The Bitcoin (BTC) Holder Strategy (MSTR) capital trap is getting tighter, according to Ilan Solot, senior global markets strategist at Marex Solutions, a division of global financial services firm Marex.
The company has a huge reserve of bitcoins, accumulated through aggressive purchases and share dilution. Common shareholders bought into Saylor’s vision, turning the company into a leveraged bet on BTC. But that narrative is colliding with reality.
“The strategy is now a fight for cascading capital; each move protects one stakeholder by torching another,” he said in an email to CoinDesk.
In fact, different groups, including BTC holders, compete for capital and are placed in a hierarchy. In a crisis, the debt is paid first. Then preferred shareholders. So common. Then whatever is left, mainly the BTC holders. Right now, the strategy needs capital. But every option available destroys someone.
Sell bitcoins? That damages the core narrative and the common shareholders who believed in it. Issue more shares? That dilutes current shareholders. Skip the preferred dividend? Let the torches produce tourists. Issue more debt? Everyone below that debt in the waterfall moves further away from safety.
“The whole dance here is about who gets the loss,” Solot said.
The company could continue issuing debt. But there is a limit. Eventually, lenders stop lending. Then comes the difficult decision: hurt the common shareholders or hurt the preferred shareholders or sell the bitcoin. There is no option that won’t hurt someone.
“Issue more debt and everyone at the bottom will be pushed further down the waterfall,” he said.
