Peter Schiff exposes the risks of BTC strategy
Microstrategy Bitcoin's strategy is very simple: raise debt to buy bitcoins and sell shares at a premium to repeat the cycle. Until recently, it was considered a miracle. In the year At the beginning of November 21, the price of MicroStrategy stood at a peak of $535.42. However, since then, it has declined significantly by over 33.94%.
Notably, during the period, the price of Bitcoin also decreased, but only by 1.74%. The latest development prompts many to question the credibility of MSTR's BTC strategy. Recently, renowned financial expert Peter Schiff exposed the downsides of MicorStrategy's Bitcoin strategy and warned of potential crashes in the BTC and MSTR markets. Has the Revolutionary Bitcoin Strategy Failed? Let's try to understand the situation in depth. Enter!
Big stock drop for Microstrategy
Over the past four days, the microstrategy has fallen approximately 33.94%. The latest decline is the company's biggest four-day decline in recent history, according to data. The company reportedly lost more than $30 billion in market value due to the downturn.
MSTR Market Overview: Retail Investors and High Trading Volume
Before the downgrade, the MSTR market saw unusually high participation from retail investors. Reports indicate that last week, retail investors bought $42 million worth of MSTR stock in a single day – the largest purchase on record. The data shows that at least $100M worth of MSTR stock was purchased by retail investors in the past week alone.
Importantly, the microstrategy market saw over $136B in trading volume last week, which is 29x higher than Amazon's market cap and far greater than it has experienced in a week as a whole.
Is MicroStrategy Bitcoin Strategy a Ponzi Scheme?
Currently, MicroStrategy holds at least 386,700 Bitcoin tokens, which are worth about $35,764,258,860. However, the total market cap of the company is over 74.95B. This implies that the company's market value is at least 2.1x higher than the value of its BTC holdings.
In the last two months, the MSTR market has seen an increase of 113.07%. At the same time, the BTC market showed an increase of 41.19%. This shows that the MSTR market has performed almost three times better than the BTC market over the period.
However, a comparative analysis of Bitcoin and MicroStrategy recently showed MSTR more volatile than BTC.
Broader implications for Bitcoin and MicroStrategy
Criticizing MicroStrategy's quick execution of its $42 billion worth of bitcoin plan, financial expert Schiff condemned the way the company recently spent $10 billion of its planned purchase of BTC tokens. He also warned that once the plan is fully implemented, both MicroStrategy and Bitcoin will face a risk.
In conclusion, Bulls argues that microstrategy can make a difference and position the company for long-term success. However, Bear argues that the strategy is unsustainable as debt and market risks grow, likening it to a Ponzi scheme.
