MicroStrategy's stock price has tripled since last October: Deconstructing the financial magic of Bitcoin

Strategy (MSTR)'s share price has experienced significant volatility since October 2024, reflecting the market's heightened focus on its Bitcoin reserve strategy. However, the core logic of this strategy is often misunderstood. This article takes an in-depth look at Michael Saylor's financing model, exploring its sustainability and market impact. This article is from an article written by JAY and is compiled, compiled and written by TechFlow. (Synopsis: GameStop learns micro-strategies to buy Bitcoin!) Will issue 1.3 billion magnesium convertible bonds, the stock price is scared down 22%) (Background supplement: Shenyu Article" Microstrategy MSTR's Bitcoin Leverage Game: Who Takes the Risk, Who Profits? Strategy (MSTR)'s share price has experienced dramatic volatility since October 2024. It soared all the way from $188 to $540, a near threefold gain, but then retreated and stabilized in the low $300 range. Behind this share price movement are a series of important initiatives driven by the company's founder, Michael Saylor, including changing the company's name to Strategy, buying more than 506,000 bitcoin (BTC), and issuing two new preferred shares, STRK and STRF. However, there are many inaccuracies in the market about how Strategy works. To help investors more clearly assess the sustainability of Saylor's Bitcoin reserve strategy, we tried to simplify its core logic. Sailer's Bitcoin Reserve Strategy: Two Core Takeaways Saylor's financial strategy can be summed up in the following two points: Sell stock options and receive a one-time gain Strategy sets the strike price to a range of 30% to 300% of the current share price by selling a buy or conversion option on MSTR stock, and collects the full proceeds in advance through structured trading. This was achieved primarily through the issuance of convertible bonds and preferred shares STRK and STRF. Issue additional shares at the right time Use the ATM (At-the-Market) mechanism to issue additional MSTR shares when market conditions are favorable to further raise capital. It is important to note that Saylor has no explicit plans to repay the principal amount of these options or bonds. His core objective is to maintain the long-term execution of the financing plan, subject to interest payments, until MSTR's share price rises to the relevant strike price. The core strength of this strategy is its highly flexible financing methods. Using this strategy, Saylor is able to choose the best financing vehicle based on market conditions: issuing convertible bonds when implied volatility is high; When the net asset value of MSTR shares (NAV) premium is high, additional shares will be issued through the ATM mechanism; When none of the above conditions are met, issue more preferred stock (such as STRK or STRF). There may often be concerns about the high leverage risk of this strategy, but the data suggests that this concern is not valid. Here are the key financial figures for MSTR: Market capitalization: $85 billion; Market cap of Bitcoin holdings: approximately $44 billion (506,000 BTC); Total debt: $8.2 billion, annual interest rate of only 0.421%, annual interest expense of about $34 million; Preferred dividend payout: $58.4 million per year for STRK and $85 million per year for STRF. A ratio analysis of these data reveals that Saylor's use of leverage is actually very limited and the cost of debt is extremely low. Bitcoin Reserve Strategy vs. Traditional Banking Model The Bitcoin Reserve Strategy of Strategy is somewhat comparable to the operating model of traditional banks. The core operating logic of both is as follows: Traditional Banking Model Banks further amplify leverage through fractional reserve systems to increase returns, but this model occasionally leads to bank bankruptcies. receiving customer deposits; use deposit funds to purchase "safe" government-backed debt (e.g. treasury bills, mortgage-backed securities, etc.); The interest paid to depositors is lower than the income from debt investments. Bitcoin Reserve Strategy Unlike traditional banks, Strategy's Bitcoin Reserve Strategy does not use excessive leverage because the government will not provide a similar bailout to the banking sector if something goes wrong. raising funds (similar to a bank receiving deposits); Use the funds raised to buy Bitcoin (rather than government-backed debt); MSTR stock earnings and regular interest or dividends are paid to investors. Although the mode of operation is different, the core goal of both models is to achieve profitability through money management. Banks rely on net interest spreads (the difference between income from debt investments and interest on deposits) to benefit investors from part of the interest on debt passed on through banks. Bitcoin reserves, on the other hand, rely on Bitcoin's capital appreciation, allowing investors to benefit from the volatility of Bitcoin's price (see more details on how this transaction works and why this model is beneficial for convertible bond buyers). This appreciation is mainly due to the increase in the price of Bitcoin or the depreciation of the US dollar against Bitcoin. The Future Potential of Bitcoin Reserve Strategy Michael Saylor is one of the strongest advocates of Bitcoin Reserve Strategy. His asset management model has successfully attracted many companies to follow suit, prompting the U.S. government to explore similar reserve strategies. The continued rise in MSTR and the price of Bitcoin became the best "advertisement" for this strategy, further driving market acceptance of the idea of Bitcoin reserves. While the Saylor strategy is still in the minority, its market influence and sustainability are increasing as Bitcoin and MSTR evolve. Market attention and feedback in turn drive the success of the strategy, and this "reflexivity" may lead to longer-term development potential for Bitcoin reserve strategies. Related reports U.S. stocks were surprised that "Black Friday" crypto concept stocks became the hardest hit area, and MicroStrategy plunged 10%; Bitcoin fears to dip 72,000 magnesium? MircoStrategy microstrategy restarts the "buy, buy, buy" model? Full analysis of new financing solutions Will Micro Strategy go bankrupt? Bitcoin villain Peter Schiff warns: If U.S. stocks go bearish, BTC may fall below $20,000 [Microstrategy stock price has risen 3 times since last October: dismantling bitcoin financial magic] This article was first published in BlockTempo's "Dynamic Trend - The Most Influential Blockchain News Media".