Half a 12 months has handed for the reason that publishing of my preliminary report on the corporate then-named MicroStrategy, now merely Technique. Apart from a reputation change, the corporate has since then broadened the arsenal of its monetary merchandise, amassed extra bitcoin, and fueled a wide selection of firms copying Michael Saylor’s playbook. There appear to be bitcoin treasury firms in every single place.
Due for an replace, we’ll now examine whether or not or not these bitcoin treasury firms’ operations are consistent with the predictions made within the preliminary report, and but once more try and conclude the place all that is finally going.
A Trigger for Alarm
In December final 12 months, the corporate appeared close to invincible: With its bitcoin yield KPI accumulating at a mind-boggling annual price of above 60%, optimism reigned. It was no marvel then that many of the arguments fastidiously specified by the report launched at the moment have been both ridiculed, ignored, or met with snarling challenges to promote the shares quick. The share worth, denominated both in greenback or bitcoin, is at time of writing flat in comparison with these days and to date provides little by way of vindication.
Tragically few understood and even reached crucial conclusion of my December report, which considerations the supply of the bitcoin yield. We’ll subsequently iterate what’s incorrect with the corporate’s metric, and why this must be a explanation for alarm for any severe investor.
The bitcoin yield — the rise in bitcoin per share — reaching previous shareholders comes from the pockets of latest shareholders. The brand new shareholders, a lot of them shopping for shares within the hope of getting a excessive bitcoin yield themselves, present the bitcoin yield both instantly by shopping for Technique widespread shares created within the firm’s world-record sized ATM (“on the market”) choices or not directly by shopping for the shares borrowed (after which bought) by delta impartial hedge funds that concurrently maintain the corporate’s convertible bonds. That is the Ponzi half of firm operations — publicly boasting a bitcoin yield far greater than any typical yield, whereas obfuscating the truth that the yield stems, not from the sale of firm items or providers, however from the brand new buyers themselves. They’re the yield, and the harvesting of their hard-earned cash will proceed so long as they willingly present it. The dimensions of the harvest is in proportion to the dimensions of the confusion, right here measured because the premium of widespread shares over firm web property. This premium is nurtured by sophisticated however inviting firm narratives, guarantees, and monetary merchandise.
As a result of the phrase “Ponzi” has been thrown Bitcoiners’ means for over a decade, they’ve turn out to be accustomed — and rightly so — to easily disregard such critiques altogether. However simply because an organization throughout the Bitcoin sector deliberately or inadvertently has constructed a Ponzi scheme, that doesn’t clearly imply that bitcoin itself is a Ponzi. The 2 property are separate. Throughout metallic financial requirements of the previous, Ponzi schemes existed, however that doesn’t imply the dear metals themselves ever have been, or are, such schemes. After I make this declare of Technique in its present type, I imply it from the purpose of definition, not from tiresome hyperbole.
The Accumulation Continues
Earlier than drawing any additional conclusions, it’s first time to select up the place we left off within the preliminary report, and map related firm selections made over the past six months. Technique introduced on December 9 that roughly 21,550 bitcoin had been acquired for about $2.1 billion (common worth: roughly $98,783 per bitcoin). This buy was carried out with proceeds from the ATM outlined within the well-known 21/21 Plan initiated earlier the identical 12 months. Only a few days later, over 15,000 extra bitcoin have been bought, additionally via the ATM providing, and some days after that announcement, about 5,000 extra have been bought.
The top of 2024 noticed the corporate requesting from its shareholders an modification to extend the variety of licensed shares of sophistication A standard inventory from 330,000,000 shares to 10,330,000,000 shares — in different phrases, a 30x. The variety of licensed shares of most well-liked inventory was to be elevated from 5,000,000 shares to 1,005,000,000 shares — a 200x. All this, although not the identical as stating the total quantity to really be issued, was accomplished to present the corporate extra liberty in future monetary operations because the 21/21 Plan shortly ran its course. By additionally specializing in most well-liked inventory, one other variant of funding might now be pursued. The complete 12 months ended with about 446,000 bitcoin owned by Technique, and with an organization bitcoin yield of 74.3%.
Perpetual Strike Most well-liked Inventory
The brand new 12 months began with an 8-Ok submitting stating that Technique was now prepared to hunt the brand new funding via most well-liked inventory. The brand new instrument, because the identify implies, was to be senior to the corporate’s widespread shares, which means the homeowners of the popular shares had a stronger declare on any future money flows. Initially, a $2 billion increase was the acknowledged aim. Whereas the brand new instrument was being ready, 450,000 bitcoin had been amassed by January 12. On the finish of the month, all 2027 convertible bonds have been known as on to be redeemed for newly issued shares, because the conversion worth was now beneath the market worth of the shares. Any Technique convertible bond far “within the cash” turns into unappealing to the most important patrons of such devices — the gamma-trading, delta impartial hedge funds — preferring early conversion adopted by new convertible bond issuance over holding the previous bonds till maturity.
On January 25, 2025, the corporate lastly filed its prospectus for Strike perpetual most well-liked inventory ($STRK), and a couple of week later, 7.3 million Strike shares have been issued with 8% cumulative dividends on the liquidation choice of $100 per share. In observe, this meant a $2 per share quarterly dividend in perpetuity, or till the shares are transformed to Technique shares in case the value of the latter reaches $1,000. Conversion was outlined on the ratio 10:1, which means 10 Strike shares have to be transformed for each new Technique share. In different phrases, the instrument is akin to a dividend-paying perpetual name choice on Technique widespread shares. If deemed crucial, Technique will pay the dividends within the type of its personal widespread shares. On February 10, about 7,600 bitcoin have been bought with the proceeds from the Strike issuance in addition to from typical ATM providing of widespread shares.
On February 21, Technique issued $2 billion value of convertible bonds maturing March 1, 2030, with a conversion worth of about $433 per share, representing a conversion premium of about 35%. About 20,000 bitcoin might shortly be bought with the proceeds. Shortly thereafter, a new prospectus was printed, enabling the corporate to situation as much as $21 billion value of Strike perpetual most well-liked inventory, which means the already bold 21/21 Plan of final 12 months now appeared to morph into one thing much more huge.
Perpetual Strife and Stride Most well-liked Inventory
As quickly as the corporate had publicly introduced its bold enlargement of its funding plan, one more instrument was introduced; Strife ($STRF), a perpetual most well-liked inventory just like Strike, was to go stay with 5 million shares. It was to supply 10% annual dividends in money — paid quarterly — as an alternative of 8% in money or widespread shares. Strife, not like Strike, had no fairness conversion characteristic, however was senior to each widespread shares and Strike. Any dividend delay was to be compensated by greater future dividends, with a most of 18% complete annual dividend price. At time of issuance, the preliminary plan of issuing 5 million shares appears to have been elevated to eight.5 million shares, elevating over $700 million. With ATM exercise for the widespread shares in addition to for Strike, Technique might lastly announce in March that the corporate held over 500,000 bitcoin. April noticed principally common widespread share ATM actions, till that sort of funding was all however depleted. Strike ATM exercise continued as effectively, however because of what was doubtless low liquidity, the greenback quantity raised was negligible. With the proceeds, Technique’s complete bitcoin place climbed above 550,000 bitcoin.
On Could 1, Technique introduced the intention of launching one other $21 billion widespread share ATM providing. This announcement got here very shortly after the ATM arm of the preliminary 21/21 Plan had been exhausted, and totally vindicated the logic outlined within the earlier report in addition to on X. As any premium to web property creates an arbitrage for the corporate, administration is certain to proceed to print new shares overvalued relative to underlying bitcoin property as a way to seize it. Issuance began virtually instantly, and extra bitcoin could possibly be amassed.
Because the mounted earnings arm of the preliminary 21/21 Plan already had been prolonged with the brand new most well-liked inventory in thoughts, buyers now confronted a large 42/42 Plan, which means a most of $42 billion in widespread share issuance and $42 billion in mounted earnings safety issuance. Might also noticed the SEC submitting of a brand new $2.1 billion ATM providing for the Strife perpetual most well-liked inventory instrument. On the finish of the month, all three ATM choices have been printing shares for the acquisition of latest bitcoin. To start with of June, one more instrument was introduced: Stride ($STRD), a perpetual most well-liked inventory asset just like Strike and Strife, was quickly to launch. It was to supply 10% non-compulsory, noncumulative dividends in money, had no fairness conversion characteristic, and was junior to each different instrument besides the widespread shares. Rather less than 12 million shares value about $1 billion have been initially issued, paving the best way for about 10,000 extra bitcoin for the corporate coffers.
A Dazzling Mosaic of Bitcoin Treasury Corporations
With the STRK, STRD, and STRF merchandise launched, and Technique’s 21/21 Plan in full swing, the total image of what has been happening within the final six months must be clearer. I identified in the preliminary report that the principle rationale behind the convertible bonds was not, regardless of the claims of the corporate, to supply bitcoin publicity to a piece of the market in want and wish of such. The patrons of the bonds have been virtually all of them delta impartial hedge funds, and, being concurrently quick Technique shares, they by no means had any precise bitcoin publicity. It was all a ruse. The true motive that Technique provided these securities to lenders was that it gave retail buyers an impression of economic innovation focusing on a multitrillion-dollar trade, in addition to facilitating additional bitcoin accumulation with out fairness dilution. And because the buyers bid on the widespread shares, so did the value discrepancy to web property and the chance of risk-free bitcoin yield develop in proportion. The better the financial confusion, coupled with Michael Saylor’s means with phrases and vivid analogies, the bigger the corporate’s arbitrage alternative.
By issuing three completely different perpetual most well-liked inventory securities over the past six months, along with the assorted convertible bonds already in place, these sophisticated monetary merchandise might now create an look of economic innovation, thus spurring additional bidding on the widespread shares.
On the time of writing, the widespread shares commerce close to double that of web property, which is a good feat by firm administration, given the massive dimension and exercise of the widespread share ATM choices. It means Technique can proceed to purchase about two bitcoin for the value of 1 in a risk-free trend.
In 2024, the corporate might get pleasure from tailwinds originating from the favored “reflexivity flywheel” principle, the place it was argued that the extra bitcoin the corporate bought, the extra its shares would improve in worth, ensuing within the alternative to purchase much more bitcoin. In 2025, this self-referential stupidity morphed barely to a “torque” narrative, manifesting itself as official firm depictions of mounted earnings cogwheels rotating the core that’s the widespread shares, with bitcoin yield produced from the equipment consequently. Precisely from the place, or how, the yield was created, few buyers appeared to be asking themselves, and as an alternative the made-up dynamic was mindlessly celebrated.
Most well-liked shares are monetary property, and never topic to the legal guidelines of physics. Being an engineer, it’s not shocking that Saylor ought to give you all these fallacious analogies in order that bitcoin yield would seem to stem from what can solely be considered as monetary alchemy. However since there are not any precise firm revenues to talk of, no precise banking (the corporate borrows, however doesn’t lend), the bitcoin yield should ultimately stem from the sooner outlined Ponzi aspect of the corporate’s enterprise mannequin; retail buyers are dazzled by fastidiously curated narratives, inflicting them to bid up the value of widespread shares sufficient for the bitcoin yield alternative to materialize. No matter bitcoin yield originating from the assorted debt devices can’t but be thought of settled as debt should finally be paid off. Solely the bitcoin yield stemming from widespread share ATM choices is instant and ultimate — a real revenue.
A Bubble of Bitcoin Treasury Corporations
Oblivious or to not the truth that narratives can’t affect actuality perpetually, the massively profitable bitcoin yield idea of Technique has unfold like a wildfire amongst administration groups of smaller firms all around the world. CEOs have seen how Technique insiders, by constantly dumping shares on the retail buyers presently chasing the shares, have turn out to be immensely wealthy, and so have began copying the playbook. The fixed Technique insider promoting might be verified by trying on the quite a few Type 144 filings.
Many of those firms have efficiently pulled this off, already enriching administration and previous shareholders on the expense of latest ones. Nevertheless it should all finish at one level, and plenty of of those firms, greedy in desperation on the daring, new technique of changing into bitcoin treasury firms (as a result of typical predominant enterprise struggling and even failing) would be the first which might be compelled to promote their bitcoin property to pay collectors when issues take a flip for the more severe. Michael Saylor himself as soon as admitted that he was determined earlier than stumbling over bitcoin.
- Metaplanet was as soon as often called Purple Planet Japan and struggled mightily to be worthwhile in Japan’s funds resort sector.
- Earlier than Méliuz SA desperately adopted a bitcoin acquisition technique, it had undergone a 100:1 reverse break up.
- Vanadi Espresso SA drifted ever nearer to chapter, managing 5 cafes and a bakery in Spain’s Alicante area, however its pivot to a bitcoin technique now appears to have carried out miracles for its share worth.
- The infamous meme inventory firm Trump Media & Expertise, with no income to talk of, is now pursuing billions of {dollars} in funding for the aim of making a bitcoin treasury firm as a way to rescue a share worth buying and selling at all-time lows.
- Bluebird Mining Ventures Ltd, additionally in desperation, I might think about — not less than if the share worth is any indicator — only recently determined to promote any gold it managed to mine as a way to fund bitcoin purchases for its treasury; the shares are at time of writing up virtually 500% in a month.
- H100 Group, a small and till lately struggling Swedish biotech firm, has, on the time of writing returned, to its buyers about 1,500% in a month on information that Adam Again, CEO of Blockstream, is funding the corporate via some sort of convertible bonds, for the pursuit of a bitcoin treasury technique.
The checklist might go on and on, however I believe the purpose is made; it’s not Microsoft, Apple, or Nvidia which might be changing into bitcoin treasury firms, however failing firms with nothing to lose. Jesse Myers, a Technique supporter and a direct affect on Michael Saylor’s bitcoin valuation modeling, admitted that,
“[…] with MicroStrategy, Metaplanet and Gamestop, they’re all zombie firms. All of them had […] a motive to take a severe look within the mirror and say, we will’t maintain doing the technique that we’ve… the trail we’ve been on. Now we have to radically reinvent our method to delivering shareholder worth.”
All these determined firms have checked out Michael Saylor and Technique and imagine they’ve discovered a transparent path to riches. By copying the monetary alchemy themselves, they’re now all concerned in an excellent switch of wealth because the bitcoin treasury firm bubble runs its course.
When the Mosaic Breaks
Although a part of the spectacular firm mosaic, Strike, Strife, and Stride are all senior to fairness. The identical is true for the convertible bonds, not all of them are presently “within the cash.” Future free money circulation will all the time have to succeed in holders of those devices earlier than no matter is left can go to homeowners of the widespread shares. In good occasions, that is clearly not an issue as a result of reasonably low debt ratio of the corporate; in dangerous occasions, the worth of all firm property decline significantly whereas debt obligations stay — like tall, looming threats to any new creditor. As a result of a phenomenon generally known as debt overhang, any new creditor will likely be hesitant to lend for the aim of paying off different debt obligations. What began as a fascinating assortment of narratives and exaggerations morphs into one thing turning on its creator.
That is all exacerbated by the truth that a chronic bitcoin bear market will trigger additional promote strain on the asset by the various bitcoin treasury firms then in misery. The extra in style Technique’s playbook turns into, in different phrases, the deeper the longer term bitcoin crash, doubtless wiping out a lot of the fairness of most firms having pursued such a technique to the bitter finish.
In abstract: Michael Saylor likes bitcoin. He, like all of us, prefers extra bitcoin to much less bitcoin. It’s then extraordinarily naive to suppose that he’ll let firm administration go on what’s by definition an arbitrage. When widespread shares commerce at a premium to web property, the corporate can create risk-free earnings for its previous shareholders by transferring wealth from the patrons of newly issued shares. This can proceed within the type of ever-larger widespread share ATM choices alongside new, obfuscating ”revolutionary merchandise”, regardless of protests and mutterings about fairness dilution. Proof of this declare is my prediction made in March, coming true within the type of a brand new $21 billion ATM providing barely one and a half months later. If Technique doesn’t act on this arbitrage, all of the copy-cats will seize it as an alternative as they try to extend their bitcoin treasury in an equally risk-free method. Within the frantic scramble to create and increase all these arbitrage alternatives, firms will tackle debt in varied kinds, and hazard abounds.
Through the subsequent bitcoin bear market, the Technique share worth will attain — after which break beneath — web property per share, inflicting giant bitcoin-denominated losses on anybody shopping for at right now’s premium. One of the best motion a Technique investor can take right now is doing precisely what the corporate and its insiders are all doing: Promote the shares!
Bitcoin is now not the principle technique of this firm, nor of any of the now multiplying bitcoin treasury firms; you’re.
That is an edited model of the article posted on the creator’s Medium web page. A fuller evaluation is featured within the subsequent Bitcoin Journal Print situation — you’ll want to get your subscription now.
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