MicroStrategy Amplifies Bitcoin Volatility in the US Stock Market
MicroStrategy (MSTR) has leveraged unique financial operations to amplify the high volatility of Bitcoin and transmit it to the US stock market, creating arbitrage opportunities for institutional investors. Retail and long-term shareholders face the risks of drastic stock price fluctuations and equity dilution in exchange for the long-term appreciation potential of Bitcoin. So, in this leveraged game, who is the biggest winner, and who is silently bearing the losses? Below is the content of a post by Shen Yu, founder of F2Pool and Cobo.
(Background: Will MicroStrategy go bankrupt? Bitcoin’s villain Peter Schiff warns: If the US stock market turns bearish, BTC may fall below $20,000.)
(Supplementary Background: MicroStrategy plans to “reissue $21 billion in preferred shares” to continue buying Bitcoin, but the stock price has already halved from its historical peak.)
Background
MSTR cleverly magnifies Bitcoin’s high volatility by 2.5 times and transmits it to the US stock market: Professional institutions (hedge funds, bond investors, and options traders) utilize high volatility for volatility arbitrage, capturing short-term profits.
MSTR raises cash through the sale of convertible bonds and ATM issuance for a large accumulation of Bitcoin.
Ordinary shareholders bear the severe stock price volatility and short-term decline risks caused by high volatility and ATM issuance. They passively capture the increase in Bitcoin per share, known as “BTC Yield,” trading short-term volatility for long-term stakes.
BTC holders capture continuous market capital inflows and rising Bitcoin prices.
So the question arises, who is losing?
Claude provided a response and a diagram: MSTR has established a mechanism that converts the funds of retail and long-term shareholders into Bitcoin holdings while creating space for volatility arbitrage. Ultimately, wealth within the system flows from the information disadvantaged (retail investors) to the information advantaged (hedge funds and MSTR), while long-term shareholders bet that the long-term appreciation of Bitcoin will offset the high risks and equity dilution they bear.
Conclusion
The financial ecosystem of MSTR is essentially a complex mechanism for redistributing risk and reward. The “losses” within the system primarily stem from wealth transfers between participants with information asymmetry, differing risk tolerances, and mismatched time horizons.