MicroStrategy’s Bitcoin Flywheel: Why the World’s Largest Corporate BTC Holder Keeps Buying More

As Bitcoin continues setting all-time highs, MicroStrategy—the publicly traded firm best known for its business intelligence software—has seen its stock (MSTR) skyrocket alongside. At one point, MSTR even outpaced the trading volume of Tesla (TSLA) and Nvidia (NVDA). But beyond the headlines lies a story of bold financial engineering, visionary leadership, and a new kind of corporate treasury strategy built entirely around Bitcoin.

This article dives deep into MicroStrategy’s transformation into what it now calls a “Bitcoin Development Company,” exploring its financial strategy, founder Michael Saylor’s vision, and the ripple effects spreading across corporate finance.

What Does MicroStrategy Actually Do?

Founded in 1989 and listed on the NASDAQ in 1998, MicroStrategy originally built its name as a provider of business intelligence (BI), data analytics, mobile software, and cloud services. Competing with giants like Salesforce, IBM Cognos, and Oracle, the firm developed tools that helped enterprises make better decisions using data visualization and analytics.

With the rise of AI, MicroStrategy has repositioned itself as “the platform accelerating AI through trusted business intelligence.”

Michael Saylor’s Bitcoin Doctrine: BTC as a Treasury Reserve

Co-founder and Executive Chairman Michael Saylor is one of Bitcoin’s most vocal evangelists. Since 2020, he has argued that Bitcoin is “digital gold” and the world’s most scarce asset.

In August 2020, MicroStrategy adopted a Bitcoin-focused Treasury Reserve Policy, using BTC as its primary corporate reserve asset. Saylor raised funds through equity and debt issuance, reinvesting proceeds into Bitcoin—over and over again.

His strategy is simple: MicroStrategy’s software business generates cash, which is then used to accumulate more Bitcoin. In turn, the company’s growing BTC holdings attract media attention and investor interest, further boosting its brand and stock price. It’s a self-reinforcing cycle—one Saylor calls a corporate “flywheel.”

Despite stepping down as CEO in 2022, Saylor remains the face of MicroStrategy’s Bitcoin strategy. He famously takes a $1 salary, receives only stock options, and recently exercised options worth nearly $400 million—pledging to reinvest some proceeds into Bitcoin.

The World’s First “Bitcoin Development Company”

In early 2024, MicroStrategy began rebranding itself as a “Bitcoin Development Company” and encouraged investors to “buy MSTR instead of Bitcoin.” Why?

Easier Access: No need for wallets or crypto exchanges—just a brokerage account.
Zero Management Fees: Unlike ETFs, there are no annual costs.
BTC Growth: The company keeps buying Bitcoin with cash flow.
Leverage Strategy: MSTR issues debt to buy more BTC.
Downside Protection: Its core software business still generates revenue.

MicroStrategy’s Bitcoin Flywheel in Action

The company’s flywheel strategy involves three key levers:

Issuing New Shares (Equity financing)
Selling Convertible Notes (Debt financing)
Buying More BTC

In Q4 2024, MicroStrategy launched its “21/21 Plan” to raise $42 billion over three years—$21 billion in equity and $21 billion in fixed-income securities—to fund further Bitcoin purchases.

Convertible Bonds: The Secret Weapon

MicroStrategy has issued six tranches of convertible bonds totaling $7.26 billion. These are bonds with a twist: if MSTR’s stock price rises past a set point, bondholders can convert them into shares. It’s a clever way to raise nearly zero-cost capital when the stock trades at a premium.

Recent bond issues had zero coupon rates and conversion premiums as high as 55%, making them attractive to investors—and highly efficient for MicroStrategy.

Even major Taiwanese financial institutions like Cathay, Fubon, CTBC, and Yuanta have purchased MSTR’s convertible bonds.

Measuring Success: Bitcoin Yield

MicroStrategy introduced a KPI called “Bitcoin Yield”—the number of BTC held per fully diluted share. This ratio strips away price volatility and focuses purely on long-term accumulation, aligning with Saylor’s Hodler philosophy.

As of November 25, 2024, Bitcoin Yield hit 59.3%—meaning shareholders’ BTC exposure had grown nearly 60% since the start of the year.

The Largest Bitcoin Treasury in the World

By November 24, 2024, MicroStrategy had purchased 386,700 BTC at an average cost of $56,761, totaling roughly $21.9 billion in cost basis. At a BTC price of $96,700, those holdings were worth $37.4 billion.

That makes MSTR the world’s largest corporate Bitcoin holder. Runner-up Marathon Digital holds just 34,794 BTC—less than 10% of MSTR’s stash.

Inspired by MicroStrategy, Marathon has adopted a full HODL policy and is issuing convertible debt to buy more BTC.

MSTR: Trading at a 178% Premium to Its BTC Holdings

While MicroStrategy’s BTC strategy has captured attention, not everyone is convinced. Citron Research recently issued a short report, arguing MSTR now trades at a 178% premium to the value of its Bitcoin holdings.

With spot Bitcoin ETFs and easier retail access to BTC, Citron claims MSTR’s stock price is now disconnected from fundamentals. They remain bullish on Bitcoin—but have hedged their position by shorting MSTR.

Can the Bitcoin Flywheel Keep Spinning?

When asked if he would ever sell, Saylor famously replied that “buying more Bitcoin is the exit strategy.”

But what happens if Bitcoin crashes? Can the flywheel survive a severe drawdown?

MicroStrategy’s business model—leveraged Bitcoin accumulation—works wonders during bull markets but risks exacerbating volatility during bear cycles.

According to Q3 2024 earnings, the company’s software division remains unprofitable. Clearly, MicroStrategy has gone all-in on its transformation into a Bitcoin vehicle.

Risk Disclosure
Cryptocurrency investments are highly volatile. You may lose your entire capital. Always conduct your own research and assess your risk tolerance before investing.