The financial trap of Bitcoin (BTC) Holder Strategy (MSTR) is tightening, according to Ilan Solot, senior global markets strategist at Marex Solutions, a division of global financial services company Marex.
The company relies on a massive hoard of bitcoin, accumulated through aggressive buying and stock dilution. Common shareholders bought into Saylor’s vision, making the company a leveraged bet on BTC. But this story clashes with reality.
“Strategy is now a fight for the cascade of capital; each action protects one stakeholder by burning another,” he said in an email to CoinDesk.
This is because different groups, including BTC holders, compete for capital and are in a hierarchy. In a crisis, the debt is paid first. Then preferred shareholders. Then common. Then all that remains, mainly BTC holders. Right now, the strategy needs capital. But every available option destroys someone.
Sell Bitcoin? This harms the main message and the ordinary shareholders who believed in it. Issue more stock? This dilutes current shareholders. Ignoring the preferred dividend? These torches attract tourists. Issue more debt? Everyone below that debt in the waterfall is moving further and further from safety.
“The whole dance here is who will grapple with the loss,” Solot said.
The company could continue to issue debt. But there is a limit. Eventually, lenders stop lending. A difficult choice then presents itself: harm common shareholders, harm preferred shareholders or sell bitcoin. There is no option that doesn’t hurt anyone.
“Issue more debt and everyone at the bottom will be pushed further down the waterfall,” he said.
