Currently, only Coinbase and MicroStrategy have reached a market value of over $100 billion in the cryptocurrency industry. This may mean that the market value ceiling of the crypto industry has already appeared. Pfizer’s market value in the US stock market is $140 billion, and its quarterly profit is $4 billion. I think this is the maximum height that MicroStrategy can reach even if it finally soars.
Coinbase’s market value and profits: Coinbase was once one of the most profitable exchanges in the world, with a market value of more than $100 billion. When it went public, its profits in one quarter were as high as $3 billion.
MicroStrategy’s Bitcoin holdings and financing strategy: MicroStrategy purchases Bitcoin through continuous bond financing. It currently holds 331,200 Bitcoins, accounting for 1.5% of the total Bitcoin supply, and its holdings are worth US$33 billion.
Guo Yu once shared that MicroStrategy’s core model is to treat long-term debt as profit on the balance sheet rather than creating cash flow. This explains why MicroStrategy has risen so much.
Comparison of MicroStrategy and MARA’s profit models: Assuming that both companies raise $1.2 billion, MicroStrategy uses it to purchase Bitcoin, while MARA uses it to invest in mining machines.
When the price of Bitcoin rose from $50,000 to $100,000, MicroStrategy made a net profit of $1.2 billion by investing in Bitcoin, but this was unrelated to the company’s business cash flow and was a floating profit. Including the Bitcoin that MicroStrategy had previously hoarded, it actually made more than $15 billion in a year.
In contrast, MARA invested $1.2 billion in mining. Although the mining cost is higher, the payback period of the mining machine is one year over time, which is equivalent to a cash flow of $100 million per month thereafter.
So for the same $1.2 billion investment, MicroStrategy’s profit depends on the price of Bitcoin, while MARA’s profit depends on the duration of Bitcoin.
This is also the core reason why I believe that $100,000 of funds in Bitcoin will overflow from MicroStrategy to mining stocks. As long as the price of Bitcoin remains at $100,000 and the computing power scale remains unchanged, the longer the time, the higher the accumulated profit.
So for the same $1.2 billion investment, MicroStrategy’s profit depends on the price of Bitcoin, while MARA’s profit depends on the duration of Bitcoin.
The impact of Bitcoin price on MicroStrategy: As the price of Bitcoin rises, the marginal effect of MicroStrategy’s purchase of Bitcoin through financing decreases. If the price of Bitcoin has reached $100,000, MicroStrategy raises another $1.2 billion, the doubling difficulty index rises, and the increase in Bitcoin may only be 20%, then the profit will be greatly reduced to $240 million.
Bitcoin price ceiling and MicroStrategy’s financing restrictions: Bitcoin prices have limited room for growth, which limits MicroStrategy’s growth potential through financing to purchase Bitcoin. As Bitcoin prices rise, MicroStrategy’s financing capabilities will also be limited, so the seemingly infinite flywheel of left foot stepping on right foot also has an upper limit, and financing can no longer continue.