MicroStrategy's Plunge Analysis: Facing 4 Possible "Death Scenario"

Article by Lin Wanwan

Lately, holders of MSTR (MicroStrategy) are probably having trouble sleeping.

This once-revered "Bitcoin Central Bank" has experienced a stock price bloodbath. As Bitcoin rapidly retraced from its all-time high of $120,000, MSTR's stock price plummeted, with its market value shrinking by over 60% in a short period. There is even a possibility that MicroStrategy might be removed from the MSCI stock index.

The price correction of the coin and the stock price halving are just surface-level issues. What really has Wall Street on edge is the increasing signs that MicroStrategy is being dragged into a currency power struggle.

This is not an exaggeration.

Over the past few months, many seemingly unrelated events have started to connect: JPMorgan Chase has been accused of significantly increasing its short positions on MSTR; users experienced delays in settlement when transferring MSTR stocks out of JPM; the derivatives market has been actively suppressing Bitcoin; there has been a swift escalation in policy discussions around the "USD stablecoin" and the "Bitcoin reserve model";

And these events are not isolated incidents.

MicroStrategy is standing at the fault line between two US monetary systems.

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

In this structural conflict, Bitcoin is not the target but the battleground of the power struggle. And MicroStrategy is the critical bridge in the conflict: It converts the traditional institutions' dollar and debt structure into a Bitcoin exposure.

If the new system is established, MicroStrategy is the core adapter; if the old system solidifies, MicroStrategy becomes a node that must be suppressed.

Therefore, MicroStrategy's recent sharp decline is not just a simple asset fluctuation; it is the result of three concurrent forces: the natural adjustment of Bitcoin's price; the vulnerability of MicroStrategy's risk structure; and the conflict spillover caused by the internal power shift within the US dollar system.

Bitcoin strengthens the Treasury Department's future monetary architecture while weakening the Federal Reserve's framework. The government faces a difficult choice: to maintain the opportunity for low-price accumulation, they must allow JPMorgan Chase to continue suppressing Bitcoin.

Hence, the hunting strategy against MicroStrategy is systemic. JPMorgan Chase understands this game too well because they are the ones who set the rules. They have placed MicroStrategy on the dissection table, clearly distinguishing its veins (cash flow), skeleton (debt structure), and soul (market faith).

Here we break down the four possible "death poses" that MSTR may face, also known as the four death spells carefully prepared by the old order for MSTR.

Pose One: Loot on the Fire

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

This logic is straightforward but not the core issue.

Because everyone knows that "if BTC drops too much, MSTR will be in trouble," but few people know: to what extent does MSTR go from "rock solid" to "unstable."

MSTR's balance sheet has three key numbers:

Total BTC holdings exceed 650k coins (about 3% of the total Bitcoin supply)

Average position cost is about $74,400

Some debt carries implicit price risk (not liquidation, but affects net assets)

Many stories of "MSTR going to zero" treat it as the forced liquidation style of exchange contracts, but in fact, MSTR does not have a liquidation price, but it has a "narrative liquidation price."

What does that mean?

Even if creditors won't force him into bankruptcy, the market will bankrupt his stock price. When the stock price drops to a certain level, he won't be able to issue more bonds or convertible bonds to continue adding positions.

The old forces like JPMorgan are joining forces to short MSTR through the US stock options market. Their tactic is simple: take advantage of the Bitcoin pullback, aggressively dump MSTR, and create panic. They have only one goal: to shatter Michael Saylor's myth.

This is MSTR's first trigger point: the Bitcoin price drops to a level where the outside world is no longer willing to give him money.

Pose Two: Debt Pressing

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

Many laypeople think MSTR simply buys coins with the money they earn, which is wrong. MSTR plays an extremely bold "leveraged arbitrage game."

Saylor's core strategy is as follows: issue Convertible Notes, borrow dollars, buy Bitcoin.

MSTR has raised a whopping $2.08 billion in high-value funds this year, a scale that is extremely rare in the annual fundraising of U.S. public companies. The sources of funding are $11.9 billion from MSTR's common stock, $6.9 billion from preferred stock, and $2 billion from convertible bonds.

It may sound ordinary, but the devil is in the details.

The interest on these bonds offered to investors is extremely low (some are even less than 1%). Why would investors buy them? Because these bonds come with a "call option." If MSTR's stock price goes up, the bondholder can convert the bond into stock and make a big profit; if the stock price does not rise, MSTR will redeem the bond at maturity with interest.

This is the famous "flywheel": issue bonds to buy coins, the coin price rises, MSTR's stock price soars, bondholders are happy, the stock has a high premium, issue bonds again, buy more coins.

This is the so-called "upward spiral." However, wherever there is an upward spiral, there must be a death spiral.

This type of thunderclap move is called a "forced deleveraging under liquidity crisis."

Imagine, if in some future year, Bitcoin enters a long period of consolidation (no need for a crash, just consolidation). 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 stocks. They coldly say, "Pay up. Cash out."

Does MSTR have cash? No. Its cash has been converted to Bitcoin.

At this point, MSTR faces a desperate choice: either borrow new debt to repay old debt. But because the coin price is in the doldrums and market sentiment is poor, the interest on new bonds will be shockingly high, directly swallowing up the meager cash flow from the software business.

Or, sell coins to repay debt.

Once MSTR is forced to announce "selling Bitcoin to repay debt," it is like launching a nuclear bomb into the market.

The market will panic: "The whale is capitulating!" Panic will cause the coin price to fall, the coin price drop will cause MSTR's stock price to plummet, the stock price crash will make more bonds unconvertible, and more bondholders will demand repayment.

This is the "Soros-style" sniping moment.

This type of detonation pose is the most dangerous because it doesn't require a Bitcoin collapse to trigger; it only needs "time." When the debt maturity date coincides with a market quiet period, the sound of the fund chain breaking will be even crisper than shattering glass.

Pose Three: Heartless Kill

If the second pose is "out of money," then the third pose is "out of trust."

This is currently MSTR's biggest hidden danger, also the blind spot most overlooked by retail investors: Premium.

Let me do some math for you. You buy a share of MSTR right now, let's say you spent 100 bucks. But in this $100, it actually only contains $50 worth of Bitcoin; what about the remaining $50?

It's air. Or to put it more nicely, it's a "belief premium."

Why is everyone willing to pay twice the price to buy Bitcoin?

In spot ETFs, such as BlackRock's IBIT, before it came out, it was because there was no choice, compliant institutions could only buy stocks. Even after spot ETFs came out, everyone still buys them because they believe Saylor can "nourish the coin through debt issuance" and run a pure accumulation strategy.

However, this logic has a fatal flaw.

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

Imagine this, but if Wall Street continues to suppress it, and the White House also pressures MSTR to hand over its chips? If the SEC suddenly releases a document saying "public companies holding coins are not compliant"? In that moment, everyone's faith collapses.

This type of detonation pose is called the "Davis Double Kill."

At 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? They're still at 1:1."

Once this thought becomes a consensus, MSTR's premium will quickly return from the current 2.5 times, 3 times, to 1 time, and even fall to 0.9 times (discount) due to its business entity having operational risks.

This means that even if the price of Bitcoin doesn't drop a cent, MSTR's stock price could be cut in half directly.

This is the collapse of narrative. It's not as bloody as a debt default, but it's more soul-crushing. You watch your Bitcoin holdings not drop, but your MSTR in your account shrinks by 60%, making you question your life choices. This is called "valuation slaughter."

Posture Four: Close the Door and Beat the Dog

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

What is MSTR doing right now? It is desperately trying to do what? It is desperately trying to increase its market capitalization, attempting to squeeze into more indices, such as the already included MSCI Stock Index and the Nasdaq, such as the S&P 500.

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

As the saying goes, fortune is where misfortune lies.

Because by entering the U.S. stock index, MSTR is no longer a simple pump stock; it has become a screw in the U.S. stock financial system structure. Wall Street is shorting MSTR with its left hand and releasing news of MSTR being kicked out of the index with its right hand, causing retail panic selling.

MSTR is already out of control. It wanted to use Wall Street's money but ended up being locked by Wall Street's rules.

It wanted to climb up by Wall Street's rules, but in the end, it may die by Wall Street's rules.

Epilogue: Palace Intrigue Destiny

Michael Saylor is a genius, but also a madman. He saw through the essence of fiat currency depreciation, seized the dividend of the era, and transformed a mediocre software company into Noah's Ark carrying the dreams of millions of gamblers.

However, the amount of Bitcoin he holds has far exceeded the capacity that this company can bear.

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

It could either use U.S. Treasuries to directly replace MSTR's equity or support MSTR in issuing nationally endorsed preferred shares, or even directly intervene administratively to forcibly upgrade its credit rating.

The climax of this drama is not completely over; the palace intrigue of the old and new U.S. financial orders is still ongoing. MSTR's structure is fragile, bullish in volatility, bearish in time.

As long as Wall Street unscrews one of MSTR's screws, then the four postures we mentioned earlier: price collapse, debt default, premium disappearance, index strangulation, will all cause MSTR's structure to become imbalanced in a short period of time.

But on the flip side: when the chain is in full swing, it could become one of the most explosive targets in the global capital markets.

This is MSTR's charm, but also its danger.

Sources:

1. Trump‘s Gambit: The Quiet War Between the White House and JPMorgan

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