The scale of what Michael Saylor has done with his formally, little known, business intelligence company over the past 5 years, is little short of astonishing. In addition to demonstrating that it was possible for a publicly traded company to hold bitcoin on its balance sheet, it also went on to prove all the neigh sayers wrong by surviving a brutal bear market in 2022, before moving into the fixed income market. He managed to effectively offer bitcoin to those buyers who couldn’t be further from being able to purchase the orange coin, by offering them products with such limited downsides, they almost couldn’t say no. When I finally moved by pension out of its managed wrapper, where fees were pretty much matching my annual contributions, I’m very happy that I bought in when I did, but now I’m beginning to question the math behind the “bitcoin leveraged play” that I’m told may offset the loss of self-custody. Note, this is what I’ve been told, but following a range of news stories over the years, and the clarity only @Hodl is able to provide, is busting your gut and risking it all really worth a relatively moderate 15% out performance? For me, no it’s not; so why am I still holding the asset? I have funds, such as the pension, that I can’t gain exposure to bitcoin and ultimately, I don’t see them as my assets, as at the drop of a hat, someone could say that I can no longer access them as 66, I now need to wait until I’m 75. Based on my limited understanding of property law, it appears those assets are not mine at all if someone controls when I can access them.

The initial argument provided by Michael Saylor for buying bitcoin was that during 2020, he began to realised the dollars he had spent the past 30 plus years accumulating were being inflated away quicker that he was able to earn them. What was probably more concerning, was that even though the business held a significant cash position and generated cash, the stock price was stable, barely reflecting the value of the assets held. However, once they used half of their cash reserves to buy bitcoin (and the other half to buy out dissatisfied shareholders), as the price of bitcoin began to run in late 2020, so did the share price of MicroStrategy. When this was combined MicroStrategy selling addition shares into the market, with the proceeds being used to purchase additional bitcoin, the purpose of the company quickly transitions from a software company with a bitcoin treasury to a bitcoin acquisition vehicle. For anyone (or company) unable to buy bitcoin directly, they now had a proxy, creating a significant source of capital flow into MSTR, creating an effective flywheel, where, as the price of bitcoin increased, they were able to sell shares and buy bitcoin, so driving further price appreciation (btc and MSTR). If the company value was more than the bitcoin they help, they were then able to buy more bitcoin with the shares they sold, allowing them to increase the amount of assets backing the shares, meaning while traditionally, selling more shares led to dilution of shareholders, the opposite was taking place.

The scenario that unfolded was in a way similar to what unfolded through 2021 and 2022 with the Grayscale bitcoin trust, where due to it being a closed end fund, share could not always be sold, so there were periods where there was either a premium or discount to bitcoin price. For MSTR, as bitcoin price increased rapidly, due to MSTR being able to use this to purchase bitcoin, the projected future value of the company was more than the assets currently under management, so the market cap of the company was more than the assets held. For the shareholder, this meant that while the bitcoin associated with each share was increasing, the dollar price of shares increased even more rapidly than the bitcoin dollar price.  Unfortunately, at the end of 2021 and into 2022, as the bitcoin price fell precipitously, so did not only the MSTR price, but also the premium over the value of the bitcoin held, to a point in later 2022, where the market was valuing the operating company negligibly (130000btc x $15k is not far off the $1.93B market cap).

Figure 1: Bitcoin held by MSTR in 2022

Figure 2: Market Cap of MSTR in 2022

Whether intentional on Michael Saylor’s part, or a fortunately unintentional consequence, what resulted was a stock that not only behaved with similar characteristics to bitcoin, but with even greater volatility. This then provided traders with a situation that they valued, by buying shares, selling futures or some other form a financial jiggery-pokery that results in them extracting value from a system (oh sorry, I meant “making money”), they wanted to trade the stock. Anyway, this provided MSTR with additional sources of demand, which could then evolve into the development of a variety of products, some dividend paying, others convertible into ordinary stock and most things in between. The result was than into the end of 2024, MSTR arrived on a formula where they could issue what seemed like infinite equity or bonds to buy bitcoin, as the bitcoin price accelerated upwards, so did the share price and their ability to purchase more bitcoin (step change in late 2024). However, as is always the case, prices cannot go up forever, and as bitcoin consolidated at the start of 2025, the share price of MSTR dropped by over 50%, much to my annoyance after suggesting to my father this is a good stock to get into (“I’m not taking any more investment advice from you” he said 😊).

Figure 3: MSTR Share Price

Interestingly, during 2025, while the bitcoin held by MSTR has continued to increase and the price of bitcoin has made new all-time highs (breaching previous ones by over 20%), if you held one share from the November 2024 peak to July 2025, you would only be around breakeven. It would appear that the money to be made from MSTR may not be only about the bitcoin price and the number of bitcoin held, but trading it from when the stock goes from being under-valued to over-valued in relation to its bitcoin holdings. This creates a bit of the problem not least because I really don’t like doing taxes, so if I want to make “the money” with MSTR, I probably need to start doing more trading, which if I time poorly I’d lose money and likely also incur a hefty tax bill. If this is the case for the bluest of blue chip companies in the field, what about the myriad of copy cats, whether Mateplanet (Japan), XXI (US), Blockchain Group (Europe), Smarter Web Company (UK), or any number of new additions this past few weeks? What is the value of putting your money with them as some form of proxy for the bitcoin they will hopefully buy, and also hopefully secure property? Are you hoping they will be able to secure better terms that other firms, use AI to create another product to attract institutional investors or rely on the fact they are in a jurisdiction where access to spot bitcoin is so unfavourable that an equity substitute is the only option (see Japan, closely followed by the UK)?

Figure 4: Selling equity to buy Bitcoin

From a position, where a company begins to pursue a bitcoin accumulation strategy through public markets, they can initially issue shares, establishing a market price and use proceeds to fund their operations, line early investor’s pockets, or in the case of a bitcoin treasury company, buy bitcoin. The above image then illustrates the logic behind the strategy of issuing new shares in order to buy more bitcoin (great work @Croesus_btc). If the market cap is higher than the assets currently held, they issue share this in a way that significantly increases the amount of bitcoin associated with each share. Unfortunately, while at a company level this is a positive move, in terms of increasing the assets held, driving marking cap growth, unless there is an associated increase in share price to reflect this action, the individual shareholder does not benefit. If the market is expecting them to purchase bitcoin, the price will already reflect this and not change. In particular, while there may be a policy where these shares are only issued when price is increasing, the issuance of these shares to the open market where there is buying pressure will absorb demand, rather than it being reflected with an increase in share price. The result of this appears to be the actions of the board to pursue a bitcoin accumulation strategy may actually be negatively affecting shareholders in the short term, by the price being supressed by the issuance of new share.

For those in control of the company, who potentially have much more direct access to the bitcoin, when compared to the average shareholder, this process works well. If the value of the business is dependent on the number of bitcoin held, the closer one is to actually owning/holding the bitcoin, the better. Shareholders, while hopefully experience some price exposure to bitcoin, have very limited, if any recourse to the bitcoin held by the company, they are dependent on management accumulating bitcoin, combined with a sufficient marketing narrative to increase interest in the stock so drive share price. Unfortunately, management are also incentivised to issue additional stocks if there is high demand, in order to purchase additional bitcoin, so further limiting upside appreciation of the stock price. Although there are legal systems in place to ensure that those with control of company assets do not misappropriate them for personal use, the opportunity to have initially allocated a significant proportion of shares to founding directors is difficult to overlook. Set up a company, allocate a million shares to myself, buy a ton of bitcoin, liquidate the company, buy back public shares, keep the bitcoin for yourself, surely I’m not the only one who has thought of this.

Although figure 2 shows how little interest there was in MicroStrategy shares before they started purchasing bitcoin, and withstanding an SEC fraud charge from 2000, MicroStrategy does have a considerable operating history. A large portion of the shared are held by Michael Saylor, but unlike more recent entrants to the scene, there are investors who have built up trust in his business and during the past 5 years, there are also assurances that he will be able to survive market and bitcoin volatility moving forward. In comparison to MSTR, each new entrant has chosen how they are going to balance personal allocation against access to potential market demand and price appreciation of their holdings quite recently. In comparison, MSTR had a need to reinvent the company, to make use of capital and move the company of out its effective 20 year stay in the Doldrums. Metaplanet (to a degree) but more liekly Semler Scientific could be viewed in similar ways, using bitcoin to transform an established firm, with a reputation, but Semler Scientific is much more difficult to describe as a “pure play”.

The problem I see with the new entrants in the UK in particular, whether Smarter Web Company (SWC)(formally known as Uranium Energy Exploration PLC), or Satsuma Technology (Formally, Alpha Tao PLC), the trading history and reputation are missing, particularly in terms of public market operations. With the focus on effectively marketing “the brand”, bringing in “bitcoin celebrities” to the board or at least “trusted voice in the bitcoin ecosystem”, with not insignificant personal investment, the motivation for involvement in these firms begins to emerge. Rather than running an operating company that delivers value to customers and generates revenues that can be saved in bitcoin, the focus is upon using financial tools as a means of exploiting a fiat financial system that prints money to accumulate bitcoin, for the company. While the company could simply purchase bitcoin and then allow its shareholders to benefit from price appreciation, by aiming to outperform the best asset of the last decade, each company will be taking on addition debt-based risk and each of the investors will be taking on third party risks of the operation. 

For anyone who has watched the Netflix show “MADOFF: The Monster of Wall Street”, you are well aware of the many ways in which bitcoin is absolutely, positively not a Ponzi scheme, much to the chagrin of any number of finance experts. While each of these treasury companies, to some degree, are also not Ponzis (traded on an open market), they are, however, each trapped within a system where they are continually reliant on bringing in more money, for the next bitcoin purchase on their journey to delivering their 10 year strategy. Where the similarity with the Madoff Ponzi remains is that when the inflows of money begin to slow and the bitcoin purchases lose momentum, faith and interest in a particular stock may well evaporate, as attention moves to the next new shiny start-up. When this point in the journey is reached, the value of the stock may simply fall back to the value of the assets held by the firm, but if bad practice led it to fall further, the shareholder would be left with no value in their shares and no claim on the bitcoin held by the firm.

For me, bitcoin is a very low risk assets, I know the monetary policy from now until long into the future. There may be a risk of a quantum attack, but that has its spot in my risk register and I’m comfortable that in that situation, bitcoin will be a long way down the list of what the quantum powered evil genius will be targeting. I just can’t say the same about bitcoin treasury companies; when compared to the best performing asset of the past 16 years, I’m not sure there is a need to pursue “additional alpha”, not least with the associated paperwork and taxes when making use of the additional volatility of these leveraged plays. If there is money tied up in “tax advantaged accounts”, they may help you scratch that trading itch that staying humble and stacking sats may be scratch, but if the government gave you a tax advantage, they could just as easily take it away. Add in the ever-present spectre of management malpractice with no access to those keys being ever present, I might just hold my bitcoin. Each new firm and each approach to the bitcoin treasury play is an interesting case study to learn from, and if nothing else, able to provide a little entertainment. Currently it feels like a who’s who list of influencers looking to trade their reach (and potentially integrity) for a few extra sats. 

But if the draw of outsized returns is still too great and you just have to try and make amends for not stacking hard enough in November 2022, be my guest but remember, while it may be a tail risk in many jurisdictions, you won’t be able to do anything with your paper bitcoin gains if they turn off the sell button. If you’re unable to firstly time the sell, hold sufficient to pay any future taxes, withdraw your cash, transfer it to a bitcoin exchange (then explain to them where your money came from and freezing the money while you attempt to provide them with evidence, cheers Strike) before executing the purchase, that’s a lot more work, risk, stress and uncertainty compared to simple buying spot bitcoin in the first place and withdrawing to cold storage. That has to be worth at least an extra 16% of sick GAINZ!!!