The Capital Operations and Market Impact of Bitcoin Investment Giant Strategy

Strategy (formerly known as MicroStrategy) shifted its focus to Bitcoin investment starting in 2020, raising funds through the issuance of stocks and convertible bonds to purchase Bitcoin, becoming a focal point in the US stock market. As of February 2025, the company has accumulated nearly 500,000 Bitcoins, worth over $40 billion, accounting for about 2% of the total global Bitcoin supply.

Strategy utilizes capital structure design to turn the stock market into a Bitcoin ATM. It raises funds by issuing new shares/convertible bonds to increase Bitcoin holdings, and then uses the Bitcoin positions to support stock price valuation, forming a capital closed loop deeply bound to crypto assets. Leveraging the unique high-premium financing mechanism of the U.S. stock market, Strategy not only stands out among Bitcoin concept stocks but has also developed a set of "alchemy" certified by the U.S. stock market through equity issuance and coin price manipulation.

The financing method of Strategy is quite clever, mainly completed through a combination of stocks and bonds to raise funds. Initially relying on bond issuance and its own cash reserves, it later massively used the ATM stock issuance mechanism to sell stocks directly in the secondary market. It plays with the capital market through a strategy that combines stock issuance and bond issuance. When the leverage ratio is low, it quickly raises funds by issuing stocks to buy Bitcoin, increasing the valuation premium; as the market notices its large stock sell-off and the stock price falls while the premium shrinks, it shifts to mainly issuing bonds.

The dramatic rise and fall of Strategy's stock price reflects its ability to attract speculators through Bitcoin investments. The core of its "turning coins into gold" technique lies in:

1. The stock price has a nonlinear relationship with Bitcoin, rising and falling not completely in sync.

2. Compared to before, the premium is gradually shrinking, and the company is being packaged as a highly volatile speculative tool.

3. Become an alternative choice for institutional investors who cannot directly purchase Bitcoin ETFs.

4. Founder Michael J. Saylor's marketing abilities stand out, emphasizing the leverage effect of the company's stock.

5. The strong financing capability supports the continuous purchase of Bitcoin, forming a unique business model.

Saylor's promotion of Bitcoin has a profound impact on the entire industry, attracting a large number of institutional investors through frequent appearances. He even stated his intention to destroy his personal Bitcoin private keys after his death, demonstrating a "messianic" determination. It is worth noting that the Bitcoin from Strategy is actually held by a third-party custodian, complying with the auditing requirements for listed companies.

Saylor not only promotes Bitcoin but also presents a vision for a global on-chain economy, even suggesting that Bitcoin be included in the United States' national strategic reserves. This idea hints at the potential emergence of a cyber financial system that transcends sovereign nations, but it will also pose new challenges for global capital flow and regulation.

Currently, the price of Bitcoin has dropped to around $87,000 from its high point, while the holding cost of Strategy is about $66,000. Even if the price of Bitcoin falls below the average holding cost, the company is unlikely to be forced to liquidate or sell off a large amount. This is thanks to Saylor holding nearly half of the voting rights and the company's flexible financial maneuvering space.

Despite facing challenges in the short term, given that an increasing number of sovereign funds and institutions around the world are starting to view Bitcoin as a reserve asset, the long-term strategy of Strategy seems to align with the market trend. However, the company's development still faces several key issues:

1. Can the volatility of the Bitcoin market maintain its current level?

2. Can the company's financing model be sustainable?

3. Is Saylor an idealist of Bitcoin or an arbitrageur?

For industry insiders, the odds of Strategy stocks may be greater than directly participating in Bitcoin, resembling a "booster" version of Bitcoin. The company continuously issues bonds and dilutes equity to purchase Bitcoin, resulting in investment returns far exceeding traditional business income. Although this operation brings high returns, it also makes the company overly reliant on Bitcoin price trends, increasing potential risks.

The capital operation model of Strategy is timely, but its sustainability remains to be observed. It successfully transfers risk from the company to the stock market by issuing convertible bonds to finance the purchase of Bitcoin, converting debt into equity at maturity by leveraging high stock prices. This approach cleverly diversifies risk into the stock market, resulting in an overall long-short ratio in the stock market that is greater than that in the crypto market.