MicroStrategy's "Alchemy": Bitcoin Investment and Capital Manipulation

1. Background Introduction

MicroStrategy was originally a corporate software company focused on business intelligence solutions, but since 2020, its focus has clearly shifted to Bitcoin investment. The company raised funds by issuing stocks and convertible bonds to purchase Bitcoin, becoming a focal point in the U.S. stock market. In February 2025, MicroStrategy officially changed its name to Strategy, at which time its balance sheet held 471,107 Bitcoins, accounting for approximately 2% of the total global Bitcoin supply. By February 21, 2025, Strategy 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 by issuing new shares/convertible bonds to increase its Bitcoin holdings, and then using the Bitcoin holdings to support the stock price valuation, forming a capital closed loop deeply linked with crypto assets. With the unique high premium financing mechanism of the U.S. stock market, MicroStrategy not only stands out in Bitcoin concept stocks but has also developed a set of "alchemy" certified by the U.S. stock market through equity issuance and coin price manipulation.

2. The Source of Speculative Motivation for MSTR Stock Price

MicroStrategy has adopted a clever financing approach, mainly completing fundraising through a combination of stocks and bonds. Initially, it relied on bond issuance and its own cash reserves, along with some common stocks and convertible bonds. In this round, it has made extensive use of the ATM( At-the-market) stock issuance mechanism, directly selling stocks in the secondary market.

MicroStrategy plays the capital markets through a strategy that combines 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 enhances its valuation premium when Bitcoin rises. During the bull market, its premium once reached as high as 300%.

However, over time, the market gradually became aware of MicroStrategy's large-scale stock sell-offs, leading to a decline in stock prices and a reduction in premiums. At the same time, the leverage ratio decreased, and the company gradually shifted towards bond financing. This change has slowed down MicroStrategy's pace of buying Bitcoin, and the demand for Bitcoin in the market has also begun to weaken.

MicroStrategy played a game of "premium hedging." By selling stocks at a high premium to raise funds to purchase Bitcoin, they shifted to issuing bonds when the premium dropped. This model provided the company with ample funds to operate Bitcoin purchases, although the market gradually realized that enthusiasm for its stocks weakened after these operations.

In general, MicroStrategy uses different financing strategies in different cycles, leveraging the high premium advantage of the stock market while steadily increasing leverage through bonds. For Bitcoin, a slower pace from MicroStrategy may indicate a weakening upward momentum for Bitcoin in the short term; for MicroStrategy, this diversified financing approach allows it to respond flexibly to different market conditions.

The reasons behind the sharp rise and fall of MicroStrategy's stock price, as well as the key points on how they attract a large number of speculators through Bitcoin investments include:

1. The nonlinear relationship between stock prices and Bitcoin: The fluctuations in MicroStrategy's stock price are not only directly linked to the price of Bitcoin.

2. The reaction and long-term impact of narrowing premiums: MicroStrategy's premium is gradually decreasing compared to before.

3. Bitcoin's "proxy investment": MicroStrategy has become an alternative choice for some institutional investors who are unable to directly purchase Bitcoin or Bitcoin ETFs.

4. Michael J. Saylor's marketing strategy and the "self-fulfilling prophecy" of MicroStrategy: Saylor not only promotes the stock but also emphasizes its leverage effect.

5. Unique Characteristics of MicroStrategy: Its success largely relies on strong financing capabilities and Saylor's marketing skills.

3. Michael J. Saylor's Bitcoin Promotion Strategy

Saylor's frequent appearances, interviews, and speeches have not only brought Bitcoin into the spotlight but also attracted a large number of institutional investors to the market. Currently, MicroStrategy and ETFs are the two main buyers in the Bitcoin market, with MicroStrategy's operations being more noteworthy as it only buys and never sells.

Saylor has stated that he has set up a will to destroy the personal Bitcoin private keys he holds after his death. This "cult leader-level" move has injected excitement into the market. It is worth noting that MicroStrategy's Bitcoin is managed by trusted third-party custodians Fidelity and Coinbase Custody, complying with the auditing and regulatory requirements for publicly traded companies.

Saylor is not only a proponent of Bitcoin, but he is even more extreme than some early investors. He has turned MicroStrategy into something akin to a Bitcoin ETF and began operating this way before the ETF emerged. It is said that Musk's decision to allow Tesla to purchase Bitcoin was largely influenced by Saylor's advice.

Saylor's recent remarks indicate that he supports the development of the entire digital economy, suggesting that the United States should become a leader in the global digital economy and promote the on-chain and tokenization of all assets. He is no longer just a Bitcoin extremist, but has recognized the potential of blockchain technology in a wide range of fields.

Saylor even proposed the idea of incorporating Bitcoin into national strategic reserves to enhance the United States' leadership in the global digital economy. This indicates that the future global economy may move towards a more decentralized financial landscape, and there could even emerge a cyber financial system that transcends sovereign nations.

However, in this new landscape, capital flows and regulation will face new challenges. Especially if the United States dominates this on-chain economy, other countries or organizations will face greater pressure from capital outflows. Traditional regulatory measures may become ineffective in the face of a decentralized on-chain economy.

4. Michael J. Saylor's Asset Gaming Strategy

Currently, the price of Bitcoin has dropped to around $87,000 from its recent high, while MicroStrategy's holding cost is approximately $66,000. This raises thoughts about how the market would react if the price of Bitcoin falls below MicroStrategy's purchase cost.

During the last bear market, MicroStrategy's situation was even worse, with net assets showing negative values. However, the company did not liquidate or was forced to sell Bitcoin, mainly because its debt maturity was still far off.

Michael J. Saylor, the founder of MicroStrategy, holds nearly 48% of the voting rights, making it difficult for any liquidation proposal to pass. Even when the company's financial situation is tight, creditors and shareholders find it challenging to raise liquidation demands.

Even if the Bitcoin price falls below the average cost of holding, MicroStrategy's stock is unlikely to fall into a "death spiral." The market has experienced these fluctuations, and investors should be more experienced and not panic like before.

The Saylor team has flexible means to respond to market fluctuations, such as issuing bonds, increasing stock issuance, or even using the Bitcoin they hold as collateral to borrow money. MicroStrategy currently holds about $40 billion in Bitcoin and can obtain funds by pledging these assets. Even if prices drop, they can avoid being forced to sell by supplementing collateral.

MicroStrategy's main debt is not due until 2028, and it is unlikely to face significant financial pressure or be forced to sell Bitcoin before then.

An increasing number of sovereign funds and institutions around the world are beginning to view Bitcoin as a reserve asset, which is a major trend. In the long run, MicroStrategy's strategy seems to align with the market trend.

Overall, although the price fluctuations of Bitcoin may put short-term pressure on MicroStrategy, considering its debt maturity 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.

Issues worthy of further discussion include:

1. Can the volatility of the Bitcoin market maintain its current level? As institutional investor acceptance increases and financial derivatives such as ETFs are introduced, the price volatility of Bitcoin may stabilize.

2. How long can MicroStrategy's financing methods last? This model relies heavily on the market's optimistic sentiment towards Bitcoin. If the price of Bitcoin experiences long-term fluctuations or declines, the company may face financial pressure.

3. Is Michael J. Saylor an idealist supporting Bitcoin or an arbitrageur? Saylor recognizes the long-term potential of Bitcoin and is also adept at leveraging market mechanisms for profit for companies and individuals. He packaged MicroStrategy's stock as a "leveraged Bitcoin investment tool," attracting institutional investors who cannot invest directly in Bitcoin.

5. Wealth Engine or Crypto Frost?

MicroStrategy's capital operation model is timely, but investing in MSTR stock should be done with caution. For those in the cryptocurrency industry, the odds of MSTR may be greater than directly participating in Bitcoin, making it more like an accelerator version of Bitcoin.

MicroStrategy appears to be a software company focused on commercial data analysis, but its actual operating model has completely shifted towards accumulating Bitcoin assets. MSTR has a leverage effect, and its stock price sensitivity to Bitcoin price fluctuations is amplified.

The company's stock has soared from $68 at the beginning of the year to about $400 now, an increase surpassing that of many well-known companies. Some believe this is the result of founder Michael J. Saylor boosting the stock price through "infinite funding外挂" operations; others criticize this as resembling a Ponzi scheme, worrying it may trigger the next collapse of the cryptocurrency market.

MicroStrategy's current Bitcoin investment returns far exceed traditional business revenue. Although software business revenue has basically not grown and even declined, the company has raised funds to purchase more Bitcoin by continuously issuing bonds and diluting equity, achieving an overall profit increase. While this operation has its benefits, it also brings risks, as the company's core business cannot generate significant profits, and its prospects are entirely dependent on the increase in Bitcoin prices.

The company enhances its financing capability by issuing non-interest convertible notes. These notes allow investors to convert them into company equity in the future, but the conversion price is much higher than the current stock price. On the surface, this seems unfavorable for investors, but in reality, note holders enjoy priority liquidation rights, which can reduce risks. MicroStrategy can continue to accumulate Bitcoin through this financing method, driving up both stock and Bitcoin prices.

The cleverness of this approach lies in successfully transferring the risk from the company to the stock market. By issuing convertible bonds to finance the purchase of Bitcoin, if the stock price is high enough when the debt matures, creditors will choose to convert the debt into shares rather than demand repayment from the company, thereby completely transferring the debt issue to the stock market. Therefore, the overall long and short odds in the stock market are greater than those in the crypto market.