MicroStrategy's Bitcoin Strategy: A Leveraged Bet With Risks

According to Odaily, Steve Sosnick, the chief strategist at Interactive Brokers, highlighted last week that Michael Saylor's approach at MicroStrategy involves issuing convertible bonds to purchase Bitcoin, essentially defining a leveraged trade—borrowing money to buy financial assets. This strategy proves highly effective when asset prices move favorably, as Bitcoin has performed well. However, if prices move unfavorably, this approach can collapse in a detrimental manner. Sosnick emphasized that MicroStrategy benefits from a 'self-fulfilling feedback loop.' The company buys more Bitcoin, which helps drive up the price, then sells more debt and equity to purchase additional Bitcoin, further increasing the price. However, such strategies do not last indefinitely and often end poorly—the question is when? In the short term, it seems the time has not yet come.