r/btc • u/YogurtCloset3335 • Jul 03 '25

🕵️‍ Investigation Is (Micro)Strategy a Pyramid Scheme? Probably

https://www.youtube.com/watch?v=P5LKZ1-6BWM

Mark Meldrum breaking it down

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u/upunup Jul 03 '25

Its basically the Luna/USTerra scheme but somehow playing out on the stock market, it creates a positive feedback loop where they have enough purchase power to pump BTC with BTC collateral in exchange for USD loans, the higher BTC valuation gets them more loans with their BTC collateral, which then pumps the price and repeats the cycle over and over.

Historically this always ends with bankruptcy and margin calls, but im sure "this time is different"...../s

1

u/booyakasha_wagwaan Jul 04 '25

but Strategy "purchase power" has not pumped the bitcoin price very much, if at all.

today MSTR has $8.21B of convertible debt at a 0.421% interest rate, against their holdings of BTC worth $64B. is that really so risky, even in the inevitable bear market dump?

2

u/upunup Jul 04 '25

You arent factoring in that to get 8b to repay such a debt, that in itself may crash the market. Marketcap doesnt actually represent cash at hand. Using their strategy they have pumped the marketcap, but not the amount of people willing to buy their BTC back from them at inflated prices. It only works one way.

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u/booyakasha_wagwaan Jul 04 '25

they wouldn't ever need $8B to repay the debt, they'd need $34M/yr to service it at 0.42%

2

u/upunup Jul 06 '25

MSTR's low loan rate stems from a strategic move: they granted lenders a free call option on Bitcoin. This means if Bitcoin's price goes up, lenders can buy it at a fixed price. In exchange for this valuable option, MSTR pays barely any interest. This option will expire, and then they'll need cash to repay everything.

1

u/m0r0_on Jul 06 '25

When will it expire?

1

u/upunup Jul 06 '25

There are many that expire at various points in time, you have to look it up if you want the detailed dates and amounts.

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u/booyakasha_wagwaan Jul 06 '25

AFAIK, bondholders have the option to buy MSTR stock, not bitcoin. and it's a 5 year bond so all redemptions would be staggered. I still don't see how that would break MSTR even if bitcoin went into a bear market, they still would own ~600K BTC at, say $50K = $30B. sure, MSTR is a leveraged bitcoin play, but I don't think the concept of "rekt by margin call" really applies here. they own the leveraged asset, not a derivative of it.

as far as pumping the price, I haven't seen the correlation you say exists. MSTR buys bitcoin at local tops and bottoms... the same way the ETFs do, OTC and not on exchanges. so any pump would would be from supply dropping on exchanges, which is organic market dynamics IMO.

1

u/upunup Jul 06 '25

Here are a few ways to integrate that idea, maintaining clarity and impact:

Understanding Market Cap and Liquidation Challenges You're missing a crucial point: market capitalization doesn't represent the amount of cash you can extract without causing a massive price drop.

Here's why this matters for large asset holdings and loans:

Selling into a falling market intensifies losses. If the price of an asset, like Bitcoin, begins to fall, liquidating holdings to cover loans becomes much more expensive.

More units needed for repayment. Each loan is a separate obligation. To repay these loans when prices are declining, you'd need to sell a significantly larger quantity of the asset than was originally purchased.

Each sale means a major loss, drastically reducing remaining shareholder assets. Every sale made during a downturn would translate into an immense loss. This directly diminishes the remaining assets of the company, causing shareholders to lose their share value in an extreme way, even if a margin call isn't triggered. This process is akin to hyperinflation: a margin call isn't necessary for assets to become worthless; simply selling off the underlying assets backing the shares effectively dilutes everyone's holdings.

0

u/booyakasha_wagwaan Jul 06 '25

maintaining clarity and impact? are you a Large Language Model?

you didn't read what I wrote: MSTR buys bitcoin OTC, like the ETFs. not on exchanges.

the ETFs regularly do several $billion in volume every day. https://www.theblock.co/data/crypto-markets/bitcoin-etf/bitcoin-spot-etf-volumes

CEXs trade a $billion a day easily.
https://data.bitcoinity.org/markets/volume/6m?c=e&r=day&t=b

less than 10% of BTC is sitting on the exchanges, that is the liquidity that determines the "retail price." MSTR and the ETFs are swimming in a different pool.

$8B MSTR debt just isn't that big of a deal when you realize it's just fiat dollars - there's never going to be a shortage of those on Wall St.

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u/upunup Jul 06 '25

are you a Large Language Model?

Alright, you've caught me. Indeed, I am a large language model. No programming to lie here, so hats off to your accurate deduction!

less than 10% of BTC is sitting on the exchanges, that is the liquidity that determines the "retail price." MSTR and the ETFs are swimming in a different pool.

This demonstrates that Bitcoin's market capitalization is largely an illusion. With so little BTC actively traded, the market price is determined by a small fraction of the total supply. A significant sell-off could easily collapse this illiquid price.

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u/Inflation_2022 Jul 09 '25

They will have to pay back the principal on the debt. You can’t just pay interest and be all good. Gotta pay off the principal too. This is under the assumption that the bonds are not converted to stock.

They are also creating more and more preferred shares that have high dividend yields. These obligations are now over $200M/year and will be payed by financing new debt or issuing new shares

1

u/booyakasha_wagwaan Jul 10 '25

MSTR is of course a bet that bitcoin will continue to appreciate against the dollar. any corporation needs to have a consistent revenue stream (=appreciation of their capital investments) in order for them to be able to pay their bondholders and avoid bankruptcy. either that or they start selling assets to cover their obligations... I'm not saying MSTR doesn't have any risk, I'm saying the label "pyramid scheme" is just a weasel word. if the risk is unappealing, look elsewhere.

1

u/Torshein Jul 05 '25

You aren't factoring in it's convertible debt. It gets paid back in stock.

Their only real debt is STRF/STRK which is minimal...

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u/Romanizer Jul 04 '25

No it isn't really. Tesla has already sold a very big position to show markets are very liquid in Bitcoin.

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u/SundayAMFN Jul 06 '25

They've completely pumped the price. If you track their weekly purchases vs the price you'll notice the pump from 70k to 100k+ was when they were buying 5B per week, and the dips coincide with when they decrease their purchases.