The cycle of leverage, no one can escape!
Do you remember the grayscale of 2021? It was hailed as a myth of earning premium with no risk, and GBTC was the market's barometer, consuming 346,000 coins $BTC in a crazy year, accounting for 76% of the annual output. Now that the halo has faded, it has to explain to the market how it can still make money.
Currently, the story of MicroStrategy is similar. It is now known as the Bitcoin treasury, constantly increasing its BTC holdings through bond issuance and stock issuance, with stock prices deeply tied to BTC, becoming a banner in the bull market.
Its mNAV premium has fallen about 54.9% from its peak, and executives are also reducing their stock holdings, leading the market to question its financing capability and the sustainability of its business model. Doesn't this resemble the eve of the premium turning point for Grayscale back in the day?
Essentially, this is all a cycle of leverage. Grayscale relied on a trust structure that only allows inflow to boost its premium, while MicroStrategy relies on borrowing money to hoard coins and amplify returns.
In a bull market, leverage is wings, but once the market turns, the knife of deleveraging is faster than anyone else; excess returns come from leverage, and excess losses are also realized by leverage.
So don't deify any institution; if MicroStrategy encounters a bear market, deleveraging will only be more painful, and cycles do not recognize individuals!
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