Is Michael Saylor becoming a risk to bitcoin?
I can't be the only one feeling a little uneasy.
Here are the facts: Microstrategy (MSTR) has 331,000 bitcoins. At the current price of $94,380 at the time of writing, this is worth $31.239 billion. But Microstrategy is valued at about $100 billion. So about $70 billion is just goodwill.
Some will argue that MSTR's price reflect the potential that bitcoin will go up. But if you think bitcoin will go up, why not buy a bitcoin? Why pay three times as much for MSTR shares? Especially when the MSTR chart is giving off bubble vibes going up 88% in two weeks:
Note from the chart that Saylor did this pumping stuff during the dot-com boom in 2000 - he has form.
Further, a lot of the rise in bitcoin's price since the election has been due to Saylor/MSTR buying bitcoin with borrowed money.
He's basically borrowing to buy bitcoin using convertible bonds at 0%. At the bond redemption date, the holder can opt to either be repaid in cash or MSTR shares.
So how can this go wrong? Well his average buying price is $49,874 per bitcoin, see the following tweet:
https://x.com/saylor/status/1858496146026467378
To take him down, traders just need a double short: short MSTR shares, and then short bitcoin. When bitcoin is $49,000, he's underwater, and the MSTR shares will fall. And the more bitcoin he buys at $90k+, the higher his breakeven average becomes, and the easier it becomes for the short-sellers to take him out.
The other way this comes to an end is the bond markets declining to lend him more money. As he's the main buyer of bitcoin at the moment, that would stall bitcoin's rise and maybe even cause a drift downwards.
God help us all if Saylor ends up having to do forced selling of bitcoin to repay his loans.
If you have MSTR shares, cash out now and buy actual bitcoins.