"The price of bitcoin, which more than doubled last year in a trend that many attributed to the "Trump trade," obviously played a big role in this alchemy, but there was also another factor-one that did seem a little magical, or insane, depending on your viewpoint. As MicroStrategy expanded its purchases, eventually accumulating more than three per cent of all the bitcoins in existence, its purchases helped drive the price of the digital currency higher."
"But-and this is the magical bit-its stock price went up even faster than bitcoin did. Toward the end of last year, investors were valuing MicroStrategy at more than two times what its bitcoins were worth, which meant that, for every dollar the company invested in bitcoin, it was creating more than two dollars in value. Some observers labelled Saylor's bitcoin strategy as an "infinite-money machine," or an "infinite-money glitch.""
"Whatever you called it, the gap between MicroStrategy's market value and the value of its bitcoins couldn't be explained by the company's non-digital assets, namely its original software businesses. Saylor's supporters offered two explanations for why MicroStrategy was still a worthy investment. First, the price of Bitcoin could rise a lot further; Saylor claimed that, by 2045, it would reach thirteen million dollars. Second, MicroStrategy had found clever ways to amplify gains for regular shareholders."
Bitcoin's strong rally and MicroStrategy's aggressive purchases combined to push both the cryptocurrency and the company's stock higher. MicroStrategy amassed more than three percent of all bitcoins, which helped lift bitcoin's price while the firm's share price rose even faster, valuing the company at over twice the value of its bitcoin holdings. Supporters cited potential massive future bitcoin appreciation and the firm's use of convertible instruments and debt to buy more bitcoin, claiming amplified exposure for common shareholders. Skeptics questioned the sustainability of the leverage strategy and whether the valuation gap could persist absent other business value.
Read at The New Yorker
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