MicroStrategy (MSTR), through unique financial operations, amplifies the high volatility of Bitcoin and transmits it to the U.S. stock market, creating arbitrage opportunities for institutional investors. Retail investors and long-term shareholders face the risks of severe stock price fluctuations and equity dilution, trading them for the long-term appreciation potential of Bitcoin. In this leveraged game, who emerges as the biggest winner, and who silently bears the losses? The following is the content from a post by Shen Yu, co-founder of F2Pool and Cobo.
(Background: Will MicroStrategy go bankrupt? Bitcoin’s villain Peter Schiff warns: If the U.S. stock market turns bearish, BTC may drop below $20,000)
(Context: MicroStrategy plans to “reissue $21 billion in preferred stock” to continue buying Bitcoin, but the stock price has already halved from its historical peak.)
Background
MSTR cleverly transmits Bitcoin’s high volatility at a factor of 2.5 to the U.S. stock market: Professional institutions (hedge funds, bond investors, and options traders) utilize high volatility for volatility arbitrage, capturing short-term profits.
MSTR obtains cash through the sale of convertible bonds and ATM equity issuance for significant Bitcoin accumulation.
Common shareholders endure severe stock price fluctuations and short-term decline risks due to high volatility and ATM equity issuance pressure. They passively capture the increasing “BTC Yield” per share, exchanging short-term volatility for long-term stakes.
BTC holders benefit from continuous market capital inflows and rising Bitcoin prices.
So, the question arises: who is losing?
Claude provided a response and a diagram: MSTR has established a mechanism that transforms the funds of retail and long-term shareholders into Bitcoin holdings while creating space for volatility arbitrage. Ultimately, wealth within the system flows from the information-disadvantaged (retail investors) to the information-advantaged (hedge funds and MSTR), while long-term shareholders bet that Bitcoin’s long-term appreciation will offset the high risks and equity dilution they face.
Conclusion
The financial ecosystem of MSTR is essentially a complex mechanism for redistributing risk and reward. The “losses” within the system primarily stem from wealth transfers between participants with information asymmetry, differing risk tolerances, and mismatched time horizons.