jakiro
In a market filled with noise, news headlines are often an amplifier of sentiment.Recently, a screenshot of news about MicroStrategy has been widely circulated in major communities.The headline boldly read: “MicroStrategy says it may be forced to sell Bitcoin if it encounters a ‘literally three-year down cycle.’”
At first glance, this seems to be disturbing news – the largest corporate holder of Bitcoin who claims to “only buy but not sell” and has diamond hands actually mentioned the word “sell”.However, when we peel back the emotional onion and look deeply at the financial data in the screenshot ($1.44 billion in cash reserves) and the extreme preconditions it sets, we will find that this is not a “letter of surrender” but a carefully designed “stress test report.”
The most eye-catching thing in the screenshot is not the assumption about “selling coins”, but the huge number on the background board: $1.44B USD RESERVE ($1.44 billion in cash reserves).
In the impression of the outside world, MicroStrategy is often portrayed as a crazy gambler, using high leverage to continuously increase its position in Bitcoin.The bears’ favorite narrative is: “Once the price of Bitcoin drops, MicroStrategy will be forced into liquidation because it cannot repay its debts, triggering a death spiral in the cryptocurrency industry.”
However, this $1.44 billion in cash reserves exists precisely to disrupt this narrative.
Debt Coverage “Safety Cushion”
MicroStrategy’s main source of funding for Bitcoin purchases is the issuance of convertible notes (Convertible Notes).This type of bond is characterized by very low interest rates (some are even zero coupons), and most of the principal maturity dates are several years in the future.
This $1.44 billion in cash means that even if the company’s main software business revenue reaches zero (extreme assumption), this money will be enough to cover debt interest and operating costs in the next few years.
As stated in the screenshot, the money provides “21.4 months of dividend coverage/operating buffer.”This is an extremely high margin of safety.In other words, MicroStrategy has bought itself an expensive “insurance” to ensure that it does not need to use Bitcoin assets to survive when the price of Bitcoin fluctuates violently.
The “cash” here is not just money, but options
In the investment world, cash is not only liquidity, but also a call option with a “buying opportunity.”When the market panicked due to this news, MicroStrategy had a lot of money in hand. Not only could it deal with debt calmly, but it could even continue to use this asymmetric advantage to bargain dip when the market was extremely depressed (although they said they would sell after a decline for three years, but they did not say they would not buy after a decline for two years).
The premise of “three-year sustained down cycle” put forward by executive Phong Le is extremely intriguing.This is not only a unit of time, but also a challenge to the cyclical law of cryptocurrency.
Counter-evidence from historical data
If we look back at the history of Bitcoin since its inception, there has never been a unilateral decline that “literally lasted three years.”
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2014–2015 Bear Market: Lasts about 1 and a half years.
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2018 Bear Market: Lasts about 1 year.
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2022 Bear Market: Lasts about 1 year.
Bitcoin is strongly dominated by the “four-year halving cycle.”Usually there is one year of violent bull market, one year of tragic bear market, and two years of shock and recovery.Setting “three years of continuous decline” as a trigger for forced selling is equivalent to saying: “Unless Bitcoin’s underlying economic model (the halving mechanism) completely fails, or the global financial system experiences an unprecedented collapse, we will never sell.”
Why three years?
This is not said casually.This is likely related to the average maturity structure of the convertible debt issued by MicroStrategy.By setting this red line, management is sending a signal to Wall Street institutional investors that our liquidity model has covered the vast majority of conventional cyclical risks.Unless a “black swan of black swans” occurs, our positions are safe.
The deeper implication of this news is that MicroStrategy is completing its transformation from an activist investment firm to a “Bitcoin shadow central bank”.
In the past, the market has worried that MicroStrategy would blow up due to volatility.Now, MicroStrategy is trying to be an “anchor” to the market by displaying high cash reserves.When a company holding hundreds of thousands of Bitcoins makes it clear that “I have the ability to survive a three-year super bear market,” it sets a psychological bottom line for the entire market.For institutions hesitant to get in at this point, this removes the biggest systemic risk concern — namely the involuntary liquidation of whales.
MicroStrategy has created a unique business model: using low-interest capital in the legal currency world (issuance of bonds), purchasing deflationary digital assets (Bitcoin), and using the cash flow from the software business and cash reserves from financing as a guarantee for interest payments.This model is a perpetual motion machine as long as Bitcoin’s long-term annualized growth rate is higher than bond interest (usually less than 1% – 3%).This news is actually telling the market: The fuel (cash reserves) of this perpetual motion machine is very sufficient. Even if the machine (currency price) is suspended for three years, MicroStrategy will not shut down.
Deduction prediction
Based on the in-depth interpretation of this news, we can make short, medium and long-term deductions about future market trends:
Short term: Cleansing of FUD (Fear, Uncertainty, Doubt)
The words “Forced to sell” in news headlines may be exploited by short sellers in the short term to create panic, resulting in small fluctuations in MSTR stock prices or BTC prices.Especially for retail investors who only read the headlines but not the content, this sounds like a warning.However, this fluctuation will be short-lived.As rational institutional investors analyze their balance sheets, they realize this is a positive – it quantifies the bottom line of risk.
Mid-term: The beginning of the wave of institutional imitation
MicroStrategy is demonstrating a standard “Bitcoin treasury management playbook” for global enterprises:
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first step:Buy Bitcoin.
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Step 2: Use stock price premium to raise funds.
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Step 3: Establish fiat cash reserves to cover interest and extreme risks.Once this “two-wheel drive” (bitcoin asset + fiat currency buffer) model is proven effective, we will see more companies like MARA, Semler Scientific and even future technology giants (such as Microsoft, Google, etc.) following this high fault-tolerance allocation strategy.
Long term: The end of volatility and the beginning of a new cycle
If giant whales like MicroStrategy are able to withstand three years of cold winter, then the gaming strategy of trying to blow up giant whales by smashing the market will gradually become ineffective.This will cause Bitcoin’s volatility to gradually decrease over the long term, with price action moving more in line with mature asset classes (such as gold or the S&P 500).
This chart from MicroStrategy is more of a declaration of war on “time” than a warning of risks.
In the financial market, the cause of most people’s death is not that they bought the wrong assets, but that they fell into the darkness before dawn – being forced to cut their flesh at a low point because of a rupture in cash flow.MicroStrategy paid $1.44 billion for its ticket to “Through the Dark.”
This news tells us that MicroStrategy is prepared for the worst.For ordinary investors, this is also a wake-up call: if you do not have the cash flow reserves and psychological quality to “withstand three years of decline” like Michael Saylor, then please be sure to manage your leverage.
But before that, as long as the “Three Years of Winter” doesn’t really come, this is the strongest declaration of confidence.The market doesn’t need to worry about whales stranding because they have evolved themselves into submarines.
