MicroStrategy's Final Battle, Becoming a Billion-Dollar Bitcoin Bank

MicroStrategy founder Michael Saylor stated that the company's ultimate goal is to become a leading Bitcoin bank and eventually grow into a company worth trillions of dollars.

MicroStrategy is rebranding itself as a "Bitcoin development company," suggesting that buying MicroStrategy stock may be more beneficial than buying BTC.

MicroStrategy is Creating Bitcoin Capital Market Tools

Since 2020, MicroStrategy has been actively acquiring Bitcoin, using debt and equity to maximize returns and outperform many traditional investments. In September, the company issued bonds again and purchased 7,420 bitcoins, bringing their total holdings to 252,220 bitcoins, equivalent to 1.2% of the total Bitcoin supply, making it the largest publicly traded company holding Bitcoin in the world.

According to a report by Bernstein Digital Assets lead Gautam Chhugani as reported by The Block, MicroStrategy's founder Saylor envisions the company as a Bitcoin bank or financial company, with its core business being the creation of Bitcoin capital market tools covering stocks, convertible bonds, fixed income, and preferred stocks.

The company's strategy is based on a long-term belief in Bitcoin as the ultimate currency and scarce asset. Chhugani explains that Bitcoin currently only accounts for 0.1% of global financial capital, and Michael Saylor predicts this percentage will rise to 7%, implying that by 2045, the price of each Bitcoin could reach $13 million.

Bernstein analysts state that if the U.S. capital markets allow MicroStrategy to raise funds through debt, equity, and other tools, the company would be keen on expanding and arbitraging between the dollar capital markets and Bitcoin. In Saylor's envisioned scenario, Bitcoin is projected to grow annually by 29%.

When asked about the scalability of the company's debt strategy, Saylor stated:

I believe it's infinitely scalable. We could raise another $100 billion, we could raise $200 billion, it's not a problem. This will be a trillion-dollar asset class, then it will go to tens of trillions, hundreds of trillions. The risk is simple—it's Bitcoin. Either you believe in Bitcoin, or you think it's nothing.

Borrowing Money to Buy Bitcoin – The Bitcoin Bank

Chhugani also points out Saylor's view that the potential average annual growth rate of Bitcoin is attractive enough to continue making money through capital market arbitrage. Traditional banks lend funds to individuals, corporations, and governments, but he believes that lending to Bitcoin poses a greater risk than providing loans to Bitcoin.

We think a better idea is to borrow $10 billion from those eager to lend and give them an additional 1% return, then lend to Bitcoin at 30% to 50% interest, with no counterparty risk.

Once you overcome the volatility and learn how to manage it, I expect the worst-case scenario for Bitcoin to grow by only 22% annually over the next decade. Who would pay you a 22% annual interest rate?

MicroStrategy's Recent Rally Outperforms Bitcoin by Far

MicroStrategy started buying Bitcoin in September 2020. Based on this initial period, we compared the MicroStrategy stock price (blue line) and Bitcoin price (red line) as shown in the table below. Their stock price and Bitcoin price are highly correlated, but recently MicroStrategy's stock price has significantly outperformed Bitcoin. Since acquiring Bitcoin, their stock price has risen by 1,395%, while Bitcoin's performance during the same period was 510%.

MicroStrategy's year-to-date increase is 207%, surpassing the 173% of the AI powerhouse NVIDIA.