Shower thoughts as I put myself in the shoes of some retarded Wallstreet hedge-funder. The type that got caught holding the GBTC premium bag last cycle. Could we have something like that going on? What would it look like?

So - I did some napkin math about a potential trade where these guys rush to give Saylor money. Remember, these guys' don't believe in shit - they are always looking for arbitrage or risk-free money or some other broken fiat dumb concept that shouldn't exist. No one will give Saylor money because they believe in Bitcoin as sound money. No one else would do it for the 0.5% interest either. They would only give it to him if they think they found a trick - like the GBTC premium or the Kimchi premium.

I am just a humble pleb, so this is all conjecture of course - but, I think this is what's going on. Let's say you have $100m and the trade duration is 1 year for easy math.

Now - on paper, you have an almost upside win-only trade. This assumes that MSTR will always trade to a premium to its Bitcoin holding. Let's say 50% for easy math again. So, if Bitcoin doubles in price, MSTR will 3x. This premium is "rational" due to leverage and the actual business. It also works backwards, if bitcoin loses 50%, MSTR will be down 75%.

So, you get all the Bitcoin upside captured by your convertible debt to MSTR, Bitcoin doubles? Great, your $100m is now $300m!! Better yet, you share none of the downside - Bitcoin dips down 80% and never recovers? No worries, unlike dumb Bitcoin Maxis, you - a prodigy of wall street - will simply get your money back with a slight loss depending on the Central bank interest rate. Win, win!

But that's not enough for you, because you are a greedy bastard, and greed is good. You don't want to lose a little bit if Bitcoin dips. You want to win no matter what. And so, you go and get another $100m and short Bitcoin. In essence, creating a strangle-like strategy where if Bitcoin drops in price, you make money. If Bitcoin goes up, you also make money. You have a volatility trade with the most volatile asset in the planet.

I hear you say, that's not really a trick. Any idiot with a robinhood account can buy a strangle on MSTR. Correct, but these options are priced with the typical Bitcoin volatility priced in.

You won't make money buying those. The way this trade is structured - the "losing" part of the strangle is non-existent or very small. This largely depends on the rate of which you can borrow the Bitcoin at and the margin requirements. So, hard to nail down exact numbers. But, it should really cost you about $8m per year in interest to short a $100m of bitcoin. At worse case scenario, the losing band is 8% range which is a joke, because Bitcoin moves that much in an afternoon. (So - at $65k, you make money if Bitcoin ends a year above $70k or less than $60k)

Ok - but why now? Well - before borrowing Bitcoin to short was a risky business dealing with the likes of BlockFi and Celsius. Some people did it, but lots of counterparty risk. Now, with ETFs, borrowing ETF shares and shorting is easy, accessible, and with a pretty reasonable rate from what I can hear. Your counterparties are respectable entities. Your typical investment bank will look at this and say - sure, why not?

And I imagine, in a typical Wallstreet, eat where you shit fashion, you are using the MSTR convertible debt as the margin for the short-leg. So, very "capital efficient" trade. You don't need to come up with a new $100m - you can use the one you lent to Saylor.

My take? These things - like the GBTC premium look clever and smart from the outside, but never really work out. I know people are excited about ETFs and MSTR and having Bitcoin in your retirement account to save on taxes. But this comes with a big fat risk of trusting Wall St. and this never, ever works out.

How can you make money of this? When the shit hits the fan, as it always does - no one will hold on to their MSTR debt until 2030 to get their money back. It is the margin for a short that have been blown up. It will be a race to convert that debt to equity and I fully expect MSTR to be a toxic ball of hot potatoes where it will mostly end up in the hands of folks using it instead of Bitcoin.

Now - Bitcoin going up might cure this toxic asset eventually (as it would have rescued SBF eventually), but it might not. I would just stay away and treat this as "how can I avoid losing money to wall street scum exercise? "