Is MicroStrategy a Pyramid Scheme?

Great video, people also forget about share buybacks which will increase value/amount of btc per share, increased future value (options and shares) hence creating a positive feedback loop and higher demand.

I saw it earlier and actually followed him to see if he's gonna make another video with the title: "I was wrong about Microstrategy"

What happensif/when BTC price drops substantially, eg during an economic recession, coming soon to a planet near you? You might be counting on BTC going up infinitely forever, but at some point, it will correct, even if only temportarily. What happens then to MSTR? And I'm not talking about a temporary correction like we just saw, because the underlying price of BTC did not fall. BTC will correct substantially and MSTR wil correct by multiples.

People really don't know how to think about this. MSTR is not an ETP/ETF. It's not a fund. MSTR is under no obligation to try to make their marketcap reflect their holdings. This means when the market is bullish on the underlying, it will trade at a premium, when the market is bearish on the underlying, it may trade at a discount, as MSTR is going to do nothing to correct either situation. So the exact relationship will be a result of market sentiment, as there is no redemption mechanism.

However, the question here is: Should MSTR trade at par with their NAV?

Well if they did, that would be your expectation with an ETP, but then, that's all the upside you could ever expect from an ETP: Whatever the underlying is doing.

MSTR has the ability of provide a Bitcoin conduit to the bond market, and because of their positioning, they will always be the premier provider in that space, even if others come along as well. And that's about a 100B a year market. MSTR, also, due to the fact that it's mechanically decoupled from its NAV, has greater volatility, that makes its options more valuable, which in turn further contributes to its volatility, and further increases its option value, and its trading depth. It's this volatility that allows MSTR to offer a bond with no coupon and a 55% convert price. So they are selling tomorrows prices, to the bond market today, buying Bitcoin at today's price at 0% interest, and no collateral. As Saylor says, they've built a Bitcoin transformer that takes raw BTC and creates low vol BTC for the bond market, and high vol BTC for the equities market.

Now all of that is functionality that an ETP lacks. Is that functionality worthless? The real question here is what is a fair NAV multiple for MSTR, and I think it's at least two. But like I said before, during a bull run it'll blow out, and during a bear cycle it'll compress. But as the market comes to appreciate the situation, that compression will probably lessen.

i think the market could also be valuing them being such a large BTC holder in the future. they may be able to make money lending it or doing all kinds of creative things

thats a very good question
their business is long time dead in the water

Then again why just not buy BTC straight or a BTC ETF? In fact buying MSTR today is buying BTC future volatity on steroid, up or down. The NAV premium of 2x, 3x or more is actually imbeded in the MSTR price. The strategy is good for people who buy MSTR now. The professor is right!

There is actually a difference between a Pyramid scheme and Ponzi scheme .

I bought Microstrategy not because I wanted it but because I couldn’t buy bitcoin ETF’s with my pension and ISA accounts. And UK banks blocked transactions to crypto exchanges.

Turned out to be a blessing in disguise.

ponzi or no ponzi?

to answer that, In my mind there is only one question that needs to be asked...(and answered)

the business model of mstr is based on the belief that btc will continue to go up (and correctly so, based on the laws of supply and demand)

If this scenario plays out, and IF mstr stopped raising new money...

IS IT GUARANTEED THAT MSTR WILL COLLAPSE?

if a collapse is inevitable, then it is a ponzi scheme.

This guy rocks….😊

18minutes in, it's Rajat who doesn't understand what Meldrum is saying.

One huge thing that’s missing in addition to your assessment is MSTR offers or will offer a valuable product! Fixed income assets is a huge industry! I worked for an Annuity/ Life wholesaler, and this competitive product is extremely valuable for hedging.

To say an asset will infinitely go up is absolutely delusional 😂 you and many others are going to get wrecked

If you want a leveraged play on bitcoin do it yourself with options.. And etf fees? Wtf? Etf fees are multiples lower than the runnings of MSTR.and the share issuances to themselves.

You keep forgiving this by highlighting that bitcoin is increasing. The underlying is irrelevant. The comparison should be between an etf and MSTR. Mark is right, it requires continued bond issuances to make the last in whole, and a lot of it. Sure, the last in might be OK over time, but for them OK is 10x worse than if they'd bought an etf outright.

Glad that I found your channel.

Is this video a click bait? yes it is!

Let me tell you one thing. Bitcoin is garbage and no matter what Sailor says it will remain garbage. Wait until he has to bail out like he did a few months ago. Does not matter how many bitcoin they own. It has no real value.

The details dont matter, the problem is their whole business model : you lend them money, they just buy Bitcoin in the hopes of making more money. it's pathetic

The Price per share in the future will go up, if investor can convert the debt into shares with predefined value of $300 per share, do you think in the time of maturity of 5 years, the price per share is still $300 or low...I don't think so, it is so much higher than that.

I am a mstr bull and im 85% allocated, but you keep saying they forget that btc price will rise and the nav premium will collapse to 0. That's not the point. The point is that if you take the same money and invest directly in btc, you would have gotten 200% gain when btc goes up 3x. While if you put the money into mstr, you would have broken even, with 0% gain

If Mark is right, then Microstrategy's CB holders are all idiot chumps. How did so many chumps get to have some many billions of dollars, and Dr. Mark not?

Using the 0 interest loan to buy bitcoin now and payback several years later, it's a formula not going to lose because bitcoin will raise couple of hundred % by the time the bond is due. As long as bitcoin is doubling every few years.

BTC is a Ponzi scheme

Yes

This is a pyramid scheme, not a ponzi scheme. And bitcoin will never be a currency because it's unstable. No retailers, landlords, or service providers will accept money that can dramatically shift in value within days. Or even intraday. Crypto bros are gullible

Saylor knows he won't be able to accumulate at the rate he is currently forever. He has described his model of accumulation and how it will go down over time, but he also has described plans for utilizing the company's current Bitcoin holdings to gain a yield. He knows the company will need to be more than a one trick pony to survive. People who don't take the time to really understand this are just going to assume it is a one trick pony.

So think about it.. there is a new cohort of indirect investors (Convertible debt investors) helping to increase the demand for BTC. In addition to the 10 Bitcoin ETFs, new vehicles and derivatives being created for BTC - insatiable demand for BTC, new companies adding BTC to their treasury and nation states buying bitcoin. Coupled with the fact that the emissions is systematically dropping every 4 years and ytd interest expense for the US just passed a Trillion dollars - massive dollar printing and treasury selling . Additionally government policies and cabinet picks are very pro-bitcoin. Very bullish for Bitcoin and MSTR.

Bitcoin is one of the very few instruments that demonstrates a smile volatility and if anything is actually more skewed to the upside.. normally volatility increases with asset price drops.. with BTC it is different vol is increasing with BTC going up.

My simple take on it is that MSTR is or will soon become the biggest public company owner of BTC, and building a track record and reputation, as well as a customer and referral base, as a company that will make the most useful and greatest volumes of BTC back products for institutions and large private customers. It will essentially become the investment banker for BTC products, wish traditionally exorbitant, Wall Street investment bankrupt fees, constantly accumulating bitcoin for the MSTR treasury in the process. That is what people knowingly or knowingly paying the premium for.

"Bitcoin will rise in price because its a finite asset" Dude whaaat. Just because something is finite doesnt mean its going to get more expensive. This is the dumbest argument Ive ever heard...

The fatal flaw in his argument is not the math, the math is correct. It is assuming that the bond buyers want bitcoin. They don't want bitcoin, they want the options and features in the convertible bond coupled with the volatility of Bitcoin/volatility of MSTR. This is a nuanced derivatives scheme and can't be seen through the lens of an alternative path to Bitcoin.

Additionally, for companies like insurance companies... there is a big difference in holding BTC on their balance sheet vs a convertible bond from a regulatory and operating perspective at this time. That difference may fade in the future, but for now, big difference.

Everyone seems to forget the cyclical nature of the crypto bull run. Mstr simps are in for a lot of pain in the next 10 months.

Rajat, why is the bitcoin in microstrategy worth so much more than a normal bitcoin? Why are you paying 3x the price for a bitcoin by buying MSTR?

Its always the people with zero education in BTC that say the dumbest shit. AND to an audience! Sad

Mark put out a second video that does have some good points, 1 the purchasers of the bonds are shorting mstr in order to remain Delta neutral, mstr is also selling more shares into the open market, 2- all the Bitcoin they own is essentially collateral for the bond holders that are lending the money in exchange for a free call option, net bottom line, the share holders are getting the short end of this trade

He didnt say ponzi…he said pyramid…my goodness.

LOL Just skimmed this, but comparing MSTR to US treasury levers and calling them a ponzi scheme is a hilarious fallacy my friend. The government issues bonds and prints currency to build infrastructure and support public programs, Saylor issues equity and debt to buy a piece of computer code that has no utility, there is a stark contrast here. If the gov raised those funds to sit and collect dust or even burn them then you might have an argument. That being said, I do agree with your point that MSTR is not quite a ponzi currently as there is a somewhat legitimized asset backing the debt and the value of the shares (at a premium of course). However if BTC has a huge pullback or extinction level event it quickly becomes one, as you need to raise more debt/equity to pay back loans from earlier bond holders that weren't converted and the ponzi cycle begins.

hey Rajat. mark actually did a follow up video maybe you should respond to that one too.

YES its very Similar to a PONZI. SO Short MSTR thru MSTZ up 27% Today

Someone take this guys CFA away LOOL