Half a yr has handed for the reason that publishing of my preliminary report on the corporate then-named MicroStrategy, now merely Technique. Aside from a reputation change, the corporate has since then broadened the arsenal of its monetary merchandise, collected extra bitcoin, and fueled a big selection of corporations copying Michael Saylor’s playbook. There appear to be bitcoin treasury corporations all over the place.
Due for an replace, we are going to now examine whether or not or not these bitcoin treasury corporations’ operations are consistent with the predictions made within the preliminary report, and but once more try and conclude the place all that is ultimately going.
A Trigger for Alarm
In December final yr, the corporate appeared close to invincible: With its bitcoin yield KPI accumulating at a mind-boggling annual charge of above 60%, optimism reigned. It was no marvel then that a lot 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 this point gives little by way of vindication.
Tragically few understood and even reached a very powerful conclusion of my December report, which considerations the supply of the bitcoin yield. We’ll due to this fact iterate what’s mistaken with the corporate’s metric, and why this must be a explanation for alarm for any critical investor.
The bitcoin yield — the rise in bitcoin per share — reaching outdated shareholders comes from the pockets of latest shareholders. The brand new shareholders, lots of them shopping for shares within the hope of getting a excessive bitcoin yield themselves, present the bitcoin yield both straight by shopping for Technique frequent 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 offered) by delta impartial hedge funds that concurrently maintain the corporate’s convertible bonds. That is the Ponzi a part of firm operations — publicly boasting a bitcoin yield far increased 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 traders themselves. They’re the yield, and the harvesting of their hard-earned cash will proceed so long as they willingly present it. The scale of the harvest is in proportion to the dimensions of the confusion, right here measured because the premium of frequent shares over firm web belongings. 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’ approach for over a decade, they’ve turn into accustomed — and rightly so — to easily disregard such critiques altogether. However simply because an organization inside the Bitcoin sector deliberately or inadvertently has constructed a Ponzi scheme, that doesn’t clearly imply that bitcoin itself is a Ponzi. The 2 belongings are separate. Throughout metallic financial requirements of the previous, Ponzi schemes existed, however that doesn’t imply the valuable 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 choose up the place we left off within the preliminary report, and map related firm choices 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 yr. Only a few days later, over 15,000 extra bitcoin have been bought, additionally by means of the ATM providing, and some days after that announcement, about 5,000 extra have been bought.
The tip 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 complete quantity to truly be issued, was finished to offer 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 yr 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 yr began with an 8-Ok submitting stating that Technique was now prepared to hunt the brand new funding by means of most well-liked inventory. The brand new instrument, because the identify implies, was to be senior to the corporate’s frequent shares, that means the homeowners of the popular shares had a stronger declare on any future money flows. Initially, a $2 billion increase was the acknowledged aim. Whereas the brand new instrument was being ready, 450,000 bitcoin had been collected by January 12. On the finish of the month, all 2027 convertible bonds have been known as on to be redeemed for newly issued shares, because the conversion worth was now under the market worth of the shares. Any Technique convertible bond far “within the cash” turns into unappealing to the biggest patrons of such devices — the gamma-trading, delta impartial hedge funds — preferring early conversion adopted by new convertible bond issuance over holding the outdated bonds till maturity.
On January 25, 2025, the corporate lastly filed its prospectus for Strike perpetual most well-liked inventory ($STRK), and a couple of week later, 7.3 million Strike shares have been issued with 8% cumulative dividends on the liquidation desire of $100 per share. In apply, this meant a $2 per share quarterly dividend in perpetuity, or till the shares are transformed to Technique shares in case the worth of the latter reaches $1,000. Conversion was outlined on the ratio 10:1, that means 10 Strike shares should be transformed for each new Technique share. In different phrases, the instrument is akin to a dividend-paying perpetual name choice on Technique frequent shares. If deemed essential, Technique will pay the dividends within the type of its personal frequent 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 frequent shares.
On February 21, Technique issued $2 billion price 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 revealed, enabling the corporate to challenge as much as $21 billion price of Strike perpetual most well-liked inventory, that means the already bold 21/21 Plan of final yr now appeared to morph into one thing much more huge.
Perpetual Strife and Stride Most well-liked Inventory
As quickly as the corporate had publicly introduced its bold growth of its funding plan, yet one more instrument was introduced; Strife ($STRF), a perpetual most well-liked inventory much like Strike, was to go stay with 5 million shares. It was to supply 10% annual dividends in money — paid quarterly — as a substitute of 8% in money or frequent shares. Strife, not like Strike, had no fairness conversion function, however was senior to each frequent shares and Strike. Any dividend delay was to be compensated by increased future dividends, with a most of 18% complete annual dividend charge. 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 frequent shares in addition to for Strike, Technique might lastly announce in March that the corporate held over 500,000 bitcoin. April noticed principally common frequent share ATM actions, till that kind of funding was all however depleted. Strike ATM exercise continued as effectively, however because of what was probably 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 frequent share ATM providing. This announcement got here very shortly after the ATM arm of the preliminary 21/21 Plan had been exhausted, and absolutely vindicated the logic outlined within the earlier report in addition to on X. As any premium to web belongings creates an arbitrage for the corporate, administration is sure to proceed to print new shares overvalued relative to underlying bitcoin belongings with a view to seize it. Issuance began nearly instantly, and extra bitcoin might be collected.
Because the fastened revenue arm of the preliminary 21/21 Plan already had been prolonged with the brand new most well-liked inventory in thoughts, traders now confronted an enormous 42/42 Plan, that means a most of $42 billion in frequent share issuance and $42 billion in fastened revenue safety issuance. Can also noticed the SEC submitting of a brand new $2.1 billion ATM providing for the Strife perpetual most well-liked inventory instrument. On the finish of the month, all three ATM choices have been printing shares for the acquisition of latest bitcoin. To start with of June, yet one more instrument was introduced: Stride ($STRD), a perpetual most well-liked inventory asset much like Strike and Strife, was quickly to launch. It was to supply 10% non-compulsory, noncumulative dividends in money, had no fairness conversion function, and was junior to each different instrument besides the frequent shares. Rather less than 12 million shares price 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 Firms
With the STRK, STRD, and STRF merchandise launched, and Technique’s 21/21 Plan in full swing, the complete image of what has been happening within the final six months must be clearer. I identified within 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 bit of the market in want and wish of such. The patrons of the bonds have been nearly 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 cause that Technique supplied these securities to lenders was that it gave retail traders 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 traders bid on the frequent shares, so did the worth discrepancy to web belongings and the chance of risk-free bitcoin yield develop in proportion. The better the financial confusion, coupled with Michael Saylor’s approach 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 varied convertible bonds already in place, these sophisticated monetary merchandise might now create an look of economic innovation, thus spurring additional bidding on the frequent shares.
On the time of writing, the frequent shares commerce close to double that of web belongings, which is a superb feat by firm administration, given the massive dimension and exercise of the frequent share ATM choices. It means Technique can proceed to purchase about two bitcoin for the worth of 1 in a risk-free vogue.
In 2024, the corporate might take pleasure in tailwinds originating from the favored “reflexivity flywheel” concept, 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 fastened revenue cogwheels rotating the core that’s the frequent shares, with bitcoin yield produced from the equipment in consequence. Precisely from the place, or how, the yield was created, few traders gave the impression to be asking themselves, and as a substitute the made-up dynamic was mindlessly celebrated.
Most well-liked shares are monetary belongings, 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 seen 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 in the long run stem from the sooner outlined Ponzi aspect of the corporate’s enterprise mannequin; retail traders are dazzled by fastidiously curated narratives, inflicting them to bid up the worth of frequent shares sufficient for the bitcoin yield alternative to materialize. No matter bitcoin yield originating from the varied debt devices can’t but be thought-about settled as debt should ultimately be paid off. Solely the bitcoin yield stemming from frequent share ATM choices is quick and remaining — a real revenue.
A Bubble of Bitcoin Treasury Firms
Oblivious or to not the truth that narratives can’t affect actuality without end, the massively profitable bitcoin yield idea of Technique has unfold like a wildfire amongst administration groups of smaller corporations all around the world. CEOs have seen how Technique insiders, by constantly dumping shares on the retail traders at present chasing the shares, have turn into immensely wealthy, and so have began copying the playbook. The fixed Technique insider promoting may be verified by wanting on the quite a few Kind 144 filings.
Many of those corporations have efficiently pulled this off, already enriching administration and outdated shareholders on the expense of latest ones. But it surely should all finish at one level, and plenty of of those corporations, greedy in desperation on the daring, new technique of changing into bitcoin treasury corporations (as a result of typical fundamental enterprise struggling and even failing) would be the first which might be compelled to promote their bitcoin belongings to pay collectors when issues take a flip for the more serious. Michael Saylor himself as soon as admitted that he was determined earlier than stumbling over bitcoin.
Metaplanet was as soon as often known as Crimson Planet Japan and struggled mightily to be worthwhile in Japan’s price range 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 with a view to rescue a share worth buying and selling at all-time lows.
Bluebird Mining Ventures Ltd, additionally in desperation, I’d think about — not less than if the share worth is any indicator — only recently determined to promote any gold it managed to mine with a view to fund bitcoin purchases for its treasury; the shares are at time of writing up nearly 500% in a month.
H100 Group, a small and till just lately struggling Swedish biotech firm, has, on the time of writing returned, to its traders about 1,500% in a month on information that Adam Again, CEO of Blockstream, is funding the corporate by means of some kind of convertible bonds, for the pursuit of a bitcoin treasury technique.
The listing 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 corporations, however failing corporations 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 corporations. All of them had […] a cause to take a critical look within the mirror and say, we are able to’t preserve doing the technique that we’ve… the trail we’ve been on. We have now to radically reinvent our method to delivering shareholder worth.”
All these determined corporations 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 at present “within the cash.” Future free money move will at all times have to succeed in holders of those devices earlier than no matter is left can go to homeowners of the frequent shares. In good instances, that is clearly not an issue as a result of slightly low debt ratio of the corporate; in unhealthy instances, the worth of all firm belongings decline significantly whereas debt obligations stay — like tall, looming threats to any new creditor. As a result of a phenomenon typically known as debt overhang, any new creditor can 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 corporations then in misery. The extra well-liked Technique’s playbook turns into, in different phrases, the deeper the longer term bitcoin crash, probably wiping out a lot of the fairness of most corporations 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 cross on what’s by definition an arbitrage. When frequent shares commerce at a premium to web belongings, the corporate can create risk-free income for its outdated shareholders by transferring wealth from the patrons of newly issued shares. This may proceed within the type of ever-larger frequent share ATM choices alongside new, obfuscating ”progressive 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 a substitute as they try to extend their bitcoin treasury in an equally risk-free method. Within the frantic scramble to create and broaden all these arbitrage alternatives, corporations will tackle debt in varied kinds, and hazard abounds.
In the course of the subsequent bitcoin bear market, the Technique share worth will attain — after which break under — web belongings per share, inflicting massive bitcoin-denominated losses on anybody shopping for at at this time’s premium. The perfect motion a Technique investor can take at this time is doing precisely what the corporate and its insiders are all doing: Promote the shares!
Bitcoin is not the principle technique of this firm, nor of any of the now multiplying bitcoin treasury corporations; 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 challenge — be sure you get your subscription now.
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