Peter Schiff Exposes Risks of BTC Strategy
MicroStrategy’s Bitcoin strategy is very simple: raise debt to buy Bitcoin and sell shares at a premium to repeat the cycle. Until recently, it was considered outstanding. At the beginning of November 21st, MicroStrategy price peaked at $535.42. But since then, the index has fallen sharply by more than 33.94%.
Notably, Bitcoin price also fell during this period, but only by 1.74%. The latest developments have indeed prompted many to question the credibility of MSTR’s Bitcoin strategy. Recently, well-known financial expert Peter Schiff exposed the shortcomings of MicorStrategy’s Bitcoin strategy, warning that the BTC and MSTR markets may collapse. Has the “so-called” revolutionary Bitcoin strategy failed? Let’s try to understand this scenario more deeply. Dive in!
MicroStrategy stock drops sharply
Over the past four days, MicroStrategy has lost about 33.94%. The latest drop was the largest four-day drop in the company’s recent history, the report showed. It is reported that the company lost more than US$30 billion in market value due to the decline in its stock price.
MSTR Market Overview: Retail Investors and High Trading Volumes
Prior to the decline, the MSTR market saw unusually high retail investor participation. Reports show that retail investors bought $42 million worth of MSTR shares in one day last week, the largest purchase on record. Data shows that retail investors bought at least $100 million worth of MSTR shares last week alone.
Importantly, MicroStrategy Markets saw over $136B in trading volume last week, which is much higher than what Amazon, which has a market capitalization of 29x, typically does in a week.
Is MicroStrategy’s Bitcoin Strategy a Ponzi Scheme?
Currently, MicroStrategy holds at least 386,700 Bitcoin tokens worth nearly $35,764,258,860. However, the company’s total market capitalization exceeds 74.95B. This suggests that the company’s market capitalization is at least 2.1 times greater than the value of its BTC holdings.
In the past two months, the MSTR market has increased by 113.07%. During the same period, the BTC market rose by only 41.19%. This shows that the MSTR market performed nearly three times better than the BTC market during this period.
However, a comparative analysis of Bitcoin and MicroStrategy shows that MSTR has shown greater volatility than BTC recently.
Wider implications for Bitcoin and MicroStrategy
Financial expert Schiff criticized MicroStrategy for executing its plan to buy $42 billion worth of Bitcoin too quickly, and denounced the company for recently spending $10 billion of the planned amount to buy BTC tokens. He also warned that both MicroStrategy and Bitcoin could experience a collapse once the plan is fully implemented.
Overall, the Bulls believe MicroStrategy’s strategy is transformative and positions the company for long-term success. However, bears believe the strategy is unsustainable as debt and market risks increase, and liken it to a Ponzi scheme.
