Bloomberg: MicroStrategy’s Bitcoin Model Won’t Last

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As a seasoned researcher with a knack for deciphering financial strategies and their underlying risks, I find myself intrigued by MicroStrategy’s bold Bitcoin play. With a career punctuated by navigating through market crashes, bubbles, and comebacks, I can’t help but appreciate the audacity of this move.

In a recent opinion piece published on a Friday, Lionel Laurent, a columnist for Bloomberg Opinion, contends that MicroStrategy’s approach of swapping debt for Bitcoin is unlikely to succeed in the long run.

More recently, Laurent was reminded that Citron Research had publicly revealed they held a short position on the company’s stock. This revelation caused a significant drop in the company’s share price, exceeding 16%.

According to U.Today’s report, MicroStrategy has now joined the ranks of the hundred largest publicly-traded companies in the United States, standing alongside tech titan Intel.

The business has significantly boosted its worth, approximately five-fold, after choosing an unusual strategy to hold Bitcoin as its primary reserve currency.

MicroStrategy’s Bitcoin strategy involves utilizing low-cost loans to acquire additional funds for further Bitcoin purchases. According to U.Today, they recently finished a $3 billion sale of convertible bonds, and their Bitcoin assets now surpass the $30 billion threshold.

Laurent points out that this bold plan comes with several potential dangers. The largest risk he cites is a significant drop in Bitcoin’s value, which could trigger the company to sell its assets or take financial losses.

Regardless of whether Bitcoin maintains its current value without significant drops, MicroStrategy might still face difficulties due to its substantial premium over Net Asset Value (NAV).

Saylor, with a history of significant ups and downs – notably a $6 billion loss in a single day back in 2000 – appears unruffled amidst mounting doubts.

In a recent interview with CNBC, Saylor stated that the greatest danger associated with investing in Bitcoin is the potential for an event that could wipe it out completely, leaving its value at zero, starting tomorrow. Despite this, investors of MicroStrategy have chosen to embrace and accept this risk.

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2024-11-22 17:36