of Bitcoin may bring some short-term pressure to MicroStrategy, considering their debt maturities and market trends, there is currently no risk of liquidation or forced sale of Bitcoin. On the contrary, they may take advantage of the current market environment to continue increasing their Bitcoin holdings, further solidifying their position in the cryptocurrency space.

Wealth Engine or Crypto Frost?

MicroStrategy's capital operation model is timely, but is MSTR stock worth investing in? In my personal opinion, for those in the crypto industry, MSTR's odds are better than directly participating in Bitcoin; MSTR overall resembles an accelerator version of Bitcoin.

MicroStrategy appears to be a software company focused on business data analytics, but in reality, its operating model has completely shifted towards accumulating Bitcoin assets. MSTR has a leverage effect, as the company holds a large amount of BTC and may increase its holdings through borrowing or issuing bonds, amplifying its stock price's sensitivity to changes in Bitcoin prices. When BTC rises, MSTR may increase even more, and vice versa.

Its stock has skyrocketed from $68 at the beginning of the year to around $400 now, an increase that even surpasses many well-known companies like NVIDIA, Palantir, and Coinbase. Some believe this is due to the founder successfully driving up the stock price through a "infinite funding外挂" operating model; others criticize it as resembling a Ponzi scheme and worry it could trigger the next cryptocurrency market crash.

MicroStrategy's current Bitcoin investment returns far exceed its traditional business income. Although software business revenue has basically not grown over the past few years, and has even declined, MicroStrategy has raised funds to purchase more Bitcoin by continuously issuing bonds and diluting equity, resulting in an overall profit increase for the company. This operation brings certain risks to the company, as the core business cannot generate significant profits, and all prospects are pinned on the rise in Bitcoin prices.

The company has further enhanced its financing capability by issuing interest-free convertible notes. These notes allow investors to convert them into company equity in the future, but the conversion price is significantly higher than the current stock price. At first glance, this seems unfavorable to investors, but in reality, note holders enjoy priority liquidation rights, which can reduce risk. Meanwhile, MicroStrategy can continue to accumulate Bitcoin through this financing method, driving a dual increase in its stock and Bitcoin prices.

The clever aspect of this approach lies in successfully shifting the risk from the company itself to the stock market. By issuing convertible bonds for financing and then using that money to buy Bitcoin, when the debt matures, if the company’s stock price is high enough, creditors will choose to convert the debt into shares instead of demanding repayment from the company. This way, the debt issue can be completely transferred to the stock market, resulting in an overall higher long-short ratio in the stock market compared to the crypto market.