[Myung Jung-sun's Insight] How Strategy Acquires Bitcoin Without Spending Cash

# Transforming Imagination into Capital – MicroStrategy's Bitcoin Asset Strategy MicroStrategy (formerly MicroStrategy) has announced its acquisition of an additional 1,895 Bitcoin (BTC) between April 28 and May 4, 2025. Chairman Michael Saylor revealed on X (formerly Twitter) that "the average purchase price was $95,167 per Bitcoin, with a total expenditure of approximately $180 million." This latest purchase boosts MicroStrategy’s Bitcoin holdings to an unmatched 555,450 BTC, solidifying its status as the public company with the largest Bitcoin treasury globally. The company's average purchase price per Bitcoin is approximately $68,550. $MSTR has acquired 1,895 BTC for ~$180.3 million at ~$95,167 per bitcoin and has achieved BTC Yield of 14.0% YTD 2025. As of 5/4/2025, we hodl 555,450 $BTC acquired for ~$38.08 billion at ~$68,550 per bitcoin. $STRK $STRF https://t.co/rusgfuyCTG — Michael Saylor (@saylor) May 5, 2025 How did an ordinary software company listed on NASDAQ manage to acquire over 555,000 Bitcoin? Since 2020, Michael Saylor has transformed MicroStrategy into what many call a "corporate Bitcoin ETF" using innovative financing strategies that challenge traditional financial constructs. Saylor's tactics extend beyond simple equity issuance, utilizing convertible bonds, zero-coupon debt, preferred shares, and public offerings. Let’s explore the roadmap that turned imagination into billions in Bitcoin. # Initial Bet: Converting Cash Reserves to Bitcoin In August 2020, Saylor initiated the company’s Bitcoin strategy by converting $250 million of corporate reserves into Bitcoin, citing "inflation risk and the declining value of the U.S. dollar." This move was unprecedented—the first instance of corporate cryptocurrency integration on an enterprise-wide scale. What started as a hedge soon became a full-scale transition, with subsequent aggressive Bitcoin purchases funded by nearly all available company assets. # $6.2 Billion Raised via Zero-Coupon Convertible Bonds—Pension Funds Embrace the Bitcoin Company To fund additional Bitcoin acquisitions, Saylor utilized zero-coupon convertible bonds—debt securities that carry no interest and can convert into equity under certain conditions. Typically unattractive to conservative investors, MicroStrategy issued a staggering $6.2 billion worth of such bonds in 2024, marking the largest issuance by a single entity, as per Bank of America data. Remarkably, conservative asset managers, including Allianz Global Investors, Voya Investment Management, Calamos, and State Street, drove the demand for these bonds. Their rationale? Investing in convertible bonds offered less risk compared to directly owning Bitcoin while leveraging the potential upside of MicroStrategy’s stock appreciation. As Bitcoin entered a bull market over the past two years, the convertible bonds delivered market-beating returns, with some generating over 100% profits post-issuance. # A Self-Reinforcing Mechanism: Premium Valuation → Equity Issuance → Bitcoin Purchases Beyond bonds, MicroStrategy leveraged an at-the-market (ATM) equity offering strategy, preregistering stock offerings with the SEC to issue shares at prevailing market prices as needed. In October 2024, the company registered a $21 billion ATM program, later extending it in May 2025 after fully utilizing the previous threshold. What makes this approach particularly effective for MicroStrategy is its significant stock price premium relative to its net asset value (NAV). This valuation premium enables new equity issuance to not only generate cash for Bitcoin purchases but also enhance value for existing shareholders—a dynamic labeled as a “self-reinforcing loop” by the Financial Times. This cycle of rising stock prices, eased capital-raising, Bitcoin acquisitions, and subsequent stock appreciation has enabled MicroStrategy to scale its asset accumulation strategy unprecedently. # Introducing Preferred Shares: Strike and Strife—Balancing Liquidity and Governance Pushing boundaries further, MicroStrategy introduced experimental preferred equity structures—Strike and Strife. Strike shares convert to common equity if the stock price surpasses a predetermined threshold, providing leveraged returns to investors during bull markets. On the other hand, Strife shares provide fixed dividends and are less likely to convert, catering to risk-averse investors. Both instruments were intricately designed to limit dilution of common equity while preserving Saylor’s control over the company. Additionally, their issuance permits strategic flexibility by tailoring capital-raising efforts to market conditions. This sophisticated financial engineering has transformed MicroStrategy into not just a technology company but a “Bitcoin-backed asset management vehicle.” # MicroStrategy’s Rise as an ETF Alternative MicroStrategy is increasingly viewed by institutional investors as a Bitcoin ETF alternative. For institutions restricted by regulations or policy from directly buying Bitcoin, MicroStrategy’s stocks, bonds, or preferred shares serve as a proxy, delivering indirect market exposure. As Saylor proudly proclaimed, "We are the world’s first corporate Bitcoin ETF." Indeed, the company has redefined asset management by leveraging structured finance, distinguishing itself by deploying Bitcoin as a “market-responsive strategic asset” rather than a passive “corporate treasury reserve.” # A Leveraged Alternative to BlackRock's ETF How does MicroStrategy differentiate itself from BlackRock’s spot Bitcoin ETF, “IBIT”? While IBIT operates at NAV with minimal tracking error, MicroStrategy trades at a substantial premium to the value of its Bitcoin holdings, often exceeding 2x. This premium reinforces its self-perpetuating mechanism of capital-raising and Bitcoin purchases. During bull markets, MicroStrategy’s dynamic model can outperform ETFs due to leverage; however, this same leverage magnifies risks during downturns. # Survival in an ETF Era Even amid competition from spot Bitcoin ETFs, why do institutional investors continue to favor MicroStrategy? - Leverage: MicroStrategy exceeds its asset value by building leveraged Bitcoin positions, potentially offering higher returns during bull markets versus traditional ETFs. - Market Influence: Holding 2.6% of all Bitcoin, MicroStrategy can exert both tangible and psychological market impacts—something ETFs cannot achieve as passive vehicles. - Liquidity: Unlike ETFs, which have redemption restrictions and NAV-based daily valuations, MicroStrategy allows real-time stock trading and can facilitate derivatives-based strategies. - Financial Engineering: Arbitrage, options, and hedging strategies unique to MicroStrategy’s volatile stock structure offer opportunities inaccessible via simpler ETFs. Compared to the “conventional approach” of ETFs, MicroStrategy resembles a “leveraged special forces unit” operating outside traditional frameworks. While higher-risk, this structure also creates unique opportunities for investors who understand its mechanics. # Risks Exist, but the Model Remains Robust Of course, risks loom—call options on convertible bonds, preferred dividend obligations, Bitcoin price volatility, or a collapse of the stock’s premium valuation could unravel the entire self-reinforcing structure. If MicroStrategy struggles to raise funds or is forced to sell Bitcoin, the feedback loop could reverse catastrophically. Yet Saylor has preemptively accounted for these challenges, constructing a multi-layered system where bonds, equities, and Bitcoin mutually reinforce each other. As long as these interdependencies hold, MicroStrategy is likely to remain the most efficient Bitcoin accumulation model available. # MicroStrategy: A Blueprint for Capitalizing on Bitcoin MicroStrategy’s first-quarter 2025 financials reveal cash holdings of just $60.36 million versus Bitcoin holdings exceeding $35 billion at market value (553,555 BTC). Some critics may call this speculative, but it reflects financial engineering paired with visionary ambition. In Antoine de Saint-Exupéry's *The Little Prince*, adults famously mistook a boa constrictor that swallowed an elephant for a mere hat. Much like that imagery, MicroStrategy’s structure may appear risky on the surface but operationally functions as a “boa constrictor embracing an elephant." Michael Saylor has realized this vision within the capital markets, and the market has rewarded this imagination with a premium valuation. Whether this model remains sustainable in the long run is uncertain. Yet, its achievements are undeniable. Since 2020, MicroStrategy’s stock price has skyrocketed 26-fold, and its Bitcoin holdings surpass those of any other institution globally. At this moment, MicroStrategy stands as the most aggressive yet sophisticated player in the global cryptocurrency market.