MSTR's Tribulation: Short Selling and Palace Intrigue

Original Title: Analysis of MicroStrategy's Plunge: Facing 4 Types of "Death Outcomes"

Original Author: Lin Wanwan, BlockBeats

Recently, holders of MSTR (MicroStrategy) are probably having a hard time sleeping.

This once-lauded "Bitcoin central bank" has experienced a bloodbath in its stock price. As Bitcoin rapidly retraced from its historical high of $120,000, MSTR's stock price and market value have significantly shrunk, plummeting over 60%, and there is even a possibility that MicroStrategy could be removed from the MSCI stock index.

The price retracement of cryptocurrencies and the halving of stock prices are merely superficial. What truly makes Wall Street anxious is the increasing signs that MSTR is caught in a battle for monetary power.

This is not an exaggeration.

In recent months, many seemingly unrelated events have begun to connect: JPMorgan has been accused of significantly increasing its short-selling of MSTR; there have been delivery delays when users transfer MSTR stocks from JPM; the derivatives market has frequently suppressed Bitcoin; discussions on "Treasury stablecoins" and "Bitcoin reserve models" have rapidly heated up;

And these are not isolated incidents.

MSTR is standing on the fault line of two American monetary systems.

On one side of the palace struggle is the old system: the Federal Reserve + Wall Street + commercial banks (with JPMorgan at the core); on the other side is the emerging new system: the Treasury + stablecoin system + a financial system collateralized by Bitcoin over the long term.

In this structural conflict, Bitcoin is not the target but the battlefield. And MSTR is the key bridge in the conflict: it converts the dollar and debt structure of traditional institutions into Bitcoin exposure.

If the new system is established, MSTR is the core connector; if the old system remains solid, MSTR is the node that must be suppressed.

Therefore, MSTR's recent plunge is not a simple asset fluctuation; it is driven by three overlapping forces: the natural adjustment of Bitcoin prices; the vulnerability of MSTR's own risk structure; and the spillover of conflicts caused by power shifts within the dollar system.

Bitcoin strengthens the future monetary structure of the Treasury while weakening that of the Federal Reserve. The government faces a difficult choice: if it wants to maintain the opportunity to accumulate at low prices, it needs JPM to continue suppressing Bitcoin.

Thus, the tactics to hunt MSTR are systematic. JPMorgan understands these game rules very well because they set the rules. They have placed MSTR on the dissection table, clearly distinguishing its blood vessels (capital flow), skeleton (debt structure), and soul (market faith).

Here, we will break down the four potential "death postures" that MSTR may face, which are also four death warrants carefully prepared by the old order.

Posture One: Take Advantage of the Fire

This is the most intuitive and the most discussed model in the market: if BTC continues to plummet, MSTR's leverage amplifies, and the stock price keeps falling, leading to a loss of refinancing ability, ultimately resulting in a chain collapse.

The logic is simple, but it is not the most critical issue.

Because everyone knows "if BTC drops too much, MSTR will have problems," but few know: to what extent must it drop for MSTR to go from "stable as a dog" to "unstable"?

MSTR's asset-liability structure has three key numbers:

Total BTC position exceeds 650,000 coins (approximately 3% of total Bitcoin supply)

Average position cost is about $74,400

Some debts have implicit price risks (although not forced liquidation, they affect net assets)

Many stories claiming "MSTR will go to zero" treat it like a forced liquidation style of exchange contracts, but in fact: MSTR does not have a forced liquidation price, but it has a "narrative forced liquidation price."

What does this mean?

Even if creditors do not force liquidation, the market can crash its stock price. When the stock price falls to a certain level, it can no longer issue debt or convertible bonds to continue to average down.

This old force from JPMorgan is working together to short MSTR through the U.S. stock options market. Their tactic is simple: take advantage of Bitcoin's retracement to aggressively sell MSTR, creating panic. Their only goal is to shatter Michael Saylor's myth.

This is MSTR's first explosion point: when Bitcoin's price drops to a level that makes the outside world unwilling to give it money.

Posture Two: Debt Collection at the Door

Before discussing convertible bonds, we first need to clarify how MSTR's CEO Michael Saylor's "magic" works.

Many novices think MSTR simply buys Bitcoin with the money it earns, but that's wrong. MSTR is playing a very bold "leveraged arbitrage game."

Saylor's core method is: issuing convertible notes, borrowing dollars, and buying Bitcoin.

This year, MSTR has raised $20.8 billion in high funding, a scale that is extremely rare in the annual fundraising of U.S. listed companies. The sources of funds are $11.9 billion from common stock, $6.9 billion from preferred stock, and $2 billion from convertible bonds.

This sounds ordinary, but the devil is in the details.

These bonds offer investors very low interest rates (some even less than 1%); why would investors buy them? Because these bonds include a "call option." If MSTR's stock price rises, the bondholders can convert the bonds into stock and make a profit; if the stock price does not rise, MSTR will repay the principal and interest at maturity.

This is the famous "flywheel": issuing bonds to buy Bitcoin, Bitcoin price rises, MSTR's stock price skyrockets, bondholders are happy, stock premiums are high, and then issue more bonds to buy more Bitcoin.

This is what is called "spiral ascent." However, wherever there is a spiral ascent, there must also be a death spiral.

This explosion posture is called "forced deleveraging under liquidity exhaustion."

Imagine if, in a future year, Bitcoin enters a long sideways period (it does not need to crash, just needs to be sideways). At this time, the old bonds mature. The bondholders see: MSTR's stock price has fallen below the conversion price.

Bondholders are not philanthropists; they are Wall Street vampires. At this point, they will never choose to convert the bonds into stock; they coldly say, "Pay up. We want cash."

Does MSTR have cash? No. It has converted all its cash into Bitcoin.

At this point, MSTR faces a desperate choice: either borrow new debt to repay old debt. But due to the depressed Bitcoin price and poor market sentiment, the interest on newly issued bonds will be frighteningly high, directly swallowing that meager cash flow from its software business.

Or, sell Bitcoin to repay debts.

Once MSTR is forced to announce "selling Bitcoin to repay debts," it will launch a nuclear bomb into the market.

The market will panic: "The long position has surrendered!" Panic leads to a drop in Bitcoin prices, a drop in Bitcoin prices leads to a plunge in MSTR's stock price, a plunge in stock price leads to more bonds unable to convert into stock, and more bondholders demanding repayment.

This is the "Soros-style" sniping moment.

This explosion posture is the most dangerous because it does not require a Bitcoin crash to trigger; it only needs "time." When the debt maturity date coincides with a market silence period, the sound of the funding chain breaking will be clearer than shattered glass.

Posture Three: Kill the Heart

If the second posture is "out of money," then the third posture is "no one believes anymore."

This is currently MSTR's biggest hidden danger and the blind spot most overlooked by retail investors: the premium rate.

Let me do the math for you. If you buy one share of MSTR now, assuming you spent $100. But this $100 actually only contains $50 worth of Bitcoin; what is the remaining $50?

It's air. Or, to put it nicely, it's "faith premium."

Why are people willing to pay double the price to buy Bitcoin?

Before the spot ETF, like BlackRock's IBIT, came out, it was because there were no options; compliant institutions could only buy stocks. After the spot ETF came out, people still bought because they believed Saylor could "nurture Bitcoin" through issuing bonds and outperform simple hoarding.

However, this logic has a fatal weakness.

MSTR's stock price is built on the narrative of "I can borrow cheap money to buy Bitcoin." Once this narrative is broken, the premium rate will revert.

Imagine if Wall Street continues to suppress, and the White House also forces MSTR to give up its chips? What if the SEC suddenly issues a document saying "holding Bitcoin is non-compliant for listed companies"? In that moment, everyone's faith will collapse.

This explosion posture is called "Davis Double Kill."

In that moment, the market will ask itself a soul-searching question: "Why should I spend $2 to buy something worth $1? Why not buy BlackRock's ETF? It's still 1:1."

Once this thought becomes a consensus, MSTR's premium rate will quickly revert from the current 2.5 times, 3 times, to 1 time, or even drop to 0.9 times (discounted) due to its operational risks as a corporate entity.

This means that even if Bitcoin's price does not drop a cent, MSTR's stock price could be halved directly.

This is the collapse of the narrative. It is not as bloody as a debt default, but it is more soul-crushing. You see your Bitcoin has not dropped, but your MSTR in your account has shrunk by 60%, and you will question your life. This is called "killing the valuation."

Posture Four: Closing the Door to Beat the Dog

The fourth posture is the most hidden, the least known, but also the most ironic.

What is MSTR desperately trying to do now? It is trying to increase its market value, attempting to squeeze into more indices, such as the already included MSCI stock index and the Nasdaq, and even the S&P 500.

Many people cheer: "Once it enters the S&P 500, there will be trillions of passive funds that must buy it, and the stock price will become a perpetual motion machine!"

As the old saying goes, fortune hides in misfortune.

Because entering the U.S. stock index, MSTR is no longer just a simple stock; it has become a screw in the structure of the U.S. stock financial system. Wall Street is shorting MSTR with one hand while releasing news of MSTR being kicked out of the index with the other, causing panic selling among retail investors.

MSTR has already lost its autonomy. It wants to use Wall Street's money, but instead, it is locked by Wall Street's rules.

It wants to rise through Wall Street's rules, but it may ultimately die by Wall Street's rules.

Epilogue: The Fate of Palace Struggles

Michael Saylor is a genius and also a madman. He has seen through the essence of fiat currency devaluation and seized the dividends of the times. He has transformed an ordinary software company into a Noah's Ark carrying the dreams of millions of gamblers.

But the amount of Bitcoin he holds has far exceeded what this company can bear.

Many in the market are already speculating that the U.S. government may directly invest in MSTR.

The method could either be to directly exchange U.S. Treasury bonds for MSTR's equity or support MSTR in issuing government-backed preferred stock, or even direct administrative intervention to forcibly enhance its credit rating.

The climax of this grand drama has not completely ended; the palace struggle between the new and old orders of American finance is still ongoing. MSTR's structure is fragile, making it prone to volatility and time-sensitive shorts.

As long as Wall Street twists one of MSTR's screws, then any of the four postures mentioned above: price collapse, debt default, premium disappearance, or index strangulation, will lead to an imbalance in MSTR's structure in a short time.

But conversely: when the chain operates simultaneously, it may also become one of the most explosive targets in the global capital market.

This is MSTR's charm, and it is also its danger.

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