Cointime

Download App
iOS & Android

Microstrategy — The Bubble That Burst

  [I published this article on March 11, 2021 (almost 2 years ago) at read.cash. A clear warning about the stock, which now is down 90% from the recent ATH. I rewrite and republish it for Medium with a few modifications, adding recent information.]  

Some of us were still too young at the beginning of the millennium, while some weren’t even born. We are trying to find pieces of this puzzle as the dot-com bubble was the starting phase of an economic meltdown that transpired in 2008.

Money was pouring into tech companies, and any website running under a dot com top-level domain was getting listed on Nasdaq and making millionaires overnight.

Microstrategy was part of this bubble, with Saylor standing as the CEO. I did some research on the company during that era, and everything looks to be shady and corrupt.

The Bubble Popped

March 2021: Full Chart of Microstrategy stock price:

(All-time) chart of Microstrategy - Yahoo Finance

[Update Dec. 2022]:

As expected, the Microstrategy bubble popped (again):

Regression To The Mean — Yahoo Finance

Saylor clearly understands bubbles.

Saylor’s dot-com days:

The company went public in 1998, and just two years later, it reached more than $3000, which was 80 times higher than the IPO price.

The S.E.C. contended that Mr. Saylor and two other MicroStrategy officials, had committed fraud in reporting profits when the company was actually losing money.

Source: New York Times

The tech bubble imploded in 2000–2001, and the price of Microstrategy went back to the ground as this medium-sized software company wasn’t Microsoft or Oracle.

MicroStrategy did agree to a cease-and-desist order and promised to make “significant” internal changes in order to ensure that it complies with securities laws in the future. In addition, the company’s corporate controller and accounting manager agreed to individual cease-and-desist orders for reporting and recordkeeping violations.

Source: Computerworld

The price crashed as the dot-com bubble officially reached its peak in March 2000 and never recovered. Until 2021.

How Saylor turned what was once a $313-a-share stock and the biggest fortune in Washington into a $4.09 stock and a merely moderate number of millions is an amazing tale of hubris, hyperbole and high-tech hallucinations.

Source: Washingtonpost

Fast forward to 2013

The next time we find Michael Saylor was during the 2013 Bitcoin bubble. It appears that Saylor had bought Bitcoin at an early stage, although he also sold it all for a small profit, missing out on the exponential gains other investors received.Bitter for not sticking to his Bitcoins, he posted tweets like this one:

The US had outlawed online gambling since 2006 but only enforced the law in April 2011 on the event we called “Black Friday”.

FTP (Full Tilt Poker) was accused of running a Ponzi Scheme and defrauding its users. as its unsustainable model collapsed.Saylor might have had some inside knowledge when making this statement. Perhaps it was his intuition and experience with internet platforms, but still, he wasn’t wrong.

The situation in MtGox was similar to FTP during these days, new money was entering Bitcoin, but the withdrawals from the MtGox exchange were problematic. In the end, MtGox collapsed, and Bitcoin entered a two-year bear market.

Seven years later

The Microstrategy bubble popped in 2022. This time, the stock price started rising after Saylor evolved into one of the top Bitcoin advocates and invested almost all the cash/profits of Microstrategy into Bitcoin.

A reasonable bet, as right after the halving, the charts were looking bullish, and the good news kept coming.

However, Saylor embarked on a twitter journey, trying to promote his image and give some thoughts on Bitcoin that went far, contradicting most of the reasons Satoshi created Bitcoin. The price of Microstrategy pumped as the whole market was bullish.

The trillions printed for the 2020 quantitative easing supported the bull run. Saylor promotes regulations, misrepresents decentralization, and insists on abiding by any requests of the governments if it will help Bitcoin’s price rise. Missing the point that Bitcoin requires nothing and is not susceptible to any regulations and restrictions.

The stock market was in a bubble in 2021 (update: NASDAQ is down 35% YTD), and perhaps cryptocurrencies are somewhere in the middle (note: this was March 2021 when I published this article).

Closing Thoughts

Saylor was playing his game and even convinced Musk to buy Bitcoin with a billion dollars at the beginning of 2021.

Microstrategy’s stock advanced together with Bitcoin, but it is pegged to volatility and attached to the Bitcoin trend, they both plummeted together.

We have not seen public addresses, and do not know where he bought his Bitcoin. Some suggest it was at Coinbase, so it could be part of the news from that exchange (beginning of 2021) about an influx of institutional money entering (back when Microstrategy was buying massive amounts of BTC in 2021).

Will Coinbase inform us about any withdrawals of fiat in banks, in terms of billions of USD, if they are to happen? [they did happen and no exchange informed anyone besides insiders].

When the downfall begins (update: the bull run ended two months after I published this article), we will notice it on the charts, but no exchange will alert us about a massive exodus.

Comments

All Comments

Recommended for you

  • UBS Group Raises Brent Crude Oil Price Forecast to $85 per Barrel by March 2027

    On April 13, UBS Group announced an increase in its Brent crude oil price forecast, projecting $100 per barrel by the end of June, $95 per barrel by the end of September, and $90 per barrel by the end of December. UBS Group has raised its forecast for Brent crude oil prices to $85 per barrel by the end of March 2027. (Jin Shi)

  • People's Bank of China: M2 Balance Reaches 353.86 Trillion Yuan at End of March, Up 8.5% Year-on-Year

    On April 13, it was reported that at the end of March, the broad money supply (M2) balance was 353.86 trillion yuan, an increase of 8.5% year-on-year. The narrow money supply (M1) balance stood at 119.32 trillion yuan, rising by 5.1% year-on-year. The currency in circulation (M0) balance was 14.71 trillion yuan, up 12.5% year-on-year. In the first quarter, a net cash injection of 613.5 billion yuan was made.

  • Trump: U.S. to Block Ships Entering and Exiting Iranian Ports on April 13 at 10 AM ET

    On April 13, President Trump announced that the United States will block ships entering and exiting Iranian ports at 10 AM Eastern Time on April 13. (Jin Shi)

  • Trump: The World Relies on the U.S. for Oil Without Crossing the Strait of Hormuz

    On April 13, Trump stated that due to Iran's actions regarding the Strait of Hormuz, the entire world is relying on the U.S. for oil. "We will implement blockade measures tomorrow at 10 AM... Other countries are also working to ensure that Iran cannot sell oil, and this will be very effective! Many ships are heading to our country, refueling, and then leaving to transport this oil, so they won't have to cross the Strait of Hormuz. This issue will ultimately be resolved. The whole world is relying on the U.S. Thanks to the 'Drill, Baby, Drill' campaign, our oil reserves have increased, surpassing the combined total of Russia and Saudi Arabia. The current situation is that ships are arriving, refueling, and no longer needing to cross the Strait of Hormuz!" (Jinshi)

  • BTC Surpasses $71,000

    Market data shows that BTC has surpassed $71,000, currently priced at $71,007.73, with a 24-hour decline of 2.79%. The market is experiencing significant volatility, so please ensure proper risk management.

  • ETH Falls Below $2200

    Market data shows that ETH has fallen below $2200, currently priced at $2199.99, with a 24-hour decline of 3.64%. The market is experiencing significant volatility, so please ensure proper risk management.

  • ETH Surpasses $2200

    Market data shows that ETH has surpassed $2200, currently priced at $2201.53, with a 24-hour decline of 3.92%. The market is experiencing significant volatility, so please ensure proper risk management.

  • BTC Surpasses $71,000

    Market data shows that BTC has surpassed $71,000, currently priced at $71,007.05, with a 24-hour decline of 2.81%. The market is experiencing significant volatility, so please ensure proper risk management.

  • BTC Falls Below $71,000

    Market data shows that BTC has fallen below $71,000, currently priced at $70,974.17, with a 24-hour decline of 2.69%. The market is experiencing significant volatility, so please ensure proper risk management.