Bitcoin Breaks $98,000 Unveiling MicroStrategy's Grand Strategy

Bitcoin price hits a new high, breaking through the $98,000 mark, exciting the market. Looking at this bull market, the rise in the 40K-70K range is mainly attributed to the launch of Bitcoin ETFs, while the 70K-100K range is greatly influenced by MicroStrategy's contribution.

Some opinions liken MicroStrategy to the Bitcoin version of Luna, but this analogy is actually not appropriate. As a staunch supporter of Bitcoin, I believe it is necessary to clarify the relationship between MicroStrategy and Bitcoin.

First, several key conclusions:

• MicroStrategy has essential differences from Luna, with a higher margin of safety.
• MicroStrategy increases its holdings of Bitcoin by issuing bonds and stocks.
• MicroStrategy's recent debt maturity date is in 2027, leaving ample time.
• The main risk faced by MicroStrategy comes from Bitcoin whales.

MicroStrategy's margin of safety is far higher than Luna

MicroStrategy was originally a software company that started investing its corporate funds into Bitcoin in 2020. After depleting its own funds, it began to leverage by issuing corporate bonds to buy more Bitcoin.

Unlike Luna, MicroStrategy adopts a strategy of low-position dollar-cost averaging combined with leverage, and the directional judgment is correct. The popularity of Bitcoin far exceeds that of UST, and MicroStrategy's influence on Bitcoin is also far less than that of Luna on UST. Essentially, MicroStrategy is just one of many factors influencing Bitcoin, completely different from Luna.

Bond and Stock Financing Supports Bitcoin Accumulation

To quickly raise funds, MicroStrategy issued bonds totaling approximately $5.7 billion, almost entirely used for the continuous purchase of Bitcoin.

MicroStrategy issues a convertible bond. Bondholders can convert the bond into company stock under specific conditions or sell the bond in the secondary market. This design poses lower risks for creditors, which is why MicroStrategy successfully raised a substantial amount of capital.

As the price of Bitcoin rises, the stock price of MicroStrategy also increases. The company can now raise funds by issuing more shares. Recently, Bitcoin broke through $80,000 to $98,000, thanks to the $4.6 billion raised from MicroStrategy's stock issuance.

Debt repayment pressure does not currently exist

Although some are concerned that MicroStrategy may face a Luna-style collapse, this is not the case. MicroStrategy's average cost of holding Bitcoin is around $49,874, and it is currently close to a 100% floating profit, with a considerable margin of safety.

Even if the price of Bitcoin falls sharply, MicroStrategy will not face forced liquidation. The earliest debt maturity date is in February 2027, and the company has ample time.

In addition, due to the design of convertible bonds, MicroStrategy's interest costs are very low, mostly below 1%. Therefore, interest expenses will not put too much pressure on the company.

Bitcoin whales are the main risk

Currently, MicroStrategy and Bitcoin have formed a causal relationship with each other. More companies may follow MicroStrategy's operations, further driving up the price of Bitcoin.

The main risks faced by MicroStrategy come from those early investors who hold large amounts of Bitcoin. As long as these whales do not sell off in large quantities, the upward momentum of Bitcoin is difficult to stop.

As of the time of writing, MicroStrategy has realized approximately $15 billion in unrealized gains. The company is likely to continue increasing its investments, making it difficult to turn back. Based on the current trend, the mid-term target price for Bitcoin may reach $170,000.

This is an impressive grand layout that showcases the charm of top financial operations. The future development of the Bitcoin market is worth our continued attention.