In-depth exploration of the MSTR model: The biggest variable in this bull market?

Original author: HighFreedom (X: @highFree 2028 )

Is the biggest variable micro-strategy (hereinafter referred to as MSTR) in this round of bull market a Ponzi scheme similar to LUNA? What is the essence of MSTR? Why is it said that the MSTR model will play a catalyst role in the growth of BTC? Will the MSTR model break the four-year cycle of the 暗号currency circle or even the eternal bull market? From what dimensions can we observe the end of the MSTR model or even this cycle?

Note 1: The article involves many charts and is divided into 7 chapters. Since Twitter does not support long articles, it is forced to be divided into 7 threads.

Note 2: Points 1, 2, and 3 are mainly basic information. Friends who have no knowledge of MSTR can start from point 1.

Note 2: All contents in 4, 5, and 6 are in-depth analysis. Friends who are familiar with MSTR can start directly from 4.

(Basic content)

1. Introduction to MSTR fundamentals: the companys original main business, shareholder structure, and revenue

2. Analysis of the core strategy of buying coins: historical analysis of buying coins, cost and amount of coins held, company debt situation, and the core KPI of the buying coin strategy (Bitcoin per share)

3. Sources of funds for crazy cryptocurrency purchases: 21/21 PLAN, the $42 billion cryptocurrency purchase plan, ATM market price stock sales and Convertible bonds (hereinafter referred to as CB)

Convertible bonds is one of the essential operations and is also the core observation object for whether there will be a spiral collapse in the future. This content will be analyzed in detail below.

(In-depth analysis)

4. The core of the game: CB basics, why MSTRs CB is so popular, who is buying MSTRs CB, what is the essence of CB,

5. Discussion on the MSTR model: What does MSTR’s premium over BTC represent? What is the essence of MSTR? What does MSTR’s premium represent? When should MSTR’s stock be bought or sold?

6. When will the game stop: Will the twilight of the MSTR model and the end of BTC come? From which dimensions can we observe? If a downward spiral unfortunately occurs, what will happen?

(Key time points)

7. MSTRs key timeline for entering the Nasdaq N Q1 00 this month

(1/7)

(The picture shows a page from the 2024 Q3 MSTR financial report. MSTR currently holds 386,800 BTC)

1. MSTR Fundamentals Introduction:

The companys original main business: BI software, classified as technology on Bloomberg, with annual software revenue of about US$400 million

Company shareholder structure: According to data disclosed at the end of Q3 2024, the boss Saylor is the largest shareholder, holding 9.75% of the shares; the other top ten shareholders are basically clients of various asset management companies or the money held by asset management companies themselves (but it should be noted that for ordinary A shares, Saylors holdings are B shares, and each B share has ten times the voting rights of A shares, so Saylor still has the final say in the company)

The companys existing financial situation: There should be about 3 billion US dollars in cash on the account (just announced last Friday); liabilities (mostly convertible bonds) about 7 billion

(2/7 )

2. Analysis of the core strategy for buying coins:

Long-term bullish BTC/USD, continue to buy BTC. Using internal cash accruals, equity and debt to acquire 386,700 ビットコインs at a price of about $22 billion (cost about $56,849), currently at a BTC price of $95,000, it is worth about $36 billion. Reference: saylortracker.com

Long-term bullish on BTC/USD, continuous buying of BTC. The company started its first purchase of coins in September 2020, the last bull market, when the average price was 10,419 USD, and bought 16,796 BTC.

Using internal cash accruals, equity and debt, 386,700 bitcoins were acquired for approximately $22 billion (cost approximately $56,849), which is currently worth approximately $36 billion at a BTC price of $95,000.

reference: saylortracker.com

Core KPI of the company: Bitcoin per share (called BTC Yield in financial reports)

The core meaning is that shareholders should not care whether I issue additional shares to dilute everyones interests or borrow money to buy coins, as long as the share of BTC corresponding to each share in your hands continues to increase (dont worry about my stock price going up or down in the short term, I just want to buy coins everywhere anyway)

Note: How MSTR continues to increase BTC Yield will be discussed later.
reference: saylorcharts.com/?chart=btcYiel…

( 3/7)

3. The source of funds for the crazy purchase of coins: 21/21 PLAN is the plan to purchase coins worth 42 billion US dollars in the next three years

There are usually two ways for a listed company to raise funds: one is to issue additional shares to attract more shareholders (equity financing); the other is to issue bonds and borrow money from others by writing an IOU (debt financing).

MSTRs ATM market price selling stocks: MSTR will issue 21 billion worth of stocks at one time on October 30, 2024. Please note that it is a one-time issuance of a large number of stocks, and then it can sell the stocks at any time during intraday trading in the next three years, and there is no need to announce before selling the stocks (the so-called At the market ATM)

MSTRs Convertible bonds (hereinafter referred to as CB) are debt financing through the issuance of CBs. CBs are different from ordinary bonds in that they have both equity and debt characteristics. This will be discussed in detail below. I think this is also the core of MSTRs game.

According to the latest regulatory filings: 8.2 billion of the 21 billion ATM stock quota has been used, and 3 billion of the 21 billion CB quota has been used
reference: microstrategy.com/financial-docu…

(4/7)

4. The core of the game: Through channels like CB, funds that are optimistic about BTC but cannot participate have the opportunity to enter the market

Convertible bonds (CB) basics: Convertible bonds are debts that can be converted into shares after certain agreed conditions are met. They are essentially corporate bonds + call options on company stocks. But please note that if a company goes bankrupt, the order of repayment is ordinary bonds > convertible bonds > shareholders, so CBs should be repaid later in the order (there is no free lunch in the world)

Take the 3 billion USD issued on 2024/11/21 as an example: 0 interest, principal guaranteed (to some extent), 5 years, with call options, premium 55%

In laymans terms

Case 1 (good case): The creditor can convert the bond into stock only if the stock price reaches $672 within five years. If the stock price rises to $700, the profit ratio is (700 – 627) / 672 = 4.2%

Case 2 (bad case): If the companys stock price never reaches $672 within five years, the creditors can only wait for MSTR to return the cash after five years (for example, if they bought $100 million of CB, the creditors can only recover the $100 million principal at that time)

Who helps MSTR issue CB: Various large traditional investment banks such as Barclays

Who is buying CB: Hedge funds that use volatility strategies and long only bond and insurance funds that are optimistic about BTC but cannot buy the coin directly

To be honest, I am not excited about hedge funds that use volatility strategies. These people may not have any faith in Bitcoin. For example, if Bitcoins volatility (vol) is high recently, they will short vol, and vice versa, they will go long vol.

What excites me most here is that Aliianz, the largest insurance company in Germany, with a scale of 2 trillion euros in insurance funds, has begun to participate in BTC, and is likely to be a net long position in BTC.

Why Aliianz doesn’t buy coins directly: Because the nature of many funds determines that they cannot buy BTC

Imagine you are a bond fund manager who manages 100 billion USD, and you are also optimistic about BTC. However, the nature of bond funds can only be invested in government bonds and corporate bonds. Such fund nature determines that you cannot buy BTC spot or BTC call options. In addition, you will find that the target return of your fund may be 6% or 7%, and the majority is government bonds. For MSTRs bond, it is basically the super alpha in your position.

At this time, MSTR said, brother, you buy my companys convertible bonds, this product is highly linked to the rise and fall of BTC. And my product guarantees your principal. As long as the company does not go bankrupt, I will return the money to you in five years; if BTC doubles and reaches your exercise price, for example, I take 70% and you take 30% (to some extent, it is very similar to the boss of a real business in real life saying: Brother, I heard that you are good at cryptocurrency trading. How about this, I will give you 20 million, you help me trade cryptocurrency, and we will split the profit 55-50. But there is a requirement, I want to guarantee the principal )

Such products are very attractive to funds that are optimistic about BTC but cannot participate at present. Products like CB open up channels for insurance funds and bond funds to participate in the rise and fall of the BTC market. There is a great lack of such products in the current market, which is why the subscription of CB is abnormal (last month, it was originally planned to issue 1.75 billion US dollars of CB, but it was too popular, and 3 billion was directly issued two days later)

The essence of CB: It essentially speeds up the level of BTC participation in funds

For hedge funds, this is a good leg in the volatility long-short strategy. To be honest, these people are not friends of us old investors.

For bond funds and insurance funds, it is equivalent to using the CB product to become a net long position in BTC with us.

CB stock situation: There are six CB stocks in the market. Investors in the first five phases have made a lot of money as the price of the currency and the MSTR stock price have risen (this thread can’t put the picture, you can see the market price of each phase of convertible bonds, the latest market price of the 2028 phase is 224, and the holder’s yield is 124%)

(5/7)

5. Discussion on the MSTR model: What does the premium of MSTR over BTC represent? When should we buy and sell the shares of this company? What is the essence of MSTR?

MSTR’s premium:

I think it represents the acceleration of BTCs rise in the future (the historical average premium is 75%. Now the premium has dropped from the high of 3 a few days ago to around 2.5)

When are MSTR stocks traded?

If you think that BTC will rise rapidly in the next period of time, then buy MSTR directly; conversely, if you think that the price of BTC will remain flat in the next period of time, then sell MSTR.

The essence of MSTR:

Using BTC as the underlying asset, we issue financial products that meet the needs of funds with different returns and risks (very similar to what traditional investment banks do, helping stocks to be issued and listed, IPOs, etc.)

(6/7)

6. When does the game stop: Migration of BTC ownership and the role of MSTR as a catalyst

Accelerated migration of BTC ownership:

To be honest, I have been trading cryptocurrencies for 8 years, and my firm belief in BTC comes from two reasons:

1. A good tool to hedge against excessive money printing by human sovereign governments: Since Japan in the 1990s and the United States in 2008 introduced unconventional monetary policies such as quantitative easing, sovereign governments will print a lot of money when they encounter problems. This is like drugs and gambling. Once you get addicted, it is difficult to quit. In the end, it is bound to lead to a large amount of over-issuance of currency. The underlying properties of BTC determine that it is the best tool on the market to take over excessive currency.

2. Accompanying the growth of BTC: I think that on the one hand, the market value of BTC is getting bigger and bigger, and on the other hand, the circle of funds involved in BTC is getting bigger and bigger, the so-called transfer of BTC ownership:

Hacker IT man -> High net worth individuals -> Technology companies -> Fund institutions -> Small countries -> Large countries

MSTR uses various financial tools to bring in funds that may not be able to participate in BTC for many years in the future. To some extent, this is an overdraft of the BTC price.

For example, it may not be until the next cycle in 2028 that insurance funds and bond funds will be able to participate in BTC. However, through tools such as CB, in a form of near capital preservation, funds that want to participate but cannot directly buy coins, such as insurance funds, can be converted into on-site spot long forces, and now they can get on board in 2024.

In simple terms, the price of the currency may take until the end of 2025 to rise to 150,000, but a company like MSTR may be able to raise the price to 150,000 within 3 months.

When the game ends:

But what if MSTR’s leveraged cryptocurrency trading method comes to an end someday? I think it will be like this:
If the subsequent MSTR bond issuance and other products cannot be issued, and the future price increase has been greatly overdrawn, but at the same time there is no larger capital to take over and buy BTC, BTC may usher in the same terrifying spiral decline as LUNA.

For example, MSTR raised the price of the currency to 250,000 within a year. At this time, it could no longer issue bonds because no one would buy them. However, if the US pension funds and small sovereign governments, which have greater financial strength, do not take over, it will be troublesome.

So, if I could give Saylor some advice one day, it would be: don’t front run too fast, don’t leverage too much, otherwise the terrifying downward spiral will cut off the ownership transfer path of BTC, seriously damaging its vitality.

Finally, I would like to give you a list of my observation dimensions:

The dusk of the MSTR pattern and the top observation dimension of BTC:

1. The popularity of the primary market subscriptions for subsequent products such as CB (if the primary market subscriptions for subsequent CBs are not so popular, then we may start to worry; it would be best to find the investment bank that helps MSTR issue CBs, as they are the first to know the situation)

2. The premium of CB issuance and financing cost: CB is essentially a financing tool with financing costs. MSTR is essentially selling the call of its own stock, which is a behavior of shorting BTC at a high level; the funds that buy CB are essentially buying this call. You can see that the CB in November was issued at an exaggerated 55% premium. If the subsequent premium is getting lower and lower, it actually means that the value of the call attached to investors is getting higher and higher, which means that the financing cost is getting lower and lower.

3. Progress of entry of larger funds: If CB gradually stops issuing, then funds with greater strength, such as pension funds, will have to take over. At this time, it is necessary to closely observe the attitudes and trends of these big brothers towards BTC.

Note: I originally thought that the top of this market was basically determined by the external monetary cycle on the one hand and the internal OG shipment situation on the other hand; but as the MSTR model gradually matures, I think it is necessary to include the analysis framework and system of when the MSTR model will come to an end.

(7/7)

7. Timeline for entering the Nasdaq in December

The Nasdaq will adjust its constituent stocks at the end of each year, and MSTR currently meets all requirements.

Key time 1:

After the US stock market closes on December 13: The Nasdaq Editorial Committee will announce the adjustment of constituent stocks

Key time 2:

December 23, US stock market opening day: MSTR officially included in the index and started trading

Finally, I would like to talk about the significance of MSTRs inclusion in the Nasdaq:

1. Passive allocation of funds: The aggressive scale of the Nasdaq is about 300 billion US dollars. According to the market weighted proportion allocation, there may be 1.5-2 billion funds that will passively buy MSTR

2. Expanding BTC fund consensus: Imagine that every Chinese aunt can open Alipay and buy some Nasdaq funds. In essence, it is a passive allocation of a little MSTR stock, and more essentially, a passive allocation of a little BTC. In fact, I think the importance of this to BTC may be no less than the listing of the US BTC SPOT ETF on January 10 this year.

参照： mstr-tracker.com

やっと

Please protect the BTC in your hands and welcome the bigger main uptrend in 2025. Don’t hand over your precious chips easily until the game is about to end.

オリジナルリンク

This article is sourced from the internet: In-depth exploration of the MSTR model: The biggest variable in this bull market?

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