You frame the issue well. A lot of ink has been spilled, but here's another way to frame it:
V = B + A
where V = MSTR's value, B = the value of MSTR's BTC, and A = the value that MSTR can extract from counterparties though capital markets arbitrage, including by issuing stock and converts above fair value.
You frame the issue well. A lot of ink has been spilled, but here's another way to frame it:
V = B + A
where V = MSTR's value, B = the value of MSTR's BTC, and A = the value that MSTR can extract from counterparties though capital markets arbitrage, including by issuing stock and converts above fair value.
Taking the limit of both sides as t -> the next risk off event, V -> B as A -> 0.
In plain English, capital markets arbitrage is not a sustainable source of value. It's important to let this really sink in before getting too flustered about how and when it ends.
A couple of reasons why MSTR's capital markets arbitrage isn't a sustainable source of value:
1. You can't do capital markets arbitrate when capital markets close; which they do, regularly
2. MSTR doesn't have a monopoly on selling BTC derivatives, including leveraged equity and BTC-linked convertibles/warrants. Capital markets are very competitive, and other participants will compete away the arbitrage; including other publicly traded companies, by issuing stock and converts, as well as prop desks and hedge funds, by manufacturing competing products.
The arbitrage ends if BTC enters a bear market or if MSTR's vol flatlines, but neither is a necessary condition. It wouldn't surprise me if it's already ended, but we'll only know that in retrospect.
You frame the issue well. A lot of ink has been spilled, but here's another way to frame it:
V = B + A
where V = MSTR's value, B = the value of MSTR's BTC, and A = the value that MSTR can extract from counterparties though capital markets arbitrage, including by issuing stock and converts above fair value.
Taking the limit of both sides as t -> the next risk off event, V -> B as A -> 0.
In plain English, capital markets arbitrage is not a sustainable source of value. It's important to let this really sink in before getting too flustered about how and when it ends.
A couple of reasons why MSTR's capital markets arbitrage isn't a sustainable source of value:
1. You can't do capital markets arbitrate when capital markets close; which they do, regularly
2. MSTR doesn't have a monopoly on selling BTC derivatives, including leveraged equity and BTC-linked convertibles/warrants. Capital markets are very competitive, and other participants will compete away the arbitrage; including other publicly traded companies, by issuing stock and converts, as well as prop desks and hedge funds, by manufacturing competing products.
The arbitrage ends if BTC enters a bear market or if MSTR's vol flatlines, but neither is a necessary condition. It wouldn't surprise me if it's already ended, but we'll only know that in retrospect.