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The Rise and Future Fall of MicroStrategy

40 points by noch 2y ago

bencarlos 2y ago
[dead]
BLKNSLVR 2y ago
Definitely interested to see how the MicroStrategy share price pans out as the 2025 bull run comes to a close. Lots of water yet to go under the bridge though.
- 7thpower 2y ago
  The bull run is over? What if it doubles in 2025?
  - pavlov 2y ago
    MicroStrategy seems heavily leveraged, which creates extra risk on the downside. If the underlying asset doubles, MicroStrategy roughly doubles. But if the underlying asset goes down by 50%, MicroStrategy is stuck paying interest on loans it took to buy an asset that’s now heavily underwater. It can suffer much worse than 50% in that scenario.
    - jstanley 2y ago
      What kind of leverage creates risk on the downside without benefit on the upside?
      - pavlov 2y ago
        MicroStrategy’s stock price seems to roughly parallel the price of Bitcoin during this bull market. They are not a simple leveraged Bitcoin fund, but something more complicated where the founder’s personality plays a big role. So I guess the market doesn’t quite know how to value this admittedly unique approach, and it defaults to just following Bitcoin on the upside. Who knows what happens if there’s a crash.
        627467 2y ago
        > something more complicated where the founder's personality plays a big role Not to pretend that other leveraged funds founder's are equally known as saylor, but how do all other funds differentiate themselves? Is it the same to through money at one vs another?
        pavlov 2y ago
        MicroStrategy is publicly listed, which is kind of special. I don’t think there’s a lot of celebrity investor hedge funds that are public. Bill Ackman’s Pershing Square is listed in London and trades at a substantial discount to net asset value (something like 30%). Maybe that’s an indication that markets find it hard to value these vehicles.
    - Uw7yTcf36gTc 2y ago
      The loans are 0% interest.
    - latchkey 2y ago
      > MicroStrategy seems heavily leveraged "seems"! https://www.youtube.com/watch?v=R87vco0jHvo https://www.youtube.com/watch?v=R87vco0jHvo
  - hlynurd 2y ago
    "what if it does next year" is a near-complete summary of the thought process of crypto buyers
    - BLKNSLVR 2y ago
      Please do some research. Yes, there are lots of degenerate gamblers, grifters, and scammers in the crypto scene, but any new platform that's in any way related to finance will attract that scum. If you spend a little while attempting to understand Bitcoin's reason for existence, it may start to make some sense. You don't have to buy in, but you will be able to provide a more educated contribution to the discussion.
  - baq 2y ago
    Smart money wins both ways. Saylor will get zeroed eventually, but when that happens is anyone’s guess.
  - BLKNSLVR 2y ago
    To clarify: I wasn't saying the bull run is over, I'm saying it'll likely end some time in 2025, likely late in 2025, if history rhymes. That's what I meant about plenty of water to yet pass under the bridge. Like you said Bitcoin could still double from here.
- rswail 2y ago
  The new US government has crypto-bros at its core and there will be use of the US Treasury to set up a "Bitcoin Strategic Reserve" that will be a way for the crypto-bros to milk the US economy to bail themselves out of the market before it dies. Bitcoins are the most useless "asset" that there has ever been. At least beanie babies had some entertainment value and tulips look pretty. Bitcoins and all the other nonsense contribute nothing to the world's real economy, it's entirely a mechanism for washing or moving fiat currency from one place to another. It is used extensively in Asia entirely for that purpose, paying for drugs and gambling transfers. For the actual economy it is useless and the entire "market" is just barely regulated gambling and entertainment.
  - panarky 2y ago
    It's hard to take seriously an argument that recycles the tired trifecta of tropes "tulips, beanie babies and drug dealers". I don't know if bitcoin will eventually become a low level store of value, or if the red hats now running US government will use it to reduce the nation's indebtedness, or if it will gradually fade away as people lose interest, or if it will crash and burn over a weekend. But I am quite certain that the current system of government currencies, sanctions, repression and surveillance is unsustainable in the long run. One look at the stupendously large debt that can never be repaid should make it obvious that the current state cannot continue forever. Nobody knows how long the long run is, but the fiat system has been flashing signals of stress and potential fracture for at least twenty years. Maybe governments and central banks can keep papering over its fault lines for another decade. But when a thing cannot continue forever, at some point it will stop. Is bitcoin the replacement for the base layer? Or is it at least a way to preserve some wealth, outside the increasingly rickety nation-state-fiat system? Some mainstream finance leaders who manage trillions and are far smarter and better connected that I am, seem to think so. I don't know, and you don't know, but there's more than enough evidence that there's something real here. It can't be easily dismissed as just beanie babies, tulips and drug dealers.
    - paulryanrogers 2y ago
      When states fail crypto isn't much of a safe harbor. It's just a fiat with crazy interchange fees, except one with a public ledger. Also mining will come to an end soon as it becomes impossible to meet the energy demand.
steveBK123 2y ago
The current bull run, as far as I can tell seems to have two legs. One is retail YOLOing into it like a meme coin. The other is professional investors who want bitcoin exposure but are bound by investment mandates to equities only. Neither of these are particularly good reasons long term, nor will they endure a pullback in bitcoin price.
- dartos 2y ago
  > The current bull run, as far as I can tell seems to have two legs. I feel like that’s just what the market has been like since 2020
  - throw0101d 2y ago
    > I feel like that’s just what the market has been like since 2020 The S&P 500 peaked at 5400 in December 2021 and dropped to 3800 in September 2022, and went mostly sideways to 4300 until October 2023, after which is has mostly gone up: * https://en.wikipedia.org/wiki/2022_stock_market_decline https://en.wikipedia.org/wiki/2022_stock_market_decline * https://www.macrotrends.net/2324/sp-500-historical-chart-data https://www.macrotrends.net/2324/sp-500-historical-chart-dat... People seem to (a) forgotten that it happened: * https://en.wikipedia.org/wiki/Recency_bias https://en.wikipedia.org/wiki/Recency_bias and (b) forgotten that it was not a forgone conclusion that there'd be a recovery/growth: * https://www.forbes.com/sites/investor/2010/12/17/the-lost-decade-was-a-golden-age-if-you-rebalanced/ https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...
    - dartos 2y ago
      I remember the market stalled in price movements, but the attitude always seemed to be bullish beyond all reason. Never noticed that attitude before 2020
- davedx 2y ago
  There are dozens of bitcoin etfs now so the second leg is gone
victor22 2y ago
People are leaving failing paper curencies which are being print nonstop all over the world. Go bitcoin.
- aprilthird2021 2y ago
  You have a point about inflation. But in this matter, what's different about Bitcoin vs gold?
  - olalonde 2y ago
    1) Bitcoin is more convenient to store and transfer: it's digital. You can literally use your brain as a Bitcoin wallet. 2) The supply of gold is less predictable. For instance, just last month, China announced the discovery of the world's largest known gold deposit, estimated to be worth over $80 billion.
    - wakawaka28 2y ago
      To be clear, $80 billion is not earth-shattering in the gold market. Lots of gold exists in the world but is too expensive to mine. I don't remember how expensive but I think it is at least half of the current price. The supply of gold grows at a very slow rate of at most 2% per year. It is getting harder to mine all the time. Demand and futures market manipulation matter far more to gold than its small supply. All the world's gold that was ever mined could fit in roughly two Olympic size swimming pools.
    - newsclues 2y ago
      The supply of discovered gold and the supply of gold extracted from mines (and recovered from other sources) aren’t the same, and one is more predictable. Which one has a greater impact on the price….
    - TZubiri 2y ago
      1) Bitcoin is more convenient to store and transfer: it's digital. You can literally use your brain as a Bitcoin wallet. You can? I think it's too computationally expensive. We do less than 1 hash per day. And thats with paper as an aid
JimmyWilliams1 2y ago
[dead]
ArtTimeInvestor 2y ago
The article makes it sound like one needs an esoteric narrative to explain the premium to NAV that MSTR is currently trading at. That is not the case. MSTR has a simple business: "Give us money, we invest it into Bitcoin for you and shield you from the downside. In return, we get some of the upside." As long as the Bitcoin price goes up, that is a viable business. How much it is worth depends on how many customers they will find in the future. It does NOT depend on their NAV. The premium to NAV simply reflects the market's valuation of their future business potential.
- steveBK123 2y ago
  > shield you from the downside How does Microstrategy shield anyone from downside?
  - ArtTimeInvestor 2y ago
    Their deal is basically "After a set period, you receive your initial investment back. If Bitcoin's price has increased during this period, you can also chose to get shares in our company instead. That way you might get back more than you invested.". Since they had a sizeable amount of Bitcoin before they started this approach, in theory they might be able to repay all the lenders in full even if the Bitcoin price only declines from now on. Depending on the details of their behavior and the price movement. If Bitcoin's price declines rapidly and they fail to sell quickly enough, then they would go broke.
    - foobarqux 2y ago
      What are you talking about? The stock can go down so that isn’t guaranteed. The bonds can also go down if bitcoin goes down enough. The convertible bonds can go down for the same reasons.
      - BiteCode_dev 2y ago
        Basically I can't dee how investing in micro strategy is better than buying btc directly
gardenhome 2y ago
Ugh this is so bullish
riskyingo 2y ago
Yeah, the coperedictor. The current financial system is straight up unusable. Cashing out on the future of money is cool.
- TZubiri 2y ago
  I thought about cashing out, but cash out into what? Every form of currency has its own risk.
lilianadavis32 2y ago
[dead]
latchkey 2y ago
For anyone curious about what Saylor is actually thinking, it is good to spend some time listening to this recent interview. https://www.youtube.com/watch?v=R87vco0jHvo https://www.youtube.com/watch?v=R87vco0jHvo
John23832 2y ago
The reality is the microstrategy is to allow investor which cannot directly own bitcoin, or bitcoin etfs, to own bitcoin. There is a premium associated with this (which am suspending analysis on), microstrategy's overshot price. Any other description is an act of mental gymnastics.
- latchkey 2y ago
  I don't own MSTR because I want to own bitcoin. I own MSTR because they buy and hold bitcoin, while creating volatility on their stock, which enables a lucrative options market. There is a subtle distinction there. The premium is irrelevant to me because my goal is to own more MSTR stock. The more stock I own, the more covered call options I can sell. Once everyone starts compounding the stock, the price goes up, they have more money to buy and hold more bitcoin, the price of bitcoin goes up. https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem What he has created is a circular infinite money machine that can only be likened to what Warren Buffet did with buying insurance companies and their infinite float.
daft_pink 2y ago
It’s bitcoin. What are you going to say? Obviously, it went up in value and down in value and it doesn’t make much sense over the long term. Currently, governments are tolerating the loophole of it being used to launder money, purchase illicit goods and evade financial border controls. As long as that is tolerated, it will be successful and when governments start to crack down it won’t be successful, because it sucks as a currency but seems to make a pretty good tulip bulb. Probably an unpopular opinion, but as someone who’s purchased a few things with bitcoin, it has insane transaction fees, is not easy to use and is not a stable store of value, so why people would flock to it as money other than the above reasons is beyond me.
- latchkey 2y ago
  > why people would flock to it as money other than the above reasons is beyond me Despite what the whitepaper laid out, it has morphed into something that isn't money. Use the analogy that Saylor lays out... https://x.com/saylor/status/1860399115449799119 https://x.com/saylor/status/1860399115449799119
adamsp279 2y ago
[flagged]

40 points by noch 2y ago

[dead]

Definitely interested to see how the MicroStrategy share price pans out as the 2025 bull run comes to a close. Lots of water yet to go under the bridge though.

7thpower 2y ago
The bull run is over? What if it doubles in 2025?
- pavlov 2y ago
  MicroStrategy seems heavily leveraged, which creates extra risk on the downside. If the underlying asset doubles, MicroStrategy roughly doubles. But if the underlying asset goes down by 50%, MicroStrategy is stuck paying interest on loans it took to buy an asset that’s now heavily underwater. It can suffer much worse than 50% in that scenario.
  - jstanley 2y ago
    What kind of leverage creates risk on the downside without benefit on the upside?
    - pavlov 2y ago
      MicroStrategy’s stock price seems to roughly parallel the price of Bitcoin during this bull market. They are not a simple leveraged Bitcoin fund, but something more complicated where the founder’s personality plays a big role. So I guess the market doesn’t quite know how to value this admittedly unique approach, and it defaults to just following Bitcoin on the upside. Who knows what happens if there’s a crash.
      - 627467 2y ago
        > something more complicated where the founder's personality plays a big role Not to pretend that other leveraged funds founder's are equally known as saylor, but how do all other funds differentiate themselves? Is it the same to through money at one vs another?
        pavlov 2y ago
        MicroStrategy is publicly listed, which is kind of special. I don’t think there’s a lot of celebrity investor hedge funds that are public. Bill Ackman’s Pershing Square is listed in London and trades at a substantial discount to net asset value (something like 30%). Maybe that’s an indication that markets find it hard to value these vehicles.
  - Uw7yTcf36gTc 2y ago
    The loans are 0% interest.
  - latchkey 2y ago
    > MicroStrategy seems heavily leveraged "seems"! https://www.youtube.com/watch?v=R87vco0jHvo https://www.youtube.com/watch?v=R87vco0jHvo
- hlynurd 2y ago
  "what if it does next year" is a near-complete summary of the thought process of crypto buyers
  - BLKNSLVR 2y ago
    Please do some research. Yes, there are lots of degenerate gamblers, grifters, and scammers in the crypto scene, but any new platform that's in any way related to finance will attract that scum. If you spend a little while attempting to understand Bitcoin's reason for existence, it may start to make some sense. You don't have to buy in, but you will be able to provide a more educated contribution to the discussion.
- baq 2y ago
  Smart money wins both ways. Saylor will get zeroed eventually, but when that happens is anyone’s guess.
- BLKNSLVR 2y ago
  To clarify: I wasn't saying the bull run is over, I'm saying it'll likely end some time in 2025, likely late in 2025, if history rhymes. That's what I meant about plenty of water to yet pass under the bridge. Like you said Bitcoin could still double from here.
rswail 2y ago
The new US government has crypto-bros at its core and there will be use of the US Treasury to set up a "Bitcoin Strategic Reserve" that will be a way for the crypto-bros to milk the US economy to bail themselves out of the market before it dies. Bitcoins are the most useless "asset" that there has ever been. At least beanie babies had some entertainment value and tulips look pretty. Bitcoins and all the other nonsense contribute nothing to the world's real economy, it's entirely a mechanism for washing or moving fiat currency from one place to another. It is used extensively in Asia entirely for that purpose, paying for drugs and gambling transfers. For the actual economy it is useless and the entire "market" is just barely regulated gambling and entertainment.
- panarky 2y ago
  It's hard to take seriously an argument that recycles the tired trifecta of tropes "tulips, beanie babies and drug dealers". I don't know if bitcoin will eventually become a low level store of value, or if the red hats now running US government will use it to reduce the nation's indebtedness, or if it will gradually fade away as people lose interest, or if it will crash and burn over a weekend. But I am quite certain that the current system of government currencies, sanctions, repression and surveillance is unsustainable in the long run. One look at the stupendously large debt that can never be repaid should make it obvious that the current state cannot continue forever. Nobody knows how long the long run is, but the fiat system has been flashing signals of stress and potential fracture for at least twenty years. Maybe governments and central banks can keep papering over its fault lines for another decade. But when a thing cannot continue forever, at some point it will stop. Is bitcoin the replacement for the base layer? Or is it at least a way to preserve some wealth, outside the increasingly rickety nation-state-fiat system? Some mainstream finance leaders who manage trillions and are far smarter and better connected that I am, seem to think so. I don't know, and you don't know, but there's more than enough evidence that there's something real here. It can't be easily dismissed as just beanie babies, tulips and drug dealers.
  - paulryanrogers 2y ago
    When states fail crypto isn't much of a safe harbor. It's just a fiat with crazy interchange fees, except one with a public ledger. Also mining will come to an end soon as it becomes impossible to meet the energy demand.

steveBK123 2y ago

The current bull run, as far as I can tell seems to have two legs. One is retail YOLOing into it like a meme coin. The other is professional investors who want bitcoin exposure but are bound by investment mandates to equities only. Neither of these are particularly good reasons long term, nor will they endure a pullback in bitcoin price.

dartos 2y ago
> The current bull run, as far as I can tell seems to have two legs. I feel like that’s just what the market has been like since 2020
- throw0101d 2y ago
  > I feel like that’s just what the market has been like since 2020 The S&P 500 peaked at 5400 in December 2021 and dropped to 3800 in September 2022, and went mostly sideways to 4300 until October 2023, after which is has mostly gone up: * https://en.wikipedia.org/wiki/2022_stock_market_decline https://en.wikipedia.org/wiki/2022_stock_market_decline * https://www.macrotrends.net/2324/sp-500-historical-chart-data https://www.macrotrends.net/2324/sp-500-historical-chart-dat... People seem to (a) forgotten that it happened: * https://en.wikipedia.org/wiki/Recency_bias https://en.wikipedia.org/wiki/Recency_bias and (b) forgotten that it was not a forgone conclusion that there'd be a recovery/growth: * https://www.forbes.com/sites/investor/2010/12/17/the-lost-decade-was-a-golden-age-if-you-rebalanced/ https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...
  - dartos 2y ago
    I remember the market stalled in price movements, but the attitude always seemed to be bullish beyond all reason. Never noticed that attitude before 2020
davedx 2y ago
There are dozens of bitcoin etfs now so the second leg is gone

victor22 2y ago

People are leaving failing paper curencies which are being print nonstop all over the world. Go bitcoin.

aprilthird2021 2y ago
You have a point about inflation. But in this matter, what's different about Bitcoin vs gold?
- olalonde 2y ago
  1) Bitcoin is more convenient to store and transfer: it's digital. You can literally use your brain as a Bitcoin wallet. 2) The supply of gold is less predictable. For instance, just last month, China announced the discovery of the world's largest known gold deposit, estimated to be worth over $80 billion.
  - wakawaka28 2y ago
    To be clear, $80 billion is not earth-shattering in the gold market. Lots of gold exists in the world but is too expensive to mine. I don't remember how expensive but I think it is at least half of the current price. The supply of gold grows at a very slow rate of at most 2% per year. It is getting harder to mine all the time. Demand and futures market manipulation matter far more to gold than its small supply. All the world's gold that was ever mined could fit in roughly two Olympic size swimming pools.
  - newsclues 2y ago
    The supply of discovered gold and the supply of gold extracted from mines (and recovered from other sources) aren’t the same, and one is more predictable. Which one has a greater impact on the price….
  - TZubiri 2y ago
    1) Bitcoin is more convenient to store and transfer: it's digital. You can literally use your brain as a Bitcoin wallet. You can? I think it's too computationally expensive. We do less than 1 hash per day. And thats with paper as an aid

JimmyWilliams1 2y ago

[dead]

ArtTimeInvestor 2y ago

The article makes it sound like one needs an esoteric narrative to explain the premium to NAV that MSTR is currently trading at. That is not the case. MSTR has a simple business: "Give us money, we invest it into Bitcoin for you and shield you from the downside. In return, we get some of the upside." As long as the Bitcoin price goes up, that is a viable business. How much it is worth depends on how many customers they will find in the future. It does NOT depend on their NAV. The premium to NAV simply reflects the market's valuation of their future business potential.

steveBK123 2y ago
> shield you from the downside How does Microstrategy shield anyone from downside?
- ArtTimeInvestor 2y ago
  Their deal is basically "After a set period, you receive your initial investment back. If Bitcoin's price has increased during this period, you can also chose to get shares in our company instead. That way you might get back more than you invested.". Since they had a sizeable amount of Bitcoin before they started this approach, in theory they might be able to repay all the lenders in full even if the Bitcoin price only declines from now on. Depending on the details of their behavior and the price movement. If Bitcoin's price declines rapidly and they fail to sell quickly enough, then they would go broke.
  - foobarqux 2y ago
    What are you talking about? The stock can go down so that isn’t guaranteed. The bonds can also go down if bitcoin goes down enough. The convertible bonds can go down for the same reasons.
    - BiteCode_dev 2y ago
      Basically I can't dee how investing in micro strategy is better than buying btc directly

gardenhome 2y ago

Ugh this is so bullish

riskyingo 2y ago

Yeah, the coperedictor. The current financial system is straight up unusable. Cashing out on the future of money is cool.

TZubiri 2y ago
I thought about cashing out, but cash out into what? Every form of currency has its own risk.

lilianadavis32 2y ago

[dead]

latchkey 2y ago

For anyone curious about what Saylor is actually thinking, it is good to spend some time listening to this recent interview. https://www.youtube.com/watch?v=R87vco0jHvo https://www.youtube.com/watch?v=R87vco0jHvo

John23832 2y ago

The reality is the microstrategy is to allow investor which cannot directly own bitcoin, or bitcoin etfs, to own bitcoin. There is a premium associated with this (which am suspending analysis on), microstrategy's overshot price. Any other description is an act of mental gymnastics.

latchkey 2y ago
I don't own MSTR because I want to own bitcoin. I own MSTR because they buy and hold bitcoin, while creating volatility on their stock, which enables a lucrative options market. There is a subtle distinction there. The premium is irrelevant to me because my goal is to own more MSTR stock. The more stock I own, the more covered call options I can sell. Once everyone starts compounding the stock, the price goes up, they have more money to buy and hold more bitcoin, the price of bitcoin goes up. https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem What he has created is a circular infinite money machine that can only be likened to what Warren Buffet did with buying insurance companies and their infinite float.

daft_pink 2y ago

It’s bitcoin. What are you going to say? Obviously, it went up in value and down in value and it doesn’t make much sense over the long term. Currently, governments are tolerating the loophole of it being used to launder money, purchase illicit goods and evade financial border controls. As long as that is tolerated, it will be successful and when governments start to crack down it won’t be successful, because it sucks as a currency but seems to make a pretty good tulip bulb. Probably an unpopular opinion, but as someone who’s purchased a few things with bitcoin, it has insane transaction fees, is not easy to use and is not a stable store of value, so why people would flock to it as money other than the above reasons is beyond me.

latchkey 2y ago
> why people would flock to it as money other than the above reasons is beyond me Despite what the whitepaper laid out, it has morphed into something that isn't money. Use the analogy that Saylor lays out... https://x.com/saylor/status/1860399115449799119 https://x.com/saylor/status/1860399115449799119

adamsp279 2y ago

[flagged]