MicroStrategy's Bitcoin Journey: A Financial Legend of a New Era

In the long history of Wall Street, MicroStrategy's strategic transformation regarding Bitcoin is destined to become a unique new chapter.

The Birth of the Bitcoin Strategy

In 2020, the global COVID-19 pandemic triggered a liquidity crisis, prompting countries to adopt loose monetary policies to stimulate the economy, leading to currency devaluation and increased inflation risks. Against this backdrop, MicroStrategy CEO Michael Saylor reassessed the value of Bitcoin. He believed that with the money supply growing at an annual rate of 15%, people needed a hedge asset that was not pegged to fiat currency. Thus, MicroStrategy launched its Bitcoin strategy.

Compared to Bitcoin ETFs or ETP products launched by other companies, MicroStrategy's strategy is more aggressive. The company purchases Bitcoin through various means such as using its own funds, issuing bonds, and issuing new shares, directly assuming the risks and rewards of Bitcoin price fluctuations.

Diversified Sources of Funds

MicroStrategy primarily raises funds to purchase Bitcoin through four main avenues:

1. Use own funds
2. Issue convertible preferred bonds
3. Issue Priority Guaranteed Bonds
4. Market Price Issuance of Stocks

As of December 30, 2024, MicroStrategy has invested approximately $27.7 billion in total, purchasing 444,262 Bitcoins, with an average holding price of $62,257 per coin.

Thinking about Key Issues

Leverage Risk Assessment

As of the end of December 2024, MicroStrategy's debt-to-equity ratio is only 0.208, which is at a low level, and the leverage risk is controllable.

The repayment ability of convertible bonds

As long as Bitcoin does not fall below $16,364 in the long term, the value of the Bitcoin held by MicroStrategy will not be lower than the total amount of convertible bonds. The company can also respond to the due repayments by issuing new shares, issuing new bonds, or selling part of its Bitcoin.

The significance of the coin amount per share

The amount of coin per share determines the net asset value per share. As long as the company's market value is higher than the total value of the held Bitcoin, issuing additional shares to purchase Bitcoin can increase the amount of coin per share and achieve "smart leverage."

The reasons for the recent acceleration in buying.

It may be due to the significant increase in the company's stock price, creating favorable conditions for financing. MicroStrategy has proposed the "42B Plan", which plans to raise 42 billion USD over the next three years to continue increasing its holdings of Bitcoin.

Future Bitcoin price increase momentum

In addition to the increase in corporate holdings, national strategic reserves may become a new driving force for the rise. However, it is not advisable to have overly high expectations in the short term.

Conclusion

MicroStrategy's Bitcoin strategy is not only a business experiment, but also a significant innovation in the history of finance. It breaks the barriers between crypto assets and mainstream capital markets, potentially opening the door to a new era in finance.