🚨 Michael Saylor's pyramid that will crash the market
Friends, on the way of any financial market there were «black swans» that dramatically and dramatically changed the whole situation.
In crypto, among the most significant ones are the collapse of Mt. Gox, Terra (LUNA) and, of course, FTX.
🔤 There were no such precedents in this cycle, but, I decided to consider one of the candidates — Strategy.
Let me explain: Strategy (formerly called MicroStrategy) is an American IT company specialising in business intelligence.
💰 Since 2020, it has bet on bitcoin, becoming the largest corporate holder of BTC (478,740 BTC), financing its purchases through bonds and issuing shares - and this is the point that interests us most.
Since the adoption of the bitcoin strategy, MSTR's shares have become highly dependent on BTC dynamics. In most cases, they repeat its price movements, but with an increased amplitude of ~1.5 times.
The main principle of the strategy is to raise borrowed funds to buy bitcoins through the issuance of convertible bonds.
The company issues debt securities with fixed income or the option to exchange for MSTR shares in the future. Conversion becomes possible if the share price reaches a predetermined level.
🛡 Why is this attractive to investors?
• Ability to exchange bonds for MSTR shares at a higher price.
• Potential increase in share price due to bitcoin accumulation.
Everything seems fine, but... This mechanism creates a kind of closed loop:
Bitcoin growth → MSTR stock growth → increase in bond conversion value → issuance of new debt → purchase of more BTC.
It follows that if the bitcoin price starts to fall, MSTR stock will fall even more.
📉 Financial risks and possible scenarios
If bondholders convert the bonds into shares when the price reaches the right level, the company's debt is effectively cancelled itself.
But if the MSTR price falls, Strategy will have to repay the debt in cash. In that case, the company may start selling its BTC to meet the obligations, and that could cause panic.
How so? One of the largest holders of bitcoin has started selling it? — Sell it too.
📥 How can all this be affected?
Right now, MSTR is on the cusp of inclusion in the S&P 500, and that moment could come in mid-June 2025. For that, the company needs to show earnings in Q1 2025.
A key factor is the value of bitcoin. If BTC holds above $96,330 by the end of Q1, Strategy's chances of getting into the S&P 500 will increase significantly.
❕ If that doesn't happen, Sailor's entire strategy will be in jeopardy, as the main trigger for raising enough capital for the company is the S&P 500 — without it, the ice will already start to crunch.
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