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@ Bitman
2024-11-29 23:32:04
IS MICROSTRATEGY A PYRAMID SCHEME?
This topic has been discussed superficially, and many still don’t understand Saylor’s strategy with Bitcoin.
That’s why I decided to break it down and explain whether this approach is truly sustainable.
https://image.nostr.build/b26c0d1acb72f182f1e79fa495c9cc7912d4fff942e422b3fa930d1b458ce394.png
To provide context, the company currently holds 386,700 BTC, acquired at an average cost of $56,761 per unit, totaling $21.9 billion.
With BTC at around $93,000, these reserves are valued at approximately $36 billion, constituting the majority of the company’s book value.
https://image.nostr.build/42e6e5549d076645c1086cecafc22903f313afd53a549b0eaf3d5aba11fd8dc1.png
As a result, the market prices MicroStrategy shares at a significant 256% premium over NAV.
This reflects investors' confidence in the leveraged strategy to acquire BTC and in the company as a proxy for exposure to the digital asset.
But is this sustainable?
https://image.nostr.build/81c00fac02ae1fc1ece636dd805a150376f543ddc121f0e38ee916330d781373.png
This fundraising dynamic will remain effective as long as the market trusts the company’s ability to raise capital and Bitcoin’s growth potential.
However, a prolonged bear market or doubts about the sustainability of this strategy could quickly collapse this premium.
With bonds at 0% interest and a 55% premium, BTC sales could occur if, by the maturity date (+2027), the stock price falls below the initially issued premium.
But here’s an interesting fact: Bitcoin currently boasts an astonishing compound annual growth rate (CAGR) of 52.71% 🤯.
https://image.nostr.build/dd8bfa12ad2e5a8c477aae1469528e573cef11d53f365fa4984f71735a81f9da.png
One of the core metrics of this strategy is BTC Yield, which assesses how much Bitcoin the company adds to its reserves per dollar raised and share dilution.
In the current quarter, the BTC Yield stands at 25.2%, reflecting high efficiency in accumulating BTC.
https://image.nostr.build/3b7885511a7c70c5980171fa68b62fa058137cee36a6d35437dfc1e14a0f0d3e.png
Saylor’s bet aligns with the concept of a "speculative attack" described by Pierre Rochard in 2014, where participants leverage fiat currency to acquire BTC.
Essentially, the strategy is to sell abundant money to buy scarce money.
https://nakamotoinstitute.org/mempool/speculative-attack/
Although some criticize MicroStrategy as a pyramid scheme, the company holds a real and liquid underlying asset: Bitcoin.
Unlike financial pyramids, the raised funds are converted into a tangible asset with intrinsic value.
MICROSTRATEGY IS NOT A PYRAMID!
The model, however, can be described as a speculative bubble, betting on the continuous devaluation of fiat currencies against BTC.
This doesn’t eliminate the risks, but it remains an asymmetric long-term bet.
https://image.nostr.build/b3c9ede15cf1bf33c542cc651296be6358bc41258ce6dda6095b62f7fa6fc2fb.jpg