MicroStrategy has transformed itself from a vague tech company into something resembling a bitcoin fund with a NASDAQ ticker. Since 2020, under the leadership of founder Michael Saylor, the company has amassed over 330,000 bitcoin.
From my perspective, it resembles the most valuable “worthless token” ever: an American tech stock. But how much “tech” is really left in MicroStrategy’s business?
Its original services seem almost irrelevant now. Today, it functions more like a bitcoin holding company, with its stash custodied by Coinbase and Fidelity—two firms deeply embedded in the American financial system.
This raises an interesting question: is MicroStrategy a stepping stone or the step toward an official U.S. bitcoin reserve, akin to the country’s strategic reserves of oil and grain?
How Does MicroStrategy’s Strategy Work?
Since 2020, MicroStrategy has pursued a strategy that is both admired and criticized. What began as a business intelligence software company has evolved into one of the largest institutional holders of bitcoin. Their approach is aggressive, calculated, and undeniably risky.
Bitcoin as a treasury reserve
MicroStrategy saw bitcoin as a way to protect its balance sheet against inflation and fiat currency devaluation. The company decided to make bitcoin its primary treasury asset, replacing cash and traditional investments to preserve value in a world of ever-expanding money supply.
Aggressive acquisitions
The company has purchased hundreds of thousands of bitcoin since 2020. Recent buys of more than 55,000 bitcoin show no signs of slowing down.
Financing through debt and equity
To fund these purchases, MicroStrategy issues convertible bonds—debt instruments offering investors fixed returns while also providing upside through the company’s stock price. They’ve also raised capital by issuing new shares, effectively leveraging their position further.
Bitcoin custody by third parties
Most of MicroStrategy’s bitcoin is stored with American custodians like Coinbase and Fidelity. While this provides accessibility and security, it also introduces dependency.
Leveraging risks
By using debt to purchase bitcoin, MicroStrategy amplifies its potential gains if bitcoin’s price rises—but equally increases its vulnerability during price drops. This makes their strategy particularly precarious.
For Saylor and MicroStrategy, there is no turning back.
Is MicroStrategy a Stepping Stone to a U.S. Bitcoin Reserve?
With over 330,000 bitcoin in its treasury, it’s worth asking whether MicroStrategy is a preview of what an official U.S. bitcoin reserve might look like. The idea isn’t far-fetched. The United States already holds strategic reserves for oil, grain, and gold—why not bitcoin?
Senator Cynthia Lummis has already advocated for adding bitcoin to the country’s national reserves. Even former President Donald Trump flirted with similar ideas during his campaign. MicroStrategy, with its bitcoin securely custodied by American firms like Coinbase, seems to pave the way for a future where national bitcoin reserves could become a reality.
But there’s a paradox. While bitcoin represents independence and sovereignty, MicroStrategy relies on third-party custodians operating squarely within U.S. regulatory frameworks. How “bitcoin” is this strategy, really, if control ultimately rests with the very institutions bitcoin aims to circumvent?
The Illusion of Free Money
MicroStrategy’s stock price has skyrocketed since 2020, but this success is entirely tied to bitcoin’s price. Herein lies the danger. Markets seem to believe MicroStrategy will forever outperform bitcoin, as though it offers magical, endless returns. This belief is a dangerous illusion.
If you truly understand bitcoin, why take these roundabout paths through the fiat system? Why use leverage and increase dependency when bitcoin itself is the antidote to such risks? It feels like a gamble that grows riskier with every price increase.
For some, MicroStrategy might be the only viable way to gain bitcoin exposure, but betting on this stock is, for me, a bridge too far.
We’ve Seen This Before
While MicroStrategy’s scale and leverage are unique, the idea of using bitcoin as a reserve asset isn’t entirely new. Consider Terra’s ill-fated attempt to do something similar with its algorithmic stablecoin, UST.
The UST and LUNA experiment:
The mechanism: UST was designed to maintain a $1 value through a system where UST and LUNA (Terra’s native token) could be exchanged.
- If UST rose above $1, LUNA was burned to mint new UST.
- If UST fell below $1, UST was burned to mint new LUNA.
- To bolster confidence, Terraform Labs purchased billions of dollars in bitcoin as a decentralized reserve. But this reserve backfired when UST lost its peg.
Why it failed:
- Systemic weakness: When UST began depegging, the reserve had to sell bitcoin en masse to defend the peg, causing a downward spiral in both UST and bitcoin prices.
- Reliance on LUNA: The entire mechanism depended on trust in LUNA, which collapsed during panic selling and speculation.
Lessons for MicroStrategy
Though MicroStrategy’s approach is simpler—buy and hold bitcoin—it shares key vulnerabilities with Terra. Both rely heavily on bitcoin as the foundation of a larger financial experiment. Terra tried to use bitcoin reserves to stabilize UST, while MicroStrategy uses bitcoin to hedge against fiat inflation.
The difference? MicroStrategy isn’t experimenting with complex algorithms or market psychology. However, Terra’s collapse demonstrates how risky it is to lean too heavily on bitcoin within a leveraged structure.
Hero or Illusion?
Michael Saylor is often hailed as a savior of bitcoin. But are there really any “bitcoin heroes”?
How “bitcoin” is Saylor’s strategy, when the holdings are stored with companies like Coinbase and Fidelity, firmly within government oversight? This isn’t an anarchic experiment but a financial play deeply rooted in traditional systems.
Perhaps MicroStrategy is a bridge to broader adoption, even by national governments. But it remains a step within a system bitcoin seeks to transcend.
Bitcoin is undoubtedly breaking through as a financial tool, but it might still be too soon to hoist the orange flags for Saylor and his company.
What Am I Missing?
Perhaps I’m overlooking something. Perhaps MicroStrategy really is a genius hack—a bridge between the old and new financial worlds. But it feels more like old wine in new bottles: a model that works as long as prices rise but crumbles just as fast when they fall.
One thing remains clear: anyone who truly understands bitcoin knows the answer starts with personal responsibility—not with stocks, loans, or reliance on third parties.