MicroStrategy’s strategy for buying Bitcoin using debt financing is not sustainable in the long term. This opinion was expressed by the columnist Bloomberg opinion Lionel Laurent.
The company Michael Saylor has increased its capitalization approximately 50 times since August 2020, when accept the first cryptocurrency as a retained asset.
MicroStrategy primarily uses equity and debt capital to purchase digital gold. The expert explained the company’s action plan in a simpler way: attract money, buy cryptocurrency, increase stock prices together with Bitcoin, and return to the market to repeat the cycle. Investors see their investment as an indirect purchase of a digital asset.
At the same time, Bitcoin added about 120% since the beginning of the year, while Microstrategy Statements – about 650%. The company is valued at 2,000 times next year’s projected revenue. Laurent compared the situation to a financial glitch in a video game: “profitable, exciting and perhaps unsustainable.”
“That’s the funny part of any glitch – the license to print huge amounts of money that don’t seem to have any connection to reality,” he said.
The expert admitted that MicroStrategy’s bitcoin reserves, worth about $24 billion, are an order of magnitude greater than the debt on its balance sheet of $4.3 billion. Raise $42 billion over the next three years questioning the sustainability of the scheme, taking into account the risks.
Laurent believes that one of the risks for MicroStrategy is the probable collapse of the digital currency, which historically is characterized by a drawdown of 50% or more. This collapse would lead to “a vicious cycle of write-downs and sales of the company’s assets.”
“Even without a crypto apocalypse, the MicroStrategy model will have bills to pay. The stock is an increasingly expensive Bitcoin substitute in a crowded market for such products, with a market capitalization nearly four times the value of BTC reserves,” the columnist said.
In this regard, he noted that Citron Research’s apparent short position in MicroStrategy shares could be a wise move. Since its opening, the company’s value has fallen by 16%, and the level of the first digital currency has increased.
“Sailor has created his own cult in the financial markets. The question now is how blind his followers are to the dangers expected in the future. For MicroStrategy, which has committed to a very large loan plan, […] this infinite money glitch will not last forever,” concluded Laurent.
Let us remind you that BitMEX analysts called It is “highly unlikely” that MicroStrategy will liquidate its Bitcoin reserves due to market conditions. According to their estimates, the asset must drop to $15,000 for this to happen.
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* Is MicroStrategy’s Bitcoin strategy a good investment? [1]
## Interview: Is MicroStrategy’s Bitcoin Strategy Sustainable?
**Introduction:**
Welcome to World-Today-News! Today, we are discussing MicroStrategy’s controversial Bitcoin acquisition strategy with two prominent voices in the financial world: [Guest 1 Name], a renowned investment strategist with a deep understanding of traditional finance, and [Guest 2 Name], a leading crypto analyst specializing in Bitcoin and decentralized finance.
**Section 1: The MicroStrategy Model:**
* [Guest 1], MicroStrategy’s strategy involves leveraging debt to purchase Bitcoin. Is this a sound long-term investment strategy, or is it excessively risky?
* [Guest 2], what makes MicroStrategy’s approach unusual compared to other institutional investors entering the crypto space? Do you see this model becoming more prevalent?
**Section 2: Bitcoin Volatility and Risk:**
* [Guest 1], Bitcoin is known for its volatility. How does MicroStrategy mitigate the risk of significant losses given its heavy reliance on a single, volatile asset?
* [Guest 2], some argue MicroStrategy could face a “vicious cycle” if Bitcoin’s price drops significantly. How realistic is this scenario, and what implications could it have for the company?
**Section 3: The Sustainability Debate:**
* [Guest 1], Lionel Laurent, a Bloomberg columnist, refers to MicroStrategy’s model as an “infinite money glitch.” Do you agree with his assessment?
*[Guest 2], how sustainable is MicroStrategy’s current strategy in the face of potential regulatory changes and increased competition in the crypto market?
**Section 4: MicroStrategy’s Future:**
* [Guest 1], what are the potential short-term and long-term consequences for MicroStrategy’s shareholders if Bitcoin’s price enters a prolonged downward trend?
* [Guest 2], despite the risks, does MicroStrategy’s commitment to Bitcoin indicate a shift in how institutional investors view cryptocurrencies? Will this encourage wider adoption?
**Conclusion:**
This has been a fascinating discussion on the intricacies of MicroStrategy’s Bitcoin strategy. We thank [Guest 1 Name] and [Guest 2 Name] for sharing their invaluable insights.
