If BTC Crashes, MSTR Has No Bottom Although I regularly have made bear forecasts on various things, I've never made a forecast of something going to zero (or as good as) before.
It's something that's outside the scope of what my strategies are designed to do. They're based on trend development ideas and actually I generally tend to get fairy bullish in tight zones on things when they are around 75% down.
When I make bear forecasts I generally make them with no regard given to what happens after they hit or to be bullish after they hit.
MSTR finds itself in the unique position of being the only stock I've ever made this forecast on (Maybe the only one I ever will) because it is apparent to me based on reading the 8-K for MSTR that if BTC were to make a technical break and follow the downtrend cycle implied by that, the situation Saylor has created makes it almost impossible MSTR doesn't go bust.
Or, more likely, they find some way to bail themselves out at the cost of the investors - like Saylor did in 2000.
Another thing you don't see me doing often is going out my way to talk bad about people. I'm just not that into it. But Saylor ... is an exception.
Saylor is the bubble man! Now, look - if you're into BTC, forget that for a second. I'm talking about Saylor. He has a history of doing something very specific - hopping onto a hype train, leveraging up to the max, encouraging others to take all in risk and seeing massive crashes in the stock if the bet wasn't right.
On March 20, 2000, MicroStrategy's stock price plummeted by a staggering 62% in a single day, falling from $226.75 to $86.75. This was one of the most dramatic single-day collapses of the dot-com era. The stock continued to fall in the subsequent days and weeks.
Saylor is a high roll gambler playing games to get his bankroll.
And the way Saylor has structured the MSTR bet makes it very hard to see any way the company could survive (without some kinda investor slaying event) a sustained downturn in Bitcoin.
I've seen videos of Saylor saying things like "If BTC went to $1 we'd just buy all the Bitcoin".
Compared to what is in their 8-K, this is outright lies. There is almost zero chance MSTR would be able to sustain its position in Bitcoin under $15,000 if it stayed there some time.
The difference between $15,000 and $1 is a lot.
MSTR's bet does not give it an exact "Liquidation price", as such. It's not like if BTC hit $14,999 the company would fail. But this idea they'd just be "Buying all the Bitcoin" is outright lies.
Because in this situation, MSTR would have no money. The way MSTR plans to raise money is selling MSTR stock at prices higher than it is now. If Bitcoin dropped and MSTR dropped, this would be far less attractive to do. The alternative is to raise funds from somewhere else (increase leverage)- but this could be hard to source in such an environment.
When the bubble boy is out of his natural environment of dreamland markets, he's not as popular.
Not buying all the BTC won't make MSTR go bust - what the problem would be as time went on is they have repayments they have to make on the debt they've accumulated. MSTR has three options how to pay this. Sell stock (Previously discussed), borrow money (take on more debt) or sell Bitcoin (At a major loss).
That's their options. They should have another one. The other option should be "Make money with the tech company" - but if you go to the weekly chart on MSTR and zoom out, you'll see they've never done that. MSTR is one of the worst performing tech stocks of all time - and in their 8-K they say they're not making money from that business.
MSTR only went up when Saylor latched onto the hype of BTC and began to deploy a leveraged bet. That for the second time in history began a sustained MSTR rally, the last one being when he did the same thing (Plus some accounting fraud) to run up the stock in the dot com bubble which then would slam and not recover until the new hype train in 2021.
I mentioned $15,000 as a bad price for MSTR. Realistically, I found it'd be unlikely MSTR can do well with BTC under 30K for a sustained period of time. Even if it crashed and then just ranged there for a few years, this would be very troublesome for MSTR. They'd have a lot of payments to make in that time with no money.
Their avenues to make money shut down. The tech company that never made money would probably be managing to under perform its terrible track record - perhaps redundant because of AI - the stock price would be in the gutter and all the people who'd be interested in lending to a guy like Saylor to do what he did would probably be quite cash strapped. Or wary.
This isn't even an isolated risk. It's not even the case you can say "If BTC goes to $10,000 and stays there for 3 years before it goes to $150,000, MSTR will struggle".
If it goes to $150,000, MSTR will just leverage up and up the price at which they'd enter into this situation of having known payments to make and no known way to generate the money to pay them other than selling BTC. Which since they would be progressively increasing their average price on that - would also always be at a big loss if sold into a downturn.
All of this assumes that Saylor can easily sell as much BTC when he wants to and that not causing an issue.
In the example of BTC trading in a range under30K for a while, our example assumes Saylor can sell BTC to cover costs and BTC remains in the range. Which might not be what happens. Given it's public knowledge when Saylor needs to make these repayments, and given it's public knowledge they have no means of making money - might not this lead to speculation?
If the market knows Saylor is going to sell, might it not front run it? Might investors and speculators not panic?
The idea of "Reflexivity" basically says that once things are in motion they will tend to feed upon themselves. Creating positive feedback loops. Good things breed good things. An example of this would be a stock rising makes it easier for the company to raise money and with more money they can make more money. Positive feedback loop.
But this same idea works the same in reverse, and the negative feedback loop for MSTR is blatantly obviously to see - so much so that I think it's inevitable if the "Risk move" in BTC EVER happens - MSTR will likely go bust. But as I keep saying, there are ways MSTR can survive - it just means the investors are screwed.
They can convert debt into stock. Maybe they'll find buyers for stock. Perhaps selling their Bitcoin can save the company at the cost of the share price.
None of them would be good for investors. And these are the only things they could do.
MSTR have taken a super aggressive bet. They've done it in a fancy way but they've basically used starting leverage and then the leverage of running profits to increasingly build a position into an uptrend. When you take the ideology out of this, all this is doing is super aggressively pyramiding into a trend with no trailing stops.
I can tell you what has to happen to your position when there's a bigger than expected pullback when that happens!
And, in this one rare case, I can tell you if that happened in BTC I see no logical way to believe MSTR does not go to zero, or as good as.
Saylor is an incredibly irresponsible man.
He has set up a situation where anything outside of the flawless bull trend over time he expects happens his company is almost certain to go bust.
And then he presents himself as the modern day investing Jesus to young and naive people with no market experience - telling them to take as much risk as they can too.
Saylor, hopefully in jest, suggests "Sell a Kidney if you must". I'd recommend he "Rent a brain if he can".
Saylor is an all in gambler. That's the truth of the man.
