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

  • US Spot Ethereum ETF Sees Net Inflow of $14.98 Million Yesterday

    On October 22, according to monitoring by Trader T, the US spot Ethereum ETF recorded a net inflow of $14.98 million yesterday.

  • Sonic to Transfer 13 Million S Tokens via Strategic OTC Agreement in Next 24 to 48 Hours

    On October 22, Sonic announced on the X platform that approximately 13 million S tokens will be transferred in the next 24 to 48 hours under a strategic over-the-counter (OTC) agreement. The counterparty is a long-term partner of Sonic, and both parties will collaborate to expand Sonic's reach and enhance user engagement through the partner's network.

  • Bank of Korea Maintains Interest Rate as Expected

    On October 22, the Bank of Korea kept the policy interest rate unchanged at 3%, in line with market expectations. Previously, South Korea raised interest rates in consecutive meetings in July and August.

  • U.S. Treasury Secretary Becerra: GENIUS Act Establishes Federal Regulatory Framework for Stablecoin Payments

    U.S. Treasury Secretary Scott Becerra stated that the GENIUS Act is a milestone in the American financial sector, further solidifying the U.S. position as a global cryptocurrency hub. He compared the bill to the National Currency Act signed by President Lincoln in 1863, asserting that it establishes a federal regulatory framework for stablecoin payments in the digital age. Becerra also mentioned that the final rules issued by the Office of the Comptroller of the Currency (OCC) will facilitate the implementation of the bill, providing a clear and pragmatic institutional foundation for private sector innovation, market competition, and maintaining U.S. leadership in the digital asset space.

  • Kalshi to Support Crypto Asset-Backed Loans for Perpetual Futures Margin

    Prediction market platform Kalshi has reached a new arrangement with crypto asset custodian BitGo, allowing certain clients to use their custodial crypto assets as collateral for loans, which will be used for margin in leveraged perpetual futures trading on the Kalshi exchange. This arrangement is aimed at clients of Kalshi Prime, a futures commission merchant registered in the U.S. It employs a tri-party collateral management structure. Loans will be provided by its affiliated lending company, Kalshi Katalyst, with collateral assets held at BitGo Bank & Trust. Eligible collateral assets include Bitcoin, Ethereum, and stablecoins deemed compliant with the GENIUS Act, with plans to integrate additional custodians in the future.

  • Serious Security Vulnerability Discovered in PHP, Leading to Mass Shutdown of Government Websites in Europe

    On October 21, due to the discovery of serious security vulnerabilities in the widely used PHP programming language, multiple government websites across Europe and other regions were forced offline on Wednesday, prompting website operators to take urgent measures to protect system security. The PHP development team announced on Tuesday that two severe security flaws had been identified and urged users to update immediately after the release of the fix. On Wednesday, the PHP team confirmed that a new version addressing the vulnerabilities had been officially released. However, reports indicated that hackers were exploiting these vulnerabilities to breach websites, leading government agencies in countries such as the Netherlands and Finland to proactively shut down some sites before the patch was made available. PHP is one of the most widely used programming languages on the internet, supporting website platforms such as WordPress, Drupal, Joomla, and Magento. According to website technology statistics agency W3Techs, approximately 75% of websites that can identify their programming language use PHP. About 43% of websites globally are powered by WordPress, covering blogs, small business sites, government portals, e-commerce platforms, and news websites. This security incident has resulted in widespread disruptions to websites across multiple European countries, including the Port of Rotterdam, the government portal Overheid.nl, the Royal Netherlands Football Association, the websites of the country's five major political parties, and several hospital websites, all of which have been temporarily shut down.

  • US Stock Indices Open Slightly Higher; SpaceX Soars 8% After Earnings

    The three major US stock indices opened slightly higher, with the Dow Jones Industrial Average up 0.20%, the S&P 500 up 0.29%, and the Nasdaq Composite up 0.71%. SpaceX opened 8% higher, reporting third-quarter revenue of $14.6 billion, a year-on-year increase of 161%. Elon Musk stated that the annual recurring revenue (ARR) is expected to reach between $500 billion and $1 trillion by the end of 2027. Among other popular stocks, Nvidia rose 2.15%, Apple increased 0.09%, Google (Class A) fell 1.28%, Microsoft decreased 0.56%, Amazon was up 0.01%, TSMC rose 1.95%, SpaceX climbed 7.8%, Meta increased 0.24%, Broadcom rose 0.8%, Tesla was up 2.98%, SK Hynix increased 4.11%, Micron Technology rose 3.31%, AMD was up 2.25%, ASML increased 2.83%, Intel rose 2.01%, Cisco increased 0.67%, Oracle was up 1.55%, Dell Technologies (Class C) rose 7.81%, and ARM increased 2.78%.

  • ZEC Surpasses $1300

    Market data shows that ZEC has surpassed $1300, currently priced at $1315.68, with a 24-hour increase of 14.89%. Due to significant market fluctuations, please ensure proper risk management.

  • OpenAI to Launch on Google Cloud: Cutting-Edge Models like GPT-6 Astra and Codex Code Intelligence Available on Google Cloud

    On October 21, the two companies announced that in the coming weeks, OpenAI will offer its cutting-edge AI models and Codex code intelligence services through Google Cloud. This move deepens the collaboration between these two competitors and highlights how major cloud service providers are becoming important distribution channels for top AI models. According to a corporate blog announcement, this partnership will integrate OpenAI's latest models, including GPT-6 Astra, into Google Cloud's Model Garden. Customers will be able to purchase these models on the Google Cloud Marketplace and settle using their existing cloud service procurement credits. OpenAI aims to promote its models to a broader range of enterprise customers.

  • Zelensky: Willing to Reach Peace Agreement While Retaining Control of At Least 75% of Territory

    On October 21, Ukrainian President Zelensky stated in an interview that Ukraine could reach a peace agreement while retaining control of at least 75% of its territory. When asked by the host whether he would be willing to accept a peace agreement that would freeze the situation as it is, with Ukraine still holding 75% or more of its land, Zelensky responded affirmatively, stating, "Now we must freeze (the front lines), this is a practical way to end this war." (CCTV News)