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The Bitcoin Perpetual Motion Machine: MicroStrategy (Bloomberg, Matt Levine)www.bloomberg.com/opinion/articles/2024-12-16/elon-musk-heard-from-the-sec
519 sats \ 2 comments \ @denlillaapan 16 Dec econ
So, Saylor is billion-dollar-cost-averaging /slash/ speculatively attacking the dollar /slash/ amassing the largest private BTC stash ever.
There's plenty on how it works and what happens if MSTR doesn't pay (here or here)
Matt Levine, as always, brings the entertainment:
"I feel like the most basic proposition of finance is that [issuing stock to buy Bitcoin] should be dilutive to the premium per share. If you sold infinite MicroStrategy shares to buy Bitcoin, surely eventually that would push down the price of MicroStrategy and push up the price of Bitcoin until the premium was zero? Or not!?"
in the meantime,
"the most obvious trade in the world is for MicroStrategy to sell as much stock as possible (and use the proceeds to buy Bitcoin), and in fact that is what MicroStrategy is doing [...] Obviously! You keep selling stock and buying Bitcoin until the price of the stock converges on the price of Bitcoin.
This is going to be on tap for a very limited time:
"if you can buy stuff for $1 and immediately turn it into $2.50 of market capitalization, then that’s pretty much a good trade for anyone. There are probably a lot of companies that have good long-term investing opportunities and would prefer to turn $1 of cash into some uncertain but possibly larger amount of long-term value."
Hashtag efficient markets. This shit should close, but so far isn't -- what am I missing?
non-paywalled newsletter here (scroll past the Elon story, unless that tickles your mind): https://newsletterhunt.com/emails/131071
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62 sats \ 1 reply \ @freetx 16 Dec
The real trick Saylor has figured out is the combination of 3 things (a) convertible bonds (b) ATM equity sales, (c) Accretion. Its that specific combination that seems like a magic money machine.
  • the bonds are 5 year + 0%. So at worse, Saylor only needs to return their premium in 5 years. This means BTC would need to be lower than todays prices in 5 years for their to be concern
  • having said that, Saylor can still use ATM equity sales to payoff bond holders (ie. in 5 years he could just release more shares and pay off bond holders, its not 'mandated' that he sells his bitcoin).
  • the most critical feature of his engine, is that is accretion, not dilution. He has managed to continually add bitcoin per share. For example, if you owned 1 share of MSTR in Feb 2024, that had claim to .00087 BTC at that time....that same share now has claim to .0015 BTC - so you gained 72% BTC holdings by doing nothing!
MSTR is effectively using fiat to mine bitcoin. Its a far more efficient "bitcoin mining engine" then a physical miner (which is now why mining companies are transitioning to this strategy like Hut8, etc).
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0 sats \ 0 replies \ @sangekrypto 16 Dec
so they have used the latest strategy to mine btc?
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