Many crypto investors are accustomed to collateralized lending such as margin in a brokerage account, perpetual futures, DeFi loans, yield farms, and other secured loans. In trust-minimized ecosystems like crypto, borrowers must give lenders some type of assurance that they will repay and almost always, that assurance takes the form of collateral.

A collateralized loan usually has a liquidation price, a threshold that allows the lender to sell the collateral on an emergency basis to repay the borrower’s obligation before asset prices collapse further.

Using this mindset, investors see MicroStrategy’s $7.2 billion in debt and 439,000 bitcoin (BTC) in available collateral and automatically assume that the company must have some sort of liquidation threshold on its debts.

Their suspicion has historical precedent. Indeed, MicroStrategy almost hit some of its liquidation triggers just two years ago — shortly after the collapse of FTX in November 2022.

At that time, MicroStrategy had outstanding debts to lenders secured by some of its BTC holdings. Fortunately, the price of BTC stopped its crash above $15,000 and never cascaded into the single digits that would have triggered liquidations.

Calculating the BTC price that would liquidate MicroStrategy

Fast forward to today, MicroStrategy currently has $46 billion in BTC yet has $7.2 billion in debt. It bought its 439,000 BTC at an average price of $61,725.

The question in the minds of many investors is simple: If BTC falls below $61,725, will progressively lower prices trigger a series of liquidations of MicroStrategy’s bitcoin?

At today’s market prices above $100,000 per BTC, MicroStrategy obviously has no liquidations to worry about. If the company were to sell just 15% of its BTC at today’s prices, it could easily pay off all of its outstanding debt.

However, with Bitcoin enthusiast Michael Saylor pulling the strings as executive chairman and a consistent decline at its legacy software business, it has no plans to sell any coins.

If not $16,500, then what?

Stonewalled with a rigid buy-and-hold corporate approach to BTC, MicroStrategy seemingly has the risk that its assets could be liquidated. For example, CryptoQuant CEO Ki Young Ju used elementary math to allegedly estimate MicroStrategy’s liquidation price as $16,500 per BTC.

However, that is as simplistic as it is incorrect. In truth, MicroStrategy doesn’t have any liquidation price.

Unlike at other times in MicroStrategy’s history, all of the company’s debt is now unsecured. Its creditors don’t hold any BTC as collateral and they have no power to force Saylor to sell any of it.

Lenders have simply accepted MicroStrategy’s promise to repay and most have accepted two types of principal repayment upon maturity: cash or MSTR shares.

Moreover, they have agreed to multiple years of debt term, delaying principal repayment for many years provided that MicroStrategy services the loans with small, quarterly interest payments.

So far, Saylor has been able to raise plenty of this type of debt at increasingly favorable interest rates — all the way to 0% on one of its recent rounds.

Using the proceeds of these debt offerings to buy BTC has so far been an excellent choice. With the currency trading near all-time highs, MicroStrategy’s outperformance recently earned the NASDAQ 100’s blessing as a new index constituent.

Read more: What is the next MicroStrategy catalyst after NASDAQ 100?

Obviously, a BTC collapse could cause panic among shareholders or lenders and force MicroStrategy to negotiate. However, there’s no particular price at which MicroStrategy must liquidate BTC.

It has approximately $7 billion of outstanding debt that matures in increments of a few hundred million dollars approximately once per year for the next decade. In the meantime, it only needs to make nominal interest payments and have sufficient cash upon principal maturity if a lender chooses to not elect conversion into MSTR shares.

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A rumor is circulating that MicroStrategy (MSTR) may not sell shares “at the market (ATM)” or issue new convertible debt in January to fund bitcoin (BTC) purchases.

If true, the blackout would devastate a large and growing community of Irresponsibly Long MSTR investors who have come to expect weekly BTC buys from Executive Chairman Michael Saylor.

The claim that MicroStrategy is entering a month of zero convertible debt offerings originates from a venture capitalist who claimed today that Saylor “has a blackout period all of January — cannot issue any new converts to buy BTC.”

Confused investors immediately asked for a source to verify the claim.

Some impromptu researchers speculated that the alleged prohibition against issuing new convertible debt relates to rules governing insider trading. Although the Securities and Exchange Commission (SEC) doesn’t prohibit trading by insiders between the close of a fiscal quarter and the filing of earnings, assuming all disclosures are otherwise up-to-date, many companies self-impose a blackout period as a sort of Wall Street custom.

Read more: MicroStrategy dilutes its shareholders to buy more bitcoin

Self-imposed blackout periods for insider trading

Blackout periods are usually two weeks to one month in length, and most companies re-allow insider trading within two days of quarterly earnings announcements. These self-imposed blackout periods help companies avoid suspicions that its employees are using non-public information to their advantage.

Other researchers speculated that the blackout precluded ATM share sales, not convertible debt issuances.

Still, others guessed that the blackout period actually has nothing to do with insider trading rules but rather committee recommendations pursuant to MicroStrategy’s December 23 addition to the NASDAQ 100 index.

In any case, MicroStrategy has regularly scheduled earnings within the range of February 3-5, 2025. Some believe that a blackout period will last the entire month of January or for just 30 days prior to its earnings call. Others believe the blackout will start on January 14.

Some doubt there is any blackout period whatsoever.

Ultimately, any blackout period is self-imposed so its imposition and duration occur at the discretion of MicroStrategy’s board of directors. The aim of the blackout period is to remain above reproach and ensure compliance with regulation fair disclosure to public investors.

Protos has reached out to MicroStrategy for clarification regarding the terms and dates of any January 2025 blackout period and will update this article if and when we receive a response.

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MicroStrategy founder Michael Saylor is planning a New Year’s Eve party in Miami Beach to celebrate his bitcoin (BTC) successes. Guests will celebrate his firm’s rally to an all-time high, its entrance into the NASDAQ 100 index, BTC surpassing $100,000, and Saylor becoming a deca-billionaire for the first time.

He will host the black tie affair at his mansion.

Although the event’s guest list is private, hundreds want in. Fans on X are already vying for spots and people are already complaining that their invitation hasn’t yet arrived. For most MicroStrategy investors, it probably never will.

Saylor floated plans for a BTC $100,000 party as early as November 2021 during its previous, $69,000 high. Although some had hoped to attend that party in early 2022, the collapses of Three Arrows Capital, Terra LUNA, Celsius, Voyager, and FTX obviously delayed those plans.

He has reiterated that promise over the years, including on the day BTC reached the magic $100,000 mark: December 5, 2024.

Manifest destiny and Saylor’s Great Gatsby party

Saylor recently likened BTC’s success in the US to manifest destiny, the imperialist belief that justified conquests and enslavements by white settlers in the 1800s.

Fans thoughtlessly used puns to raise their hand for Saylor’s party.

Read more: MicroStrategy bulls think Michael Saylor can pump it to 10X its BTC

Saylor recently teased his party on live television. After accepting CNBC’s congratulations for his management of MicroStrategy in 2024, Saylor praised President-elect Donald Trump’s appointments of digital asset-friendly chiefs at key regulatory agencies like the Treasury and Securities and Exchange Commission.

He also gushed about the incoming conservative majority, saying, “The red wave is incredibly auspicious for Bitcoin and for the entire crypto industry.”

He then agreed to host the BTC celebration party on New Year’s Eve. It will be, as he’s promised, very expensive.

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MicroStrategy has disclosed the acquisition of a further 15,350 bitcoin (BTC) using $1.5 billion raised from dilutive share sales. In total, the company now owns 439,000 BTC acquired at an average cost of $61,725 apiece.

Unfortunately, the 10-figure purchase did little to pump the company’s share price. MSTR is up about 4% since Friday, tracking BTC’s gain over the same time period. However, with BTC currently trading near its all-time high above $106,000, many shareholders are becoming impatient with MicroStrategy’s downside volatility.

Unlike BTC, MSTR is nowhere close to its all-time high. Although the stock is one of the best-performing large-cap stocks this year, it’s one-fifth below its November 21 pre-market print of $548.20.

Around that time, Saylor also lost voting control over MicroStrategy. He’s now a minority voter and chairman, prohibited from serving as the company’s CEO due to a 2022 legal settlement.

MicroStrategy dilutes shareholders, boasts of accretive yield

Some shareholders are growing weary of Saylor’s strategy of selling shares “at the market (ATM)” — i.e. at prevailing market prices, with no discount — in order to acquire more BTC.

Saylor has announced $21 billion worth of ATM sales in his current round of financing, which is still underway.

These sales instantly dilute shareholders while simultaneously increasing the company’s BTC holdings — assuming all of the proceeds are used to acquire BTC, which has been the case in recent months.

Although Saylor’s ATM strategy is a confusing transfer of money from one pocket to another, many bulls believe in MicroStrategy’s promise of “accretive dilution.” Because MicroStrategy trades at a premium to its BTC holdings, the company is able to capture a percentage of this premium through dilutive share and debt offerings.

As a result, the company has historically accreted BTC on a dilution-adjusted, per-share basis.

Since the start of the year, MicroStrategy has added 72.4% more BTC per MSTR share, even after accounting for dilution of currently outstanding obligations.

At the time of its $548.20 all-time high, MicroStrategy’s premium to its so-called net asset value, or “NAV premium,” exceeded 3.4X. It has fallen ever since and is currently at 2.22X.

In other news, on late Friday evening, Saylor received NASDAQ committee approval to join its prestigious, eponymous Nasdaq-100 index. Its addition as a constituent grants it active and passive flows from indexation, including mutual funds and ETFs like QQQ.

On January 1, the company will also benefit from a FASB rule change that will allow it to report gains on unsold BTC.

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At the 4pm close of trading in New York, MicroStrategy will hear the determination of its highly anticipated bid to join the prestigious NASDAQ 100 index. The well-publicized event has already attracted bids from investors who view MicroStrategy as highly qualified for approval.

After the NASDAQ committee’s announcement, there are a variety of other catalysts on the horizon for MicroStrategy, including year-end tax loss harvesting, the presidential inauguration, and quarterly earnings announcements.

However, in addition to these, there’s also an idiosyncratic catalyst on its near-term calendar: a bitcoin (BTC)-specific, Financial Accounting Standards Board (FASB) rule change.

The FASB establishes generally accepted accounting principles (GAAP) for US public companies and maintains financial accounting and reporting standards for Securities and Exchange Commission (SEC) filings.

In its rulebook, the FASB forces public companies to treat BTC assets in a manner that disadvantages MicroStrategy on its balance sheet and earnings reports.

Specifically, the FASB has categorized BTC as an “indefinite-lived intangible asset.” As relevant to financial reports, this designation requires a public company to permanently mark down the value when its BTC declines in USD price.

Read more: MicroStrategy bitcoin purchases aren’t stopping premium decline

Rather than an asset on a balance sheet that can subsequently increase in value, the FASB has only allowed BTC losses to pass through as an expense/loss on the income statement.

MicroStrategy CEO Michael Saylor had been lobbying the FASB to change its BTC accounting rules for years. The board has agreed to implement his suggestions starting January 1, 2025, per rule change ASU 2023-08.

No more permanent mark-downs for bitcoin

As a result, MicroStrategy will soon be able to list its bitcoin holdings on its balance sheet at its current USD value — including increases from quarter to quarter.

Read more: MicroStrategy’s average bitcoin purchase price exceeds $58,000

On its first-quarter income statement — and every quarter thereafter — the FASB will finally permit MicroStrategy to list both positive and negative price changes of its bitcoin since the start of each quarter.

In addition to enhanced transparency and a standardized number on MicroStrategy financials that quantitative traders can easily compare across thousands of stocks, this FASB rule change will also impact another catalyst.

By allowing MicroStrategy to recognize its USD gains from BTC’s appreciation, these values will improve MicroStrategy’s candidacy for other indices that use GAAP reporting standards, including the world’s largest index, the S&P 500.

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The higher MicroStrategy (MSTR) climbs, the more eyes it attracts. As the company’s market capitalization has swelled, veterans of finance are questioning its growth prospects — including some of its fans’ unique or redefined financial terms.

For example, a chartered financial analyst created a video questioning whether MicroStrategy’s supposed “bitcoin (BTC) yield” metric might have pyramid scheme mechanics. Many other critics have called the Michael Saylor-led BTC acquisition company a type of pyramid scheme.

Unlike a pyramid scheme, however, MicroStrategy doesn’t guarantee returns, distribute dividends, promise earnings from equity investment, or make any payouts to later investors from the proceeds of earlier investors.

Still, some critics are simply convinced that something must be wrong. Indeed, Ben Hunt laughed at a MicroStrategy investor redefining a conservative, 5% interest on cash equivalents as meaningful “earnings.”

Casting the claim as representative of deluded mania among MicroStrategy bulls, he flagged the irresponsible idea that such interest should deserve any earnings multiple whatsoever, let alone a 50X multiple.

MicroStrategy bought 423,650 BTC on incredible leverage

Investors who bought in early to MicroStrategy’s BTC-gobbling journey are certainly enjoying a meteoric rise; shares are higher even than its dot com bubble peak. MSTR is up 530% year-to-date and has a NASDAQ 100 index inclusion decision scheduled for tomorrow at 4pm New York time — a possibly bullish catalyst. 

Skeptics think investors coming in now, however, are late to the party and might be left holding the bag.

MicroStrategy has made no secret of its primary operation as a corporation: acquiring large amounts of BTC using leverage. Most recently, it funded the purchase of 21,550 BTC.

In essence, MicroStrategy diluted its own stock to buy more BTC at close to the currency’s all-time high.

A slide from MicroStrategy’s third-quarter investor meeting describes its strategy as “intelligent leverage.” It says the company’s BTC holdings increased from 189,150 to 252,220, a 33.3% jump.

During the same quarter, the outstanding assumed diluted shares increased from 20,764,000 to 23,510,000, a 13.2% increase.

Despite this dilution, in MicroStrategy’s view, its “assumed diluted shares” have actually increased its BTC holdings. Thanks to investors bidding a premium for MSTR above and beyond its BTC holdings, the company’s ability to sell shares and convertible debt to capture that premium allows it to accrete BTC on an assumed diluted share basis.

Read more: Why is MicroStrategy nowhere close to its all-time high, unlike bitcoin?

Skeptics see doom on the horizon for MicroStrategy

Of course, if or when MSTR’s premium to its BTC holdings were to ever collapse, this mechanism would cease to function. As long as MSTR trades at a premium to the company’s BTC, however, the company can continue to accrete BTC on a fully diluted basis.

For many years in the future, MicroStrategy also has to repay its loans via repayment to lenders in cash or stock. If it cannot pay those loans off, lenders are senior to shareholders.

Bears think these future debt obligations are a serious concern. Bulls consider these loan amounts — typically in the high hundreds of millions or low billions of dollars per year for the next few years — as negligible obligations for a company whose market capitalization is now $94 billion.

MicroStrategy is staking its future on BTC’s ability to continue to appreciate. Skeptics think CEO Michael Saylor is the leader but his shareholders are the sucker at the table.

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MicroStrategy acquired another $2 billion worth of bitcoin (BTC) last week, but it hasn’t helped investors regain last month’s confidence. The premium shareholders place on its stock is at a two-month low, and its share price is 30% off its all-time high from November 21.

MicroStrategy has a small software business, yet most investors calculate its value as a multiple of its BTC holdings. To that end, on November 20, the company owned $31 billion of BTC yet traded at a $106 billion market capitalization — a generous, 3.4X premium.

At publication time, that multiple has declined by one-third to 2.2X.

Over the past three weeks, bullish traders have claimed price targets for MicroStrategy upwards of 10 or even 100 times higher than current prices. Some believe the company can somehow eclipse the value of BTC itself.

There are believers that the company’s dilutive share and debt offerings are accretive on a dilution-adjusted basis — even though most of their calculations exclude some of the company’s future obligations.

As MicroStrategy premium slides, skeptics pile on

Skeptics are as prevalent as optimists, however. Short-seller Andrew Left has bet that the company is overvalued, and many others think the stock exhibits bubble characteristics.

Read more: Why is MicroStrategy nowhere close to its all-time high, unlike bitcoin?

Last week, MicroStrategy used more proceeds of dilutive offerings to acquire 21,550 additional BTC at an average purchase price of $98,783 per coin. The company owns 423,650 BTC, worth $41.5 billion at publication time. Its current market capitalization is $89 billion.

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During a recent appearance on a Yahoo! Finance podcast, Michael Saylor called for investors to dump gold and buy bitcoin (BTC). This time, he escalated his plea to treasury secretaries and central bankers.

He jeered at the owners of the gold in large banks, including sovereign treasury funds and central banks, for failing to adopt BTC as the “world’s reserve capital network.” He also suggested the US should somehow dump its gold, purposefully crashing its price, and then use the proceeds to acquire approximately 5 million BTC.

With incredible clarity, Saylor advised the incoming US administration to “buy 20-25% of the BTC network on behalf of the US government. Catalyze the development of that world reserve capital network. Then let all the Chineses and Russians and the foreigners sell all their other assets and buy BTC – and then that money flows into the United States.”

He went further, advising the US government to dump all of its gold and somehow “demonetize” gold entirely in favor of BTC.

Dumping gold for BTC

Saylor’s plea echoes a 2020 ad campaign by Barry Silbert’s Grayscale. 

Four years ago, Grayscale encouraged retail gold owners to sell their gold for BTC — specifically, its Grayscale Bitcoin Trust (GBTC).

The Drop Gold campaign poked fun at precious metals as a relic of the past, burdening investors with weight and underperformance. Like Saylor, Grayscale claimed that BTC offered better scarcity plus superior utility in the modern world.

Read more: CHART: Bitcoin makes up 52% of $3.9T global crypto market cap

However, like Saylor’s advice for gold owners, the Drop Gold campaign wasn’t particularly popular. Many critics called it a variation of the World Economic Forum’s “you will own nothing and be happy” meme.

In other words, BTC cheerleaders like Saylor allegedly push commoners to liquidate real assets like gold and buy virtual assets of which unlimited variations can be invented by the ruling elite.

MicroStrategy is a BTC treasury company that acquires BTC on debt and leveraged equity products. As of the close of trading Friday, its market cap was 2.3X its 402,100 BTC holdings.

MicroStrategy investors refer to this multiple as the company’s “NAV premium.”

Recently, some investors started shying away from MicroStrategy shares, causing a dip in its share price.

The company closed Friday’s trading session 27% below all-time highs. Its market cap-to-BTC premium has similarly declined from its 3.4X high to Friday’s 2.3X.

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As bitcoin (BTC) surpassed $100,000 and hit an all-time high on December 4, many MicroStrategy (MSTR) investors were hoping for their bags to levitate. Unfortunately, their shares — along with those of the company’s CEO Michael Saylor — dipped considerably the following morning.

MicroStrategy is a BTC acquisition company that is primarily valued on a multiple of its BTC holdings. Its shares trade independently of BTC in the market based on sentiment, supply, and demand. MSTR closed at $406 on Wednesday but fell another 4.8% by Thursday.

That close logged an embarrassing 28% retracement from the company’s $543 all-time high on the same day that BTC achieved its own peak.

Granted, that decline roughly matched BTC’s decline over the same period. However, price tracking doesn’t reassure investors who hope for MSTR’s outperformance.

MicroStrategy is supposed to, in the minds of many investors who knowingly bought its shares at a premium multiple on its assets, somehow increase that multiple for long-term investors.

Currently valued at 2.3X its BTC holdings, MSTR traded at 3.4X as recently as November 20. Bullish investors hope to see that number reach high-single if not double digits.

Read more: Michael Saylor has lost voting control of MicroStrategy

How much is bitcoin ‘yield’ worth?

Despite MicroStrategy’s disappointing Thursday, the company and its CEO definitely have their fans. Many remain enthusiastic about what Saylor refers to as “bitcoin yield,” which seems to work differently to the financial industry’s definition of yield.

BTC, of course, doesn’t offer native yield, emissions, earnings, or dividends. MicroStrategy claims to harvest yield, however, from bond markets and arbitrage strategies to the benefit of its shareholders.

Anyway, excluding certain future obligations, Saylor boasted yesterday that he accreted 63.3% more BTC per assumed diluted share outstanding of MSTR since the start of 2024. Unfortunately, that factoid didn’t prevent a pre-market flash crash from $443 to $379, nor did it prevent shares from ending Thursday’s session 4.8% lower than the prior day’s close.

Read more: Bitcoin has hit $100,000 and is the world’s 7th largest asset

Some bullish traders name their Saylor fan clubs with degenerate self-awareness and resort to hyperbole. One fan refers to MicroStrategy as “the new Federal Reserve.” Many praise Saylor’s indiscriminate hoovering up of BTC at any cost with vague, future hopes of financializing its trove via “bitcoin bank” services — whatever that means.

MicroStrategy’s dependence on BTC has caused it problems before. In 2022, Michael Saylor resigned as CEO. A major reason for the resignation? A quarterly report containing $917 million in BTC impairment losses.

Since then, however, and as a mere non-executive chairman, Saylor has turned that investment around and become the best-performing large-cap stock on US markets. MSTR is up over 500% this year and now ranks among the top 50 companies in the Nasdaq-100 (QQQ) index.

In total, it has earned an impressive 68% return on all of its BTC purchases to date.

In fact, the NASDAQ 100 committee is considering rebalancing its index to add MicroStrategy as a constituent. News of that decision will arrive by December 13.

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The average price MicroStrategy (MSTR) paid for its bitcoin purchases has risen to $58,263. Through tens of billions of dollars in dilutive and convertible stock offerings, the company has acquired 402,100 bitcoin – mostly in exchange for debt and future shareholder dilution.

Excluding those future obligations, CEO Michael Saylor boasts that the company’s currently outstanding shareholders have earned a yield of 38.7% during the month of November. This figure is calculated by dividing MicroStrategy’s bitcoin by its “assumed diluted shares outstanding,” a proprietary metric that excludes a variety of future obligations – especially if MSTR rallies above the conversion prices of debtholders.

The yield impresses his investors, nonetheless, who see MicroStrategy’s ability to tap corporate debt markets as a unique method to purchase bitcoin on a dilution-adjusted basis. 

Some members of the self-aware fan club, Irresponsibly Long MSTR, go way beyond Saylor’s bullish projections of $180,000 per bitcoin near-term and $13 million by 2045. Its most degenerate and hyper-bullish members think that MicroStrategy’s market cap could even exceed bitcoin itself.

Michael Saylor earns billions personally this year amid bitcoin rally

Substantially all of Saylor’s wealth derives from owning a large stake in and operating MicroStrategy, the firm he founded decades ago. Forbes estimates Saylor’s personal net worth at $9.2 billion. Bloomberg does not estimate his net worth on its Billionaires Index, which lists its estimate of the world’s 500 richest people that ends at $6.35 billion.

As of publication time, MicroStrategy’s market capitalization is $86 billion, a 2.2X premium on its $38.2 billion worth of bitcoin holdings.

Although the stock is up an impressive 480% year-to-date, its multiple on its bitcoin holdings has fallen considerably from its all-time high of 3.5X premium on November 20.

Read more: What happens if MicroStrategy can’t sell enough bitcoin to repay lenders?

That MicroStrategy even trades at a premium to its bitcoin holdings still mystifies many financial commentators. “There is no downside!” wrote Jason Calacanis regarding Saylor’s strategy, sarcastically. “The best strategy humanity has ever created,” wrote another with equivalent sarcasm. “Using endless leverage never ends well,” said another.

There are several catalysts on the near-term horizon, including continued bitcoin purchases using its previously announced $42 billion capital raise. Moreover, MicroStrategy is hoping to gain exposure to passive investment flows through indexation. For example, a snapshot occurred on November 29 for its ability to join the prestigious NASDAQ 100.

A decision about that index inclusion will occur on December 13. If approved, it would actually join the ‘QQQ’ on December 20.

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