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Mindaoyang, a highly regarded crypto OG and the founder of dForce, has recently shared insights on MicroStrategy’s grand strategy. Strikingly, he has compared MicroStrategy’s structurally sound and long-term winning approach to Buffett’s Berkshire Hathaway in the traditional financial world. Let’s dive deeper to know more.
MicroStrategy has achieved significant profits in less than two years by transforming its stock into a traditional finance version of Bitcoin. This strategy involves a triple arbitrage between stocks, bonds, and Bitcoin.
The Stock/Bitcoin Relationship
Saylor’s strategy involves issuing stock at a premium, and using the proceeds to buy Bitcoin, which increases the company’s per-share net asset value and earnings. This linear leverage effect pushes Bitcoin’s price higher, increasing the company’s per-share net asset value and earnings.
Convertible Bonds Exquisitely Designed
Coming to the stock/bond relationship, he noted that as MSTR’s market cap rises, it enters more indexes, which prompts the creation of more trading derivatives, and increases trading volume, lowering both equity and bond financing costs. He remarked that MicroStrategy’s convertible bonds are an exquisitely designed instrument, full of Buffett-like wisdom.
Notably, Saylor’s convertible bonds are medium- to long-term, zero-coupon, and have no principal repayment during the term. The choice between conversion to stock or repayment in cash lies entirely with Saylor, which eliminates the risk of default due to inability to repay at maturity.
The Bitcoin Bond Relationship
He noted that MicroStrategy’s unique approach to the Bitcoin/Bond relationship, which involves borrowing USD bonds to buy Bitcoin. With zero default risk, borrowing a “depreciating” asset (USD bonds) to buy an “appreciating” asset (Bitcoin), over the long term, he termed it as a no-lose game. He stressed that he has never seen anyone master the triple arbitrage of stocks, bonds, and Bitcoin to such an extreme degree.
MSTR Reaching $1 trillion Easier Than ETH?
From the perspective of premium levels, he also quoted that MSTR reaching a $1 trillion valuation might be easier than Ethereum achieving the same milestone.
Notably, MicroStrategy carries a 300% premium on Bitcoin. For secondary market participants,he noted that the risk is extremely high if they don’t understand the underlying variables.
Will The Same Strategy Work On Other Assets?
But can the same strategy be applied to other assets like ETH, SOL, or meme coins? He remarks that the viability of this strategy hinges on having enough counterparties willing to accept similar convertible bond terms.
For assets like ETH and SOL, he states that the strategy is more complex due to additional economic models, technology, and market risks. However, potential returns could be higher, potentially leading to a “degen version” of MicroStrategy. He believes that the whales are already gearing up for this.
What do you think? Will Companies follow footsteps of Microstrategy? Share with us and stay tuned.