Forbes cover: Big bet on Bitcoin

Source: Nina Bambysheva Forbes

MicroStrategy isn’t just a giant bitcoin bet, it’s a revolution in corporate finance.

Most people view billionaire Michael Saylor’s publicly traded company MicroStrategy as a huge, risky bet on bitcoin. But a closer look reveals a masterpiece, a blueprint for manipulating traditional finance to tap into the magic dust that’s fueling the cryptocurrency frenzy.

New Year’s Eve at Villa Vigia was a riot of orange and gold, a scene straight out of Fitzgerald’s fanciest fantasies. More than 500 people crammed onto the manicured lawns of the century-old home, whose Versailles-style ballroom has hosted the likes of Margaret Thatcher, Henry Kissinger and Mikhail Gorbachev.

Bitcoin’s recent break above $100,000, rather than its arrival in 2025, was the feast’s true raison d’être. Waiters circulated champagne on silver trays, appetizers were emblazoned with the ubiquitous B, and dancers in gold tights waved glittering orange orbs in a nod to Bitcoin’s signature hue. A giant playing card loomed in the center of the garden, with the king’s face replaced by a cheeky B.

The party continued on the water aboard the Usher. The 154-foot superyacht, featured in the 2015 film Entourage, shimmered against the Miami skyline. Shuttle buses streamed by, carrying bitcoin executives, influencers and, most importantly, institutional investors, all dressed in “bitcoin chic” (orange suits, B logo accessories). Two giant projectors played clips predicting bitcoin’s rise to millions, while a DJ in a space helmet blasted bass-heavy tracks amid swaying palm trees.

“I’m getting a little tired of winning,” quipped a reveler wearing a black Satoshi hat. The partygoers all had crypto cred: The man in the Satoshi hat was David Bailey, the 34-year-old CEO of BTC Inc. and publisher of Bitcoin Magazine, who hosted the July Bitcoin conference at which Donald Trump vowed to make the U.S. “the crypto capital of the planet” and build a national bitcoin reserve.

Michael Saylor, 59, owner and host of Villa Vecchia, weaved through the revelers in his signature black blazer, blue jeans and a T-shirt with a B. on the front. He graciously accepted handshakes and requests for selfies. Here, Bitcoin is God, and Saylor is its prophet.

Crypto is like a second rebirth for Saylor, who made and lost more than $10 billion during the original dot-com bubble. Back then, he co-founded MicroStrategy, a software company based in Tysons Corner, Va., after graduating from MIT in 1989. The company, which started out as a data-mining and business-intelligence software business, ran afoul of the Securities and Exchange Commission over accounting practices. In 2000, the company paid a fine, settled with the federal government and restated its results for previous years.

For the next two decades, MicroStrategy's sales were mediocre and its market value hovered around $1 billion. That all changed in 2020, when Saylor decided to make Bitcoin a core strategy for MicroStrategy.

Last year, after the SEC approved Bitcoin ETFs from giants like BlackRock and Fidelity, the cryptocurrency’s price soared, more than doubling in 12 months and topping $100,000 in early December. Just before Christmas, MicroStrategy joined the Nasdaq 100 index, spurring more demand for its shares, which rose more than 700% last year as it issued bonds and accumulated more Bitcoin (it now owns 471,107). Saylor’s company is now the largest holder of the digital asset, second only to the elusive Satoshi Nakamoto, who is said to hold 1 million Bitcoins. During 2024, Saylor’s net worth jumped from $1.9 billion to $7.6 billion. One month into the new year, he’s worth $9.4 billion.

MicroStrategy’s staggering gains have sparked a slew of critics and short sellers who can’t understand how a small software company with just $48 billion in Bitcoin can have a market cap of $84 billion. But what Saylor’s critics don’t understand is that MicroStrategy deftly straddles two worlds: one governed by the rules of traditional finance, where companies issue debt and equity that are bought and sold by hedge funds, traders and other institutions; and the other ruled by faithful, staunch believers who believe that Bitcoin will bring you a better world.

What’s driving MicroStrategy’s success is embracing and nurturing volatility, a defining characteristic of its core assets. Volatility is the enemy of traditional investors, but the friend of options traders, hedge funds and retail speculators, making MicroStrategy one of the most active stocks on the market. While its annual revenue is relatively small at $496 million, its daily trading volume rivals that of the seven largest tech companies: Meta, Apple, Alphabet, Microsoft, Amazon, Tesla and Nvidia.

“People think it’s crazy,” Saylor said. “How can such a small company have such high liquidity? It’s because we put a crypto reactor in the middle of the company, attracting capital and then spinning it. This increases stock volatility, making our options and convertible bonds the most interesting and best-performing products on the market.”

Michael Saylor is 100% right about the popularity of the $7.3 billion in convertible bonds issued by the company since 2021. Every minute of the trading day, MicroStrategy’s stock price is amplified in real time by the constant fluctuations of Bitcoin, which increases the implied volatility of the call options inherent in its convertible bonds. That’s because convertible bonds, unlike ordinary bonds, provide debt holders with the security of having the option to exchange their bonds for MicroStrategy shares at a predetermined price before maturity. Every trader trained in the Black-Scholes option pricing formula knows that high implied volatility increases the value of options. As a result, Saylor can issue convertible bonds with almost no interest costs.

The six convertible bonds MicroStrategy has issued so far have maturities between 2027 and 2032, with interest rates ranging from 0% to 2.25%. In the public bond market, where liquidity has been shrinking due to the boom in private credit, institutional investors are hungry for excess returns. Not only are MicroStrategy's bonds one of the only ways for large investors such as German insurer Allianz and U.S. bank State Street to invest in digital assets, they are also among the best performing bonds on the market, with returns of more than 250% since issuance. Even MicroStrategy's $3 billion, five-year bond issued in November with a 0% coupon and a strike price of $672 (80% higher than MicroStrategy's current stock price) is up 89% in just a few months. Volatility is vitality Those were the three words MicroStrategy co-founder Michael Saylor tweeted last March that revealed the magic bullet driving the outperformance of his stocks and bonds: the implied volatility of the company’s options, which was driven by his accumulation of bitcoin. Many traders crave volatility, and they expect MicroStrategy’s stock price to swing more than 90% over the next month, compared with 60% for Tesla and 30% for Amazon. Saylor understands that institutional investors who measure performance on a quarterly basis will continue to buy his risky stocks to boost their portfolio returns. Issuing large amounts of convertible bonds like MicroStrategy’s would normally dilute a company’s stock, but in this case, the convertible bonds had a bullish effect because they represented future demand for increasingly expensive shares. Through secondary offerings and convertible bond offerings, MicroStrategy’s outstanding shares have grown from 97 million to 246 million since 2020. Its stock price has risen 2,666% over the same period. In late January, its shareholders voted to significantly increase the company’s authorized shares to 10.3 billion shares. The cycle runs on itself: issuing billions of low-cost or no-cost debt and equity, driving up the price of Bitcoin through massive purchases, and driving MicroStrategy’s stock into wild swings. Over and over again.

“They found a monetary loophole in the financial markets and exploited it,” marveled Richard Byworth, a former convertible bond trader at Nomura Securities and managing partner at Syz Capital, an alternative investment firm in Zurich, Switzerland.

Seller makes no secret of his admiration for Bitcoin, which is understandable. Last August, he invented a brand new financial indicator called Bitcoin Yield, or BTC Yield. This “yield” is not related to any revenue generated, but simply measures the percentage of the company’s bitcoin holdings versus the company’s fully diluted shares over time. His original goal was to grow 4% to 8% annually, but MicroStrategy reported in January that bitcoin yields were 48% in the fourth quarter and 74.3% for all of 2024 — big, but meaningless numbers that he offers like bait to his adoring followers.

Try to value MicroStrategy the old-fashioned way, says Ben Werkman, a former commercial banker, consultant and early investor in the company’s bitcoin strategy. Saylor “turned off the P&L thinking and said, ‘We’re going to start with the net asset side of the company and focus on leveraging our strengths on the balance sheet,’ which in this case means acquiring more bitcoin.”

That’s exactly what MicroStrategy is doing. In October, Saylor unveiled a plan called “21/21” to raise up to $42 billion over the next three years (half in equity and half in debt) to buy more bitcoin. In November and December alone, the company acquired nearly 200,000 bitcoins, worth about $18 billion.

This will all go very well as long as the price of bitcoin keeps rising, but what if bitcoin crashes, as it has done so many times before?

"Scale is everything because liquidity is everything. MicroStrategy is the single largest source of liquidity for trading bitcoin-related risks, both in the spot market and, more importantly, in the options market."

Unless the world really does end, MicroStrategy should be fine. Bitcoin would need to fall more than 80% from its current level of more than $100,000, and last for at least two years, for MicroStrategy to be unable to repay its current debt. Saylor once again demonstrated his talent for exploiting the behavior of capital markets and bond investors.

All of MicroStrategy's $7 billion in debt is unsecured, and technically, none of the bitcoin in its coffers can serve as collateral. Moreover, at the company's current share price of $373, its more than $4 billion in debt is already "worth money," or effectively equity.

"In reality, MicroStrategy has very little debt on its balance sheet," said Jeff Park, head of alpha strategy at Bitwise, a San Francisco-based crypto asset manager, adding that MicroStrategy's bitcoin holdings are unlikely to be forcibly liquidated because institutional bondholders have a high tolerance for refinancing, even in the worst-case scenario of bankruptcy.

What's stopping other companies from replicating Le's bitcoin financial engineering? Nothing. Many companies have already begun to follow suit. According to Park, Bitwise has counted about 90 public companies, including well-known companies such as Tesla and Block, that have included bitcoin on their balance sheets. In March, his company will launch the Bitwise Bitcoin Standard Company ETF, which will include a bitcoin-weighted index of 35 public companies that hold at least 1,000 bitcoins (about $100 million). MicroStrategy will dominate the index.

Imitators are providing ammunition for MicroStrategy's opponents. Kerrisdale Capital, a Miami-based investment firm, published a short report on the stock in March, saying: MicroStrategy stock represents a rare and unique way to get Bitcoin, but this situation is no longer there. But Park believes that, like Netflix in the streaming field, MicroStrategy's first-mover advantage and scale make it different.

"Scale is everything because liquidity is everything. Whether it is the spot market or the options market, they are the most liquid source for trading Bitcoin-related risks," Park said. "MicroStrategy's options market is by far the deepest single-name options market in the world." MicroStrategy's crazy options even spawned a fund called YieldMax MSTR Option Income Strategy ETF, which generates income by selling call options. The one-year-old fund has an annual return of 106% and has accumulated $1.9 billion in assets.

Sitting by the pool of Villa Vikia, with his three parrots Hodl, Satoshi and Max chattering behind him, Saylor shrugged off critics. “The conventional business wisdom of the last 40 years says that capital is a liability and volatility is bad. The Bitcoin standard says that capital is an asset and volatility is good — that’s its nature,” he insists. “They live in a flat world, a pre-Copernican world. We’re on a train going 60 miles an hour, spinning a gyroscope with 30 tons on it, while the rest of the world stands by the track, motionless.”

This isn’t Michael Saylor’s first trip to the sun.

Born in 1965 on an Air Force base in Lincoln, Nebraska, he was steeped in military discipline early in life. His father was a chief master sergeant, and the family moved between Air Force bases around the world before settling near Wright-Patterson, Ohio, home of the Wright Brothers Aviation School.

He attended MIT on a full scholarship from the Air Force ROTC to study aeronautics and astronautics, and to write a paper on computer simulations of Italian Renaissance city-states. In his spare time, he enjoys playing guitar in a rock band and flying gliders. He graduated with highest honors in 1987 and was commissioned as a second lieutenant in the Air Force, but his dream of becoming a fighter pilot was derailed by a heart murmur that turned out to be a misdiagnosis.

When 1+1=3, by doubling down on Bitcoin, MicroStrategy’s market value grew 60-fold in 4 years, even as Bitcoin prices languished.

At 24, he co-founded MicroStrategy with fellow MIT fraternity member Sanju Bansal. At the time, few understood the potential of data analytics, and the company was the first to get into the field. Riding the dot-com boom, the company went public in 1998, and by 2000 its market value soared to more than $24 billion. Saylor’s net worth peaked at nearly $14 billion, and he became a technology evangelist, predicting a world where data would flow like water. "We're going to use our technology to wipe out the entire supply chain," Saylor told Forbes magazine in late 1998. "We're going to do whatever it takes to win a permanent victory over the entire industry around the world."

Then the company collapsed. On March 10, 2000, MicroStrategy's stock price peaked at $313 per share, more than 60 times its initial public offering price. Two weeks later, the company announced that it would need to restate its financial results, and its stock price plummeted to $72. The Securities and Exchange Commission charged Saylor and others with accounting fraud, and MicroStrategy later settled the charges for $11 million. Within two years, the company's stock price fell below $1. Saylor's $13 billion fortune evaporated.

"It was the darkest moment of my life. It's terrible when people lose money because they trust you," he said.

In 2020, after years of quantitative easing and trillions of dollars in government stimulus related to the coronavirus pandemic, Saylor was convinced that the $530 million in cash and short-term investments remaining on MicroStrategy’s balance sheet would be better invested in Bitcoin. The U.S. government can print dollars at will—and it’s working hard to do so—but Bitcoin is designed with a hard cap: There will never be more than 21 million Bitcoins.

If the price of Bitcoin plummets, MicroStrategy’s stock price will fall harder and faster than Bitcoin itself. But don’t dismiss Saylor because he’s too smart. Many other companies have followed MicroStrategy’s lead—the company now calls itself “the world’s first and largest Bitcoin Treasury.”

Some public companies, like Metaplanet, are even relying on Bitcoin to stay afloat. The Tokyo-based hotel chain faced an existential crisis during the pandemic, when Japan closed its borders to tourists. The small hotelier sold nine of its 10 hotels and issued shares and bonds to buy the hotels for $70 million in Bitcoin. Metaplanet’s shares, which trade on the Tokyo Stock Exchange and over-the-counter, are up 2,600% by 2024, and its market value is now $1 billion, despite holding just $183 million worth of bitcoin. The company’s homepage now reads “Securing the Future with Bitcoin,” with little mention of the hotel. “We are very grateful to Michael Saylor for giving us a business plan for the world to follow,” said Simon Gerovich, Metaplanet’s chief executive, who was a guest at Saylor’s New Year’s party.

“I invented 20 things and tried to make them successful, but none of them changed the world. Satoshi created one, gave it to the world, and then disappeared. It made me more successful than every idea I had.”

While many companies are unlikely to go to the extremes of Metaplanet, bitcoin holders are sure to grow. In January, the Financial Accounting Standards Board changed a rule that previously only allowed companies to record a drop in the value of cryptocurrencies as a loss in their quarterly reports, so that holdings will now be marked to market, allowing for simultaneous hedging of gains and losses. For MicroStrategy, which has lobbied for the rule change, this could mean multiple quarters of earnings ahead and the possibility of inclusion in the S&P 500.

According to YCharts data, hundreds of large public companies around the world today hold more than twice the cash they need for current operations and liabilities. The most notable of these is Berkshire Hathaway, which currently holds $320 billion in cash.

Given the $35 trillion (and growing) national debt, Saylor's mantra has always been "cash is trash." "Financial repression is a timeless phenomenon," insists Bitwise's Park, an inevitable result of the government's lowering of interest rates. We live in a world where finance is highly developed, and the real economy has been largely disconnected from the financial economy. You can't actually pay off your debts without printing more money. If you think you have to keep printing more money, then you better believe that the yield curve will be suppressed.

In Saylor's view, Villa Vecchia itself is the best example. The 18,000-square-foot mansion on Miami’s “Millionaire’s Row” was built in 1928 for the president of F.W. Woolworth. Saylor bought the house in 2012 for $13 million. “This house was worth $100,000 in 1930. It was valued at $46 million a few years ago,” Saylor said in a 2023 podcast interview. “Do the math — it’s on its way to being worth $100 million, which means the dollar is going to be worth 99.9% less in 100 years. Bottom line: Money in the bank is not money.”

The next few years of Trump’s presidency could be good for MicroStrategy and Bitcoin. Despite his big talk about “government efficiency,” Trump was a big spender during his first term: According to the Committee for a Responsible Federal Budget, the national debt increased by $8.4 trillion during Trump 1.0’s four years in office. Despite once publicly calling Bitcoin a “scam” that would compete with the dollar in 2021, Trump is now all in on cryptocurrency. In fact, his son Eric recently posted a photo with Saylor at Mar-a-Lago with the caption “Two friends, one passion: Bitcoin.”

Not only is the value of the dollar likely to depreciate further over the next four years, Saylor’s relentless advocacy fits neatly into the dystopian MAGA worldview. “The human condition has always been plagued by dirt: toxic food, toxic liquids, and the human economic condition has always been plagued by toxic capital. My mission is to educate the world about non-toxic capital,” he preached.

But even Michael Saylor occasionally steps down from his podium to reflect on his corporate journey. “We adopted Bitcoin out of frustration and desperation, and then it became an opportunity, then a strategy, then an identity, and finally a mission,” he said. “The irony of my career is that I invented 20 things and tried to make them successful, but I really didn’t change the world with any of them.” Cong Cong created something, gave it to the world, and then disappeared, and now we are just passing on the spirit. Ironically, this makes me more successful than someone who tries to commercialize every idea he has. It's a lesson in humility.