MicroStrategy’s Bitcoin Gambit: A Masterclass in High-Stakes Corporate Crypto

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2025-06-03 02:22:17

The MicroStrategy playbook: The good, bad and ugly

Wall Street’s favorite corporate Bitcoin whale just doubled down—again. Michael Saylor’s tech firm now holds over $10B in BTC, turning balance sheets into a volatility rollercoaster.

The good: First-mover advantage paid off. Their 2020 pivot to Bitcoin as a treasury asset sparked a wave of corporate adoption—and delivered 10x returns at peak prices.

The bad: Quarterly earnings now swing wildly with crypto markets. Last year’s $1.5B impairment charge had traditional CFOs reaching for antacids.

The ugly: That 2% annual bond offering? Basically betting shareholder capital on Bitcoin outperforming junk-rated debt. Because nothing says ’prudent fiscal strategy’ like levered crypto speculation.

Love it or hate it, MicroStrategy rewrote the corporate finance playbook—one Satoshi at a time. Just don’t ask about the margin calls.

The trade explained

DATs are funding their crypto purchases by issuing bonds atlow coupon rates (0-5%).

Who’s buying these?

One group of buyers are the market-neutral hedge funds, which simultaneously buy the bond note and short MSTR stock to delta-hedge.

Their profits come from the underlying volatility of MSTR stock. When MSTR’s price goes up, the fund shorts more stock. When prices drop again, they buy it back at a lower price.

The more volatile the stock price, the more of a profitable spread there is. The profit exists because realized volatility exceeds expected/implied volatility (otherwise known as gamma-scalping).

As my colleague Byron Gilliam put it aptly, Saylor is in the business of selling cheap volatility.

The second group of buyers are long-only asset managers (e.g. Allianz, Calamos).

For these guys, if MSTR trades above the conversion price of the bond, then the bond is just like equity and can soar well past par.

Should MSTR’s price collapse, bondholders still have a senior claim on principal at maturity; today that claim is backed by ~$60.4 billion of BTC on its balance sheet (though MSTR’s converts are unsecured).

It’s profitable due to an asymmetric payoff. Limited downside and equity-like upside.

Both these sets of buyers enable Saylor to buy more bitcoin, which drives up the net asset value (NAV) of the company, which in turn drives up the price of MSTR stock.

This is what’s referred to as Saylor’s “infinite money loop”: It works so long as the option value of the equity trades at a premium to the net bitcoin per share (because markets are inefficient!)

Why aren’t funds just buying the ETF if they want crypto exposure?

I’ll let Pantera’s Cosmo Jiang do the explaining for me, per his recent letter:

“If you buy MSTR at 2x NAV, you are buying 0.5 BTC instead of buying 1.0 BTC via spot. However, if MSTR can raise capital and grow BPS 50% per year (last year it grew 74%), by the end of year two you WOULD have 1.1 BTC — more than if you had simply bought spot.”

Bitcoin per share (BPS) is the benchmark metric that all the participants in this game are eyeing.

DATs want to grow BPS (or ETH/SOL/XRP per share) faster than the company’s stock price appreciation, and that in turn depends on how well the firm can leverage capital markets to raise even more.

The risks

But of course, there is no such infinite money glitch.

DATs are already advertising their stock as offering “yield,” but no such organic cash yield exists. The metric works only as long as the stock price stays above the underlying NAV.

Whereas Strategy’s bonds were originally unsecured, copycats are raising capital with secured terms, which entails real liquidation risks.

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Should crypto markets tank, DATs will be forced to sell their assets to repay note-holders if they cannot top up collateral.

Everyone’s excited about the buying, but no one’s talking about the potential forced selling.

Until they have to.