Some thoughts on MSTR Bitcoin “financial report”

Author: Andy Baehr Source: coindesk Translation: Shan Ouba, Golden Finance

“Strategy mode” is good for Bitcoin. But what about the rest of the crypto market? Andy Baehr of CoinDesk’s index department asked.

MSTR released its earnings report on May 1. Several media interviews last Thursday morning made me prepare in advance. We don’t usually talk about stocks, so I plan to cut in from a macro perspective. But during the preparation, I couldn’t help rolling my eyes-MSTR always makes people react like this.

MSTR is the stock code of MicroStrategy (now renamed “Strategy”). Strategy, led by Michael Saylor, is a pioneer in the “Bitcoin Treasury” model, which has now been imitated by Metaplanet and dozens of other companies. According to recent announcements, Strategy plans to raise $84 billion through equity and fixed income instruments.

Here are three key questions I think about:

1. Is this a "financial report"?

MSTR's "earnings" and "target price"... can no longer be understood in the traditional sense, especially after excluding the accounting impact of ASC 2023-08. There are essentially two variables: Bitcoin price and financing costs. Wall Street analysts and commentators should see this clearly.

2. Strategy, or Strategy?

You can’t just say “Strategy” without adding “You know, the old MicroStrategy.” Just like you have to explain Prince, Puff Daddy, Kanye West, and Twitter.

By the way: people are saying the word “strategy” all the time.

3. Don’t be a “troll”?

MSTR has a $107 billion market cap supported by $53 billion in Bitcoin holdings and a “Cyclops-like goodwill.” There are no lifeboats, no parachutes, and seemingly no “Plan B.” If it fails, the Bitcoin market will likely be blamed.

Despite these "eye-rolling" emotions (and the flattering coverage of some media), we still have to admit a few points:

• The fundraising ability is indeed amazing. This company has a strong "force".

• MSTR is up 36% year-to-date, while Bitcoin has only risen less than 5%. I am embarrassed to mock it.

• MSTR has cleverly used stock price volatility as a "feature" rather than a "problem" to:

1. issue attractive convertible bonds;

2. attract a lot of options trading;

3. engage in a so-called "corporate income strategy" (although I ask everyone to stop calling selling options an "income strategy").

• MSTR's preferred stocks (STRK and STRF) are sought after by investors who prefer preferred stocks - several of my friends have already "fallen in love with them."

MSTR Creates a Movement

Strategy (with a capital “Strategy”) has not only created a trend, but an investment category.

There are now multiple products built around MSTR, including this new “dividend-paying” leveraged MSTR ETF (note: trading volatility is at 70, but that’s not exciting enough). Grayscale has also launched an ETF that tracks 30 public companies that hold at least 100 bitcoins.

Finally, there’s Cantor Equity Partners, the SPAC (special purpose acquisition company) that is merging to become Twenty One Capital, which will hold $3 billion in bitcoins in the future. If you mention this to a group of analysts, they will all shout in unison: “Gamestop!” It sounds really interesting.

The inclusion of Bitcoin on the balance sheets of non-crypto companies is indeed a trend worth noting (excluding crypto-native companies, such as CoinDesk's parent company Bullish).

However, this trend is limited to Bitcoin for now.

American (Bitcoin) Exceptionalism

Despite the gradual deregulation of digital assets in the United States and a recent wave of ETF applications, Bitcoin still dominates the entire crypto market (it still accounts for about two-thirds of the total cryptocurrency market value).

This is not a problem in itself - if we are talking about a store of value asset to replace corporate treasury assets that were originally allocated in cash and US Treasuries.

But the problem is that the proliferation of new forms of Bitcoin exposure — leverage, yield, options, protection, and more — has gradually displaced education and awareness of other blockchain assets that are expected to deliver more technical promise and utility, yet are receiving less and less attention.

In the past, this neglect was somewhat excusable: investors and advisors without brokerage or futures accounts had difficulty directly allocating to these assets. (Ether is an exception, of course, but if we are to take the “digital asset class” seriously, ETH alone is clearly not enough.)

We believe that the limited enthusiasm for ETH investment vehicles is partly due to a lack of deep understanding and exposure to the broader asset class.

If 2024 is the year when Bitcoin "officially debuts", we hope that 2025 will provide investors and traders with a deeper and broader opportunity for thinking and practice.

Otherwise, the narrative of US crypto investment will gradually become a story of "Bitcoin supremacism" - in which case, it will be equivalent to wasting more possible profit opportunities.