New Players in Bitcoin Investment: Capital Operations and Market Impact of MicroStrategy

1. Introduction

A business software company that originally focused on business intelligence solutions shifted its focus to Bitcoin investment starting in 2020, raising funds by issuing stocks and convertible bonds to purchase Bitcoin, becoming the center of attention in the US stock market. On February 6, 2025, this publicly listed company, which holds the most Bitcoin globally, officially changed its name to Strategy. As of February 21, 2025, the company has hoarded nearly 500,000 Bitcoins, worth over $40 billion.

This company essentially transforms the stock market into a Bitcoin ATM through capital structure design—raising funds by issuing new shares/convertible bonds to increase Bitcoin holdings, and then using the Bitcoin holdings to support stock price valuation, forming a capital closed loop deeply bound with crypto assets. With the unique high-premium financing mechanism of the US stock market, this company not only dominates among Bitcoin concept stocks but has also mastered a set of "alchemy" certified by the US stock market through equity issuance and coin price manipulation.

2. The Driving Forces Behind Stock Price Speculation

The company's financing method is mainly completed through a combination of stocks and bonds to raise funds. Initially relying on bond issuance and its own cash reserves, it later adopted a large-scale ATM (At-the-market) stock issuance mechanism to sell stocks directly in the secondary market.

The company plays the capital market through a strategy that combines stock issuance and bond issuance. When the leverage ratio is low, it quickly raises funds by issuing stocks to buy Bitcoin, thereby increasing leverage, and enhances its valuation premium when Bitcoin rises. During the bull market, its premium once reached as high as 300%.

As time went by, the market noticed the company's large-scale stock sell-off, leading to a decline in stock prices and a narrowing of premiums. After the leverage ratio decreased, the company gradually shifted to a financing method primarily based on bond issuance. This change led to a slowdown in the company's pace of buying Bitcoin, and the demand for Bitcoin in the market also began to weaken.

The company played a "premium hedging" game. It raised funds by selling stocks at a high premium to purchase Bitcoin, and when the premium dropped, it turned to bond issuance. This model provided the company with ample funds to operate Bitcoin purchases, although the market gradually became aware of these operations and its enthusiasm for the stock weakened.

3. The Crypto Holy War of "Holding Bitcoin, Never Selling"

The company's founder has not only brought Bitcoin into the spotlight through frequent appearances, interviews, and speeches, but also attracted a large number of institutional investors into the market. The company and ETFs have become the two main buyers in the current Bitcoin market, but the company's operations are more noteworthy, as its strategy is to only buy and not sell.

The founder has stated that he has made a will, planning to destroy the Bitcoin private keys he personally holds after his death, completely erasing these Bitcoins from circulation. This "cult leader level" operation seems to demonstrate his everlasting contribution to the Bitcoin industry.

The company's Bitcoin is held by a trusted third-party institution, complying with the audit and regulatory requirements for listed companies. The founder is not only a strong proponent of Bitcoin but has also proposed the inclusion of Bitcoin in the national strategic reserves, as well as a vision for a global on-chain economy.

4. The Möbius Loop of Asset Games

Although the price of Bitcoin has recently retreated, the company's situation is better than during the last bear market. The founder of the company holds nearly half of the voting rights, making it difficult for any liquidation proposal to pass. Even if the price of Bitcoin falls below the average cost of holdings, the company has various ways to respond, such as issuing bonds, increasing stock issuance, or using the Bitcoin it holds as collateral to borrow money.

The company's main debt will not mature until 2028, so it will not face significant financial pressure in the short term. An increasing number of sovereign funds and institutions around the world view Bitcoin as a reserve asset, and this trend is favorable for the company's long-term development.

However, the company's strategy also faces some challenges:

1. The volatility of the Bitcoin market may decrease, affecting the company's high return strategy.
2. The company's financing model is highly dependent on market optimism, which may be difficult to sustain in the long term.
3. The company's founder is both a supporter of Bitcoin and an arbitrageur of market volatility opportunities.

5. Wealth Engine or Crypto Frost?

The company's stock has performed remarkably, rising from $68 at the beginning of the year to around $400 now, surpassing many well-known tech companies in terms of growth. Some believe this is the result of the founder's "infinite funding plug-in" operation model driving up the stock price, while others are concerned it may trigger the next cryptocurrency market crash.

The company's current Bitcoin investment returns far exceed traditional business income. By continuously issuing bonds and diluting equity, the company has raised funds to purchase more Bitcoin, resulting in an overall profit increase. However, this operation also brings risks to the company, as the core business cannot generate significant profits, and the company's prospects are highly dependent on Bitcoin price trends.

The company enhances its financing ability by issuing non-interest-bearing convertible notes. These notes allow investors to convert them into company equity in the future, but the conversion price is much higher than the current stock price. This financing method enables the company to continue accumulating Bitcoin, driving a dual increase in both stock and Bitcoin prices.

This approach cleverly shifts the risk from the company to the stock market by issuing convertible bonds to finance the purchase of Bitcoin, using the bond-to-stock mechanism to avoid debt risk. Therefore, the overall long-short odds in the stock market are greater than those in the crypto market.