Bitcoin Breaks $98,000, the Driving Force Behind It Sparks Controversy

The price of Bitcoin has broken through the $98,000 mark, exciting the market. Analysts believe that the rise in the $40,000-$70,000 range is mainly due to the launch of the Bitcoin ETF, while the rise in the $70,000-$100,000 range is closely related to the operations of MicroStrategy.

Some opinions compare MicroStrategy to a Bitcoin version of Luna, but this analogy is debatable. Bitcoin, as a mainstream cryptocurrency, is fundamentally different from Luna. This article aims to clarify the relationship between MicroStrategy and Bitcoin.

Several key points:

• MicroStrategy's margin of safety is much higher than Luna
• The company increases its holdings of Bitcoin by issuing bonds and conducting a stock offering.
• Its most recent debt will mature in 2027, which is more than 2 years away from now.
• The main potential risk that MicroStrategy faces comes from Bitcoin whales.

Difference Between MicroStrategy and Luna

MicroStrategy was originally a software company that started investing in Bitcoin in 2020. After exhausting its own funds, the company began borrowing through over-the-counter leverage to purchase Bitcoin.

Unlike the mutual printing of Luna and UST, MicroStrategy adopts a low-level dollar-cost averaging strategy with leverage, which is a standard borrowing long operation. The use of Bitcoin far exceeds that of UST, and MicroStrategy's influence on Bitcoin is also far less than Luna's influence on UST. Therefore, it is inappropriate to compare the two.

MicroStrategy's Financing Strategy

To quickly raise funds, MicroStrategy issued a total of approximately $5.7 billion in debt and used most of it to purchase Bitcoin.

The company issued a type of convertible bond. Bondholders have the right to convert the bond into company stock under certain conditions. This design is more favorable to creditors:

• If Bitcoin falls and the company has cash, creditors can receive cash returns.
• If Bitcoin falls and the company's funds are tight, creditors can convert to stocks to cash out.
• If Bitcoin rises, creditors can obtain more stock returns.

This low-risk, high-return design has allowed MicroStrategy to successfully raise funds.

With the rise in Bitcoin prices, the company's stock price has also surged significantly. Currently, MicroStrategy's daily trading volume has surpassed that of some tech giants. The company can now raise funds not only through bond issuance but also by issuing additional shares.

Last week, Bitcoin rose from $80,000 to $98,000, closely related to MicroStrategy's operations. The company raised $4.6 billion by issuing new shares and invested all of it into the Bitcoin market.

MicroStrategy's Debt Situation

Despite concerns that MicroStrategy may face a crisis similar to Luna, that is not the case. The company's average cost of holding Bitcoin is around $49,874, which is close to 100% floating profit, providing a significant margin of safety.

Even if the price of Bitcoin drops significantly, MicroStrategy does not face the risk of forced liquidation due to the use of off-exchange leverage. The earliest debt that needs to be repaid will mature in February 2027, which is more than two years away.

In addition, the convertible bonds issued by the company generally have low interest rates, most of which are below 1%, and the highest is only 2.25%. Therefore, interest pressure does not pose a significant threat.

Potential Risks

Currently, MicroStrategy has formed a mutually influential relationship with Bitcoin. More and more companies are beginning to emulate its operational model. For example, a publicly listed Bitcoin mining company recently issued $1 billion in convertible bonds, which are planned to be used to purchase Bitcoin.

In this case, the main potential risk faced by MicroStrategy comes from early Bitcoin whales. If these whales can form some sort of tacit understanding with MicroStrategy, it is expected to drive the Bitcoin price further up.

As of now, MicroStrategy has achieved a floating profit of approximately $15 billion. Due to substantial profits, the company may continue to increase its investments. According to the current trend, the mid-term target price for Bitcoin may reach $170,000.

This operational model demonstrates a well-designed positive strategy that deserves market attention.