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I like my finance simple, and don't like when the techno mumble-jumble starts to obscure the purpose of the thing. When they begin to talk about coupons, and convertibles, and whatnot it feels like they're trying to fool you into something that is actually simple, but obscured by technical jargon, pretty much like what shitcoiners do.
When Strategy or whatever the company name is buys bitcoin, it's not with their own money, they take it from investors that buy some type of instrument, because as I see it Microstrategy is a company that was pretty lame in its business, but now that it buys BTC is pretty successful. These investors are buying said instruments because they expect some return, right? So basically what they're doing is good'ole leverage, or what am I getting wrong? They buy BTC with money that isn't theirs, and the people who lend them is expecting some return? The only way I see that being done is by selling BTC at a later stage, creating even more volatility in the next bear market.
And now there's Capital21 with Jack M doing the same? So the game is basically to find whatever fiat at hand and buy BTC like there's no tomorrow, but all that is with the expectation to sell it a future date, or why would someone give them money instead of buying BTC themselves?
What am I getting wrong? Please explain it to me like if I was buying the ETH dip.
This is called capital structure arbitrage. Some fund managers are only mandated to buy stocks, some only bonds, some only convertible bonds. All are trying to maximize risk adjusted returns for their clients. Because the market is somewhat limited for convertible bonds guys, they end up paying premium for what looks attractive. To correctly price converts is more art than science, they depend on too many parameters, but one of them is expected volatility of the underlying assets. Bitcoin volatility is considered high, Saylor and Mike monetize that.
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But the thing is betting on the price of the stock rising, and the price of the stock is betting on BTC price rising, right? I saw they pay zero interest (coupon) so why would someone buy that crap?
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Pension funds cannot buy Bitcoin directly. Some even not ETF. If some fund can only buy converts, they diversify their portfolios like this.
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Trapped capital; option upside
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🤣🤣🤣🤣
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I'm not any sort of expert on Strategy, but I thought they were taking out loans that could be covered by the revenue from their software business, if necessary. If bitcoin's price collapses, they could still pay the loans with that revenue and keep the bitcoin. If bitcoin appreciates, they can pay the loan off with a fraction of the bitcoin purchased with the loan.
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I had the impression that their software business sucked.
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I think it's more that it had limited growth potential. As I understand it, they have very steady revenue from it and using it to buy bitcoin was seen as a better option than trying to invest in the software enterprise.
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From the 10-K:
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Please explain it to me like if I was buying the ETH dip.
Way to make me laugh way too loud and blow my cover!! 🤣
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the game is basically to find whatever fiat at hand and buy BTC like there's no tomorrow, but all that is with the expectation to sell it a future date, or why would someone give them money instead of buying BTC themselves?
No. But to refinance at higher value. What they're (literally) banking on is bitcoin taking over the world.
  • if they're right, the coupons and debt and interest won't matter, because the BTC they got their hands on will be worth so much more (in old-money units).
  • Iif they're wrong, they'll blow up. (But then the BTC dream is dead and we can all go home/back to fiatworld "work" — no need to worry about Saylor or Mallers ever again)
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Ok, if that's the case, there will be such a concentration of BTC into those corporations that decentralization might be compromised. They could well force the game into state compliance and KYC etc.
This whole thing doesn't feel right anyway.
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'all that is with the expectation to sell it a future date'
No the expectation and fundamental premise these people are working upon is that Bitcoin price relative to fiat will continue to rise.
There is no need to sell the Bitcoin as long as that occurs as you have an appreciating asset and investors in Strategy shares can cash out the leveraged gains if they wish but Strategy itself never needs to sell the Bitcoin.
It is seeing and treating Bitcoin as a speculative commodity and enabling profit taking without Strategy ever selling any of the commodity itself. Shareholders can cash out as long as others are willing to buy in.
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How are the bondholders paid back?
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Good point!
Note- 'the expectation and fundamental premise these people are working upon is that Bitcoin price relative to fiat will continue to rise.'
As long as BTC price is still rising (or even if it isn't) - guess the plan is to issue more bonds, and eternally roll over the debt bomb?
Same way the US government uses USTs!
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7 sats \ 0 replies \ @000w2 13h
They are paid in new shares
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0 sats \ 0 replies \ @mo 4h
someone else is watching
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Yeah Saylor has pushed up a level with MSTR moving into the QQQs and showing that their is appetite for this trade on a grand scale. Companies can raise and stack through the equity markets and these zirp convertible bond markets all desperate for some kind of volatility.
As long as NGU continues they can keep refinancing, all the companies doing this, MSTR, KULR, Metaplanet, 21 are all just funnels tapping into different pools of capital.
I think there will be one of these in every countries stock market, offering this trade to local investors too
The way I see it is if governments aren't yet ready to print to buy Bitcoin, plays like this can bring them to the table if this gets big enough and it all goes south, if enough people are involved they can get bailed out, and thats kinda the end game!
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