:....New Year's Eve at Villa Vecchia is a delirious blur of orange and gold, a scene straight out of F. Scott Fitzgerald's most opulent fantasies. More than 500 people crowd onto the manicured lawns of the century-old Miami Beach estate with its Versailles-inspired ballroom that once welcomed luminaries including Margaret Thatcher, Henry Kissinger and Mikhail Gorbachev.
Bitcoin’s recent surge past $100,000—not the dawn of 2025—is the real raison d’être for the bash. Servers glide around with champagne on silver trays, hors d’oeuvres are stamped with the omnipresent B and dancers in golden bodysuits undulate with glowing orange orbs in homage to bitcoin's signature hue. At the center of the garden looms a massive playing card, the king’s face replaced with a brazen B.
On the water, the party continues aboard the Usher. The 154-foot superyacht, which was featured in the 2015 film Entourage, glistens against the Miami skyline. A constant stream of shuttles disgorges an unending parade of bitcoin executives, influencers and, most importantly, institutional investors, all decked out in “bitcoin chic” (tangerine suits, B-logo bling). Two giant projectors flash clips forecasting bitcoin’s rise into the millions, while a DJ clad in a space helmet directs bass-heavy tracks between the swaying palms.
“I kind of feel a little sick of winning,” quips one reveler in a black cap emblazoned with SATOSHI NAKAMOTO—the handle of bitcoin's anonymous creator. The partygoers all have crypto cred: The guy in the Nakamoto hat is David Bailey, the 34-year old CEO of BTC Inc., publisher of Bitcoin Magazine, who hosted the Bitcoin Conference in July at which Donald Trump vowed to make America the “crypto capital of the planet” and establish a national bitcoin stockpile.
> "I invented 20 things, tried to make them successful and really didn't change the world with any of them. Satoshi created one thing, gave it to the world and disappeared. It's made me more successful than every one of my ideas."
Villa Vecchia’s owner and host, Michael Saylor, 60, moves through the revelry clad in his signature black blazer, blue jeans and T-shirt whose front sports (of course) a B. He graciously accepts handshakes and requests for selfies. Here, bitcoin is God—and Saylor is its prophet.
Crypto is a second coming of sorts for Saylor, given that he made and lost more than $10 billion during the original dot-com bubble. Back then, MicroStrategy, the Tysons Corner, Virginia-based software firm he cofounded in 1989 fresh out of MIT, was in the data mining and business intelligence software business before running afoul of the Securities and Exchange Commission over its accounting practices. In 2000, the company paid a fine, settled with the feds and restated its results for the preceding couple of years.
For the next two decades MicroStrategy languished with tepid sales and a market cap hovering around $1 billion. That all changed in 2020, when Saylor decided that going all in on bitcoin would be MicroStrategy’s core strategy.
Last year, after the SEC approved Bitcoin ETFs from giants like BlackRock and Fidelity, the cryptocurrency’s price skyrocketed, more than doubling over 12 months and breaking through $100,000 in early December. Just before Christmas, MicroStrategy joined the Nasdaq 100, spurring even more demand for its stock, which is up more than 700% in the last year, as it issued debt and accumulated more bitcoin (it now owns 471,107). Saylor’s company is now the largest holder of the digital asset outside of the elusive Nakamoto, who is said to hold 1 million tokens. During 2024, Saylor’s net worth jumped from $1.9 billion to $7.6 billion. A month into the new year he was worth $9.4 billion.
MicroStrategy’s eye-popping gains have stirred up a swarm of critics and short sellers unable to fathom how a tiny software company holding only $48 billion in actual bitcoin could have a market capitalization of $84 billion. But what Saylor’s detractors fail to understand is that MicroStrategy is brilliantly straddling two realms, one bound by the rules of traditional finance, in which companies issue debt and equity bought and sold by hedge funds, traders and other institutions, and the second governed by the faithful, unwavering believers in a better world brought to you by bitcoin.
The fuel propelling MicroStrategy’s success is its embrace and cultivation of volatility, the defining characteristic of its core asset. Volatility is anathema to traditional investors, but it’s a great friend of the options traders, hedge funds and retail speculators that have helped make MicroStrategy among the most active stocks in the market. With its relatively tiny annual revenue of $496 million, it has a daily trading volume that rivals that of any of the Magnificent 7 tech giants (Meta, Apple, Alphabet, Microsoft, Amazon, Tesla and Nvidia).
“People think that’s crazy,” Saylor says. “How can such a small company have that liquidity? It’s because we put a crypto reactor in the middle of the company, pull capital in and then we spin it. That puts volatility in the equity, and that makes our options and convertible bonds the most interesting and highest-performing in the market.”
Michael Saylor is 100 percent correct when it comes to the desirability of the $7.3 billion in convertible bonds his company has issued since 2021. Every minute of the trading day, MicroStrategy’s stock price is being amplified in real time by bitcoin’s constant gyrations, increasing what’s known as the implied volatility of the call option inherent in its convertible bonds. That’s because unlike straight bonds, convertibles give debt holders safety, with the option of exchanging their notes for MicroStrategy stock at predetermined prices until maturity. Every trader schooled in the Black-Scholes option pricing formula knows that high implied volatility increases the value of the option. Thus Saylor has been able to issue his convertible debt at almost no interest cost.
So far, MicroStrategy’s six convertible notes, issued with maturities from 2027 to 2032, have interest rates ranging from 0% to 2.25%. In public bond markets, where liquidity has been shrinking thanks to the boom in private credit, institutional investors are starving for excess returns. MicroStrategy’s bonds not only represent one of the only ways big investors like German insurer Allianz and State Street can invest in digital assets, but they’ve also been one of the market’s top performers, clocking returns in excess of 250% since issuance. Even the $3 billion five-year notes MicroStrategy issued in November, with their 0% coupon and strike price of $672 (80% above MicroStrategy's current share price) are up 89% in just a few months.
Saylor understands that institutional investors, who are measured against quarterly benchmarks, will keep buying his high-octane paper to boost their portfolio returns. Issuing huge amounts of convertible bonds, as MicroStrategy has, is normally dilutive for a company’s stock, but in this case it has had no dilutive effect because the notes represent future stock demand at increasingly higher prices. Through secondary offerings and convertible issuance, MicroStrategy’s outstanding shares have grown since 2020 from 97 million to 246 million. Over the same period, its stock has appreciated 2,666%. In late January, its shareholders voted to vastly increase the company's authorized shares to 10.3 billion. The cycle feeds itself: Issue billions in low- or no-cost debt and equity, drive bitcoin prices higher with large purchases and catapult MicroStrategy’s hypervolatile stock. Rinse and repeat.
“What they found is a monetary glitch in the financial markets that they’re taking advantage of,” marvels Richard Byworth, a former convertible bonds trader at Nomura and managing partner at Zurich, Switzerland-based alternative investment firm Syz Capital.
Saylor is understandably unabashed in his hyping of bitcoin. Last August he invented an entirely new financial metric dubbed Bitcoin Yield or BTC yield. This sort of “yield” has nothing to do with any income being generated but simply measures the percentage change in the ratio of the company’s bitcoin holdings to the company’s fully diluted shares over time. His initial targets for the measure were 4% to 8% growth annually, but in January MicroStrategy reported a BTC Yield of 48% for Q4 and 74.3% for all of 2024—big, but meaningless numbers he has fed like chum to his adoring followers.
Try to put a value on MicroStrategy the old-fashioned way and you’ll lose your marbles, according to Ben Werkman, a former commercial banker, consultant and early investor in the company’s bitcoin strategy. Saylor “turned off the income statement thinking and said ‘We’re going to attack the net worth side of the company, focus on leveraging the strength that we have on our balance sheet, and in this case, that means acquiring more bitcoin.’”
Which is exactly what MicroStrategy is doing. In October, Saylor unveiled a plan called “21/21” to raise a whopping $42 billion—half through equity, half through debt—over the next three years to buy more bitcoin. In November and December alone, the firm scooped up nearly 200,000 coins worth roughly $18 billion.
It all works out brilliantly as long as the price of bitcoin keeps rising. But what if it collapses, as it has many times before?
Unless it's a true apocalypse, MicroStrategy should be okay. Bitcoin would need to fall by more than 80% from its current $100,000-plus level and stay that way for at least two years for Micro-Strategy to fall short in its ability to cover its current debt obligations. Here again Saylor has shown genius in exploiting the capital markets and the behavior of bond investors.
All of the $7 billion in debt MicroStrategy has issued is unsecured and not technically backed by any of the bitcoin in its coffers. Moreover, at the company’s current stock price of $373, more than $4 billion of its debt is already “in the money” or, effectively, equity.
“Actually, there is very little debt on MicroStrategy’s balance sheet,” says Jeff Park, head of alpha strategies at Bitwise, a San Francisco-based crypto asset manager, noting that a forced liquidation of MicroStrategy’s bitcoin holdings would be unlikely because institutional bond-holders have high tolerance for refinancings, even in worst-case bankruptcy scenarios.
image [https://cdn.magzter.com/1369322608/1740409964/articles/0KsXltJjT1740484449828/NLiAoh7e71740488322354.jpg]
What is stopping other companies from copying Saylor’s bitcoin-fueled financial engineering? Nothing. And many are starting to do exactly that. According to Park, Bitwise counts about 90 public companies, including well-known names Tesla and Block, that have added bitcoin to their balance sheets. In March, his company will launch the Bitwise Bitcoin Standard Corporate ETF, which will be a bitcoin holdings-weighted index of 35 public companies in possession of at least 1,000 bitcoin (roughly $100 million) in their treasuries. MicroStrategy will dominate the index.
The copycats are giving ammunition to MicroStrategy haters. The days when MicroStrategy shares represented a rare, unique way to gain access to bitcoin are long over, according to Kerrisdale Capital, a Miami-based investment firm that issued a short thesis on the stock in March. But Park argues that like Netflix in streaming, MicroStrategy’s first-mover advantage and size set it apart.
“Size is everything because liquidity is everything. MicroStrategy is singularly the most liquid source to trade bitcoin-related risks, both by the spot market and, more importantly, the options market.” Park says: “The options market for MicroStrategy is by far the largest single name options market in the entire world.” MicroStrategy’s frenetic options have even spawned a fund called YieldMax MSTR Option Income Strategy ETF, which sells call options to generate income. The year-old fund has an annual yield of 106% and has already amassed $1.9 billion in assets.
Sitting by the pool at Villa Vecchia, with his crypto-named parrots Hodl, Satoshi and Max chattering away in the background, Saylor waves off his critics. Conventional wisdom in business for the last 40 years was that capital is a liability and volatility is bad. The bitcoin standard dictates capital is an asset and volatility is good—it’s a feature, he insists. “They’re living in flatland, a pre-Copernican world. We’re on a train going 60 miles an hour spinning a gyro with a 30-ton weight on it, and the rest of the world is standing by the side of the track, stationary.”
image [https://cdn.magzter.com/1369322608/1740409964/articles/0KsXltJjT1740484449828/7461407771.jpg]
The Vault La Plus Ça Change
WHEN FORBES PINNED down a young Michael Saylor for a long interview spanning "Martin Luther King, Mother Teresa, Churchill, Caesar and Lincoln" in 1998, MicroStrategy was well into its first stint as a Wall Street darling, thanks to its dot-com-era software suite. "Our culture is part intellectual, part military, part fraternity, part religion," bragged Saylor, who was sitting on $880 million of MicroStrategy stock and couldn't see the coming crash.
"We think we've found the next great market-the ability to ...
Bitcoin’s recent surge past $100,000—not the dawn of 2025—is the real raison d’être for the bash. Servers glide around with champagne on silver trays, hors d’oeuvres are stamped with the omnipresent B and dancers in golden bodysuits undulate with glowing orange orbs in homage to bitcoin's signature hue. At the center of the garden looms a massive playing card, the king’s face replaced with a brazen B.
On the water, the party continues aboard the Usher. The 154-foot superyacht, which was featured in the 2015 film Entourage, glistens against the Miami skyline. A constant stream of shuttles disgorges an unending parade of bitcoin executives, influencers and, most importantly, institutional investors, all decked out in “bitcoin chic” (tangerine suits, B-logo bling). Two giant projectors flash clips forecasting bitcoin’s rise into the millions, while a DJ clad in a space helmet directs bass-heavy tracks between the swaying palms.
“I kind of feel a little sick of winning,” quips one reveler in a black cap emblazoned with SATOSHI NAKAMOTO—the handle of bitcoin's anonymous creator. The partygoers all have crypto cred: The guy in the Nakamoto hat is David Bailey, the 34-year old CEO of BTC Inc., publisher of Bitcoin Magazine, who hosted the Bitcoin Conference in July at which Donald Trump vowed to make America the “crypto capital of the planet” and establish a national bitcoin stockpile.
> "I invented 20 things, tried to make them successful and really didn't change the world with any of them. Satoshi created one thing, gave it to the world and disappeared. It's made me more successful than every one of my ideas."
Villa Vecchia’s owner and host, Michael Saylor, 60, moves through the revelry clad in his signature black blazer, blue jeans and T-shirt whose front sports (of course) a B. He graciously accepts handshakes and requests for selfies. Here, bitcoin is God—and Saylor is its prophet.
Crypto is a second coming of sorts for Saylor, given that he made and lost more than $10 billion during the original dot-com bubble. Back then, MicroStrategy, the Tysons Corner, Virginia-based software firm he cofounded in 1989 fresh out of MIT, was in the data mining and business intelligence software business before running afoul of the Securities and Exchange Commission over its accounting practices. In 2000, the company paid a fine, settled with the feds and restated its results for the preceding couple of years.
For the next two decades MicroStrategy languished with tepid sales and a market cap hovering around $1 billion. That all changed in 2020, when Saylor decided that going all in on bitcoin would be MicroStrategy’s core strategy.
Last year, after the SEC approved Bitcoin ETFs from giants like BlackRock and Fidelity, the cryptocurrency’s price skyrocketed, more than doubling over 12 months and breaking through $100,000 in early December. Just before Christmas, MicroStrategy joined the Nasdaq 100, spurring even more demand for its stock, which is up more than 700% in the last year, as it issued debt and accumulated more bitcoin (it now owns 471,107). Saylor’s company is now the largest holder of the digital asset outside of the elusive Nakamoto, who is said to hold 1 million tokens. During 2024, Saylor’s net worth jumped from $1.9 billion to $7.6 billion. A month into the new year he was worth $9.4 billion.
MicroStrategy’s eye-popping gains have stirred up a swarm of critics and short sellers unable to fathom how a tiny software company holding only $48 billion in actual bitcoin could have a market capitalization of $84 billion. But what Saylor’s detractors fail to understand is that MicroStrategy is brilliantly straddling two realms, one bound by the rules of traditional finance, in which companies issue debt and equity bought and sold by hedge funds, traders and other institutions, and the second governed by the faithful, unwavering believers in a better world brought to you by bitcoin.
The fuel propelling MicroStrategy’s success is its embrace and cultivation of volatility, the defining characteristic of its core asset. Volatility is anathema to traditional investors, but it’s a great friend of the options traders, hedge funds and retail speculators that have helped make MicroStrategy among the most active stocks in the market. With its relatively tiny annual revenue of $496 million, it has a daily trading volume that rivals that of any of the Magnificent 7 tech giants (Meta, Apple, Alphabet, Microsoft, Amazon, Tesla and Nvidia).
“People think that’s crazy,” Saylor says. “How can such a small company have that liquidity? It’s because we put a crypto reactor in the middle of the company, pull capital in and then we spin it. That puts volatility in the equity, and that makes our options and convertible bonds the most interesting and highest-performing in the market.”
Michael Saylor is 100 percent correct when it comes to the desirability of the $7.3 billion in convertible bonds his company has issued since 2021. Every minute of the trading day, MicroStrategy’s stock price is being amplified in real time by bitcoin’s constant gyrations, increasing what’s known as the implied volatility of the call option inherent in its convertible bonds. That’s because unlike straight bonds, convertibles give debt holders safety, with the option of exchanging their notes for MicroStrategy stock at predetermined prices until maturity. Every trader schooled in the Black-Scholes option pricing formula knows that high implied volatility increases the value of the option. Thus Saylor has been able to issue his convertible debt at almost no interest cost.
So far, MicroStrategy’s six convertible notes, issued with maturities from 2027 to 2032, have interest rates ranging from 0% to 2.25%. In public bond markets, where liquidity has been shrinking thanks to the boom in private credit, institutional investors are starving for excess returns. MicroStrategy’s bonds not only represent one of the only ways big investors like German insurer Allianz and State Street can invest in digital assets, but they’ve also been one of the market’s top performers, clocking returns in excess of 250% since issuance. Even the $3 billion five-year notes MicroStrategy issued in November, with their 0% coupon and strike price of $672 (80% above MicroStrategy's current share price) are up 89% in just a few months.
Saylor understands that institutional investors, who are measured against quarterly benchmarks, will keep buying his high-octane paper to boost their portfolio returns. Issuing huge amounts of convertible bonds, as MicroStrategy has, is normally dilutive for a company’s stock, but in this case it has had no dilutive effect because the notes represent future stock demand at increasingly higher prices. Through secondary offerings and convertible issuance, MicroStrategy’s outstanding shares have grown since 2020 from 97 million to 246 million. Over the same period, its stock has appreciated 2,666%. In late January, its shareholders voted to vastly increase the company's authorized shares to 10.3 billion. The cycle feeds itself: Issue billions in low- or no-cost debt and equity, drive bitcoin prices higher with large purchases and catapult MicroStrategy’s hypervolatile stock. Rinse and repeat.
“What they found is a monetary glitch in the financial markets that they’re taking advantage of,” marvels Richard Byworth, a former convertible bonds trader at Nomura and managing partner at Zurich, Switzerland-based alternative investment firm Syz Capital.
Saylor is understandably unabashed in his hyping of bitcoin. Last August he invented an entirely new financial metric dubbed Bitcoin Yield or BTC yield. This sort of “yield” has nothing to do with any income being generated but simply measures the percentage change in the ratio of the company’s bitcoin holdings to the company’s fully diluted shares over time. His initial targets for the measure were 4% to 8% growth annually, but in January MicroStrategy reported a BTC Yield of 48% for Q4 and 74.3% for all of 2024—big, but meaningless numbers he has fed like chum to his adoring followers.
Try to put a value on MicroStrategy the old-fashioned way and you’ll lose your marbles, according to Ben Werkman, a former commercial banker, consultant and early investor in the company’s bitcoin strategy. Saylor “turned off the income statement thinking and said ‘We’re going to attack the net worth side of the company, focus on leveraging the strength that we have on our balance sheet, and in this case, that means acquiring more bitcoin.’”
Which is exactly what MicroStrategy is doing. In October, Saylor unveiled a plan called “21/21” to raise a whopping $42 billion—half through equity, half through debt—over the next three years to buy more bitcoin. In November and December alone, the firm scooped up nearly 200,000 coins worth roughly $18 billion.
It all works out brilliantly as long as the price of bitcoin keeps rising. But what if it collapses, as it has many times before?
Unless it's a true apocalypse, MicroStrategy should be okay. Bitcoin would need to fall by more than 80% from its current $100,000-plus level and stay that way for at least two years for Micro-Strategy to fall short in its ability to cover its current debt obligations. Here again Saylor has shown genius in exploiting the capital markets and the behavior of bond investors.
All of the $7 billion in debt MicroStrategy has issued is unsecured and not technically backed by any of the bitcoin in its coffers. Moreover, at the company’s current stock price of $373, more than $4 billion of its debt is already “in the money” or, effectively, equity.
“Actually, there is very little debt on MicroStrategy’s balance sheet,” says Jeff Park, head of alpha strategies at Bitwise, a San Francisco-based crypto asset manager, noting that a forced liquidation of MicroStrategy’s bitcoin holdings would be unlikely because institutional bond-holders have high tolerance for refinancings, even in worst-case bankruptcy scenarios.
image [https://cdn.magzter.com/1369322608/1740409964/articles/0KsXltJjT1740484449828/NLiAoh7e71740488322354.jpg]
What is stopping other companies from copying Saylor’s bitcoin-fueled financial engineering? Nothing. And many are starting to do exactly that. According to Park, Bitwise counts about 90 public companies, including well-known names Tesla and Block, that have added bitcoin to their balance sheets. In March, his company will launch the Bitwise Bitcoin Standard Corporate ETF, which will be a bitcoin holdings-weighted index of 35 public companies in possession of at least 1,000 bitcoin (roughly $100 million) in their treasuries. MicroStrategy will dominate the index.
The copycats are giving ammunition to MicroStrategy haters. The days when MicroStrategy shares represented a rare, unique way to gain access to bitcoin are long over, according to Kerrisdale Capital, a Miami-based investment firm that issued a short thesis on the stock in March. But Park argues that like Netflix in streaming, MicroStrategy’s first-mover advantage and size set it apart.
“Size is everything because liquidity is everything. MicroStrategy is singularly the most liquid source to trade bitcoin-related risks, both by the spot market and, more importantly, the options market.” Park says: “The options market for MicroStrategy is by far the largest single name options market in the entire world.” MicroStrategy’s frenetic options have even spawned a fund called YieldMax MSTR Option Income Strategy ETF, which sells call options to generate income. The year-old fund has an annual yield of 106% and has already amassed $1.9 billion in assets.
Sitting by the pool at Villa Vecchia, with his crypto-named parrots Hodl, Satoshi and Max chattering away in the background, Saylor waves off his critics. Conventional wisdom in business for the last 40 years was that capital is a liability and volatility is bad. The bitcoin standard dictates capital is an asset and volatility is good—it’s a feature, he insists. “They’re living in flatland, a pre-Copernican world. We’re on a train going 60 miles an hour spinning a gyro with a 30-ton weight on it, and the rest of the world is standing by the side of the track, stationary.”
image [https://cdn.magzter.com/1369322608/1740409964/articles/0KsXltJjT1740484449828/7461407771.jpg]
The Vault La Plus Ça Change
WHEN FORBES PINNED down a young Michael Saylor for a long interview spanning "Martin Luther King, Mother Teresa, Churchill, Caesar and Lincoln" in 1998, MicroStrategy was well into its first stint as a Wall Street darling, thanks to its dot-com-era software suite. "Our culture is part intellectual, part military, part fraternity, part religion," bragged Saylor, who was sitting on $880 million of MicroStrategy stock and couldn't see the coming crash.
"We think we've found the next great market-the ability to ...
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Forbes (Digital) - 1 Issue, February/March 2025