Earlier today, Michael Saylor dropped a new announcement by MicroStrategy, with the crypto community immediately going nuts over it. In that tweet, he went on to show a pyramidal chart explaining their "Long Term Target BTC Capital Structure," and, honestly, the shape alone got everyone asking if this whole thing is starting to look like a pyramid scheme.
The important highlight in the tweet was this new thing, $STRC, or, as it is called, "Stretch," a kind of Perpetual Preferred Stock meant for select investors. In fact, what Saylor is saying here is that MicroStrategy wants to create a capital structure around Bitcoin that is stacked like a pyramid. At the top, there is $STRF, then $STRC, then $STRK, and so on-all on top of MicroStrategy's gigantic Bitcoin holdings.
Just by looking at the image, one can quickly understand the reason why people are doubtful on the internet. The pyramid structure gives the impression that each new layer is relying on the one below to survive. People saw that and instantly said, it looks like a Ponzi structure dressed in corporate language. Others said Saylor is just creating financial instruments based on Bitcoin, the same way that banks would build products on top of assets all the time.
So is it a pyramid scheme? Here's my personal take.
I don't think MicroStrategy is actually running a classic pyramid scheme because they aren't asking random people to recruit others or promising guaranteed profits. But I do think Saylor is pushing things to an extreme level. The chart gives off a vibe that MicroStrategy wants to build an entire tower of financial products on top of the value of Bitcoin. It looks like stacking leverage on leverage.
And that is where the risk comes in.
If Bitcoin goes up forever, like Saylor believes, then maybe all these layers will make sense. But if Bitcoin ever crashed badly, this whole structure could become extremely unstable. When you put too many layers of finance on one asset, you are creating top-down pressure. And the people who might feel that pressure first are normal investors.
My take is that MicroStrategy is not scamming people, but they are moving in a very aggressive direction; it feels like financial engineering. Crypto investors have seen too many blow-ups to feel comfortable with anything that looks like a pyramid, even when it is just a chart. I think MicroStrategy is trying to evolve into a kind of Bitcoin-powered bank, and the new $STRC announcement is another step in that plan.
But honestly, the design of that chart was a bad PR move because it left the door wide open for people to compare it to a pyramid. And once the internet makes that joke, the joke spreads fast. I really do think it's not a scam, but it's also not something the average investor should jump into without understanding the risks. MicroStrategy's playing a high-stakes game, and the higher they climb, the harder the fall could be if something goes wrong.
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Saylor, is playing a very risky game, with all this leverage. I don’t like it!
The end of the story is obvious! When the leverage cost increases and the current model breaks, MicroStrategy will go bad! It’s ridiculous how many bitcoin peeps who preach self custody give MicroStrategy praise. Just shows how even reasonable people can get sucked into garbage. !PIZZA !LADY
Fact, this form of business is just asking for trouble, especially with such a volatile asset!
No it’s not a “Pyramid” scheme, but it will end badly regardless. It’s quite pathetic how many bitcoiners who preach holding pen keys or u don’t idk it randomly make exception for MicroStrategy and praise it. MicroStrategy Will likely be the next best cycle event just as Mt Gox was 11 years ago , Bitfinex was 7 or so years ago & FTX was 3 years ago. Doesn’t mean it will be criminal like them but when borrowing and interest costs change it will fail and model will break and caste chaos and big headlines temporarily. It’s ridiculous that the very people preaching self custody seem to mostly praise MicroStrategy.
!LADY !PIZZA
I've been saying this even before his started the preferred stocks. Now his plan is looking even more unstable. I think a lot of people were blinded by his enthusiasm — finally a big name who is by all appearances is as pro-BTC as we are ! — and started to see MSTR as a safer alternative, a way to protect themselves from the dramatic drops. Then with the preferred stocks, the idea that we can earn a monthly or quarterly income while still supporting BTC is appealing, but unlike all the other ETFs, this one has Saylor's name. In other words, I think he has bamboozled a lot of people. Maybe even himself. But he has set up a house of cards that will be harder and harder to prevent collapsing.
First off good job reading through all my typos and still understanding my point! 😂
I agree 100%! I do think he is a legit true believer but I may be wrong, either way doesn’t change how this ends. MS will be the next bear market excuse for a deep correction as was Gox & FTX in prior cycles. Many keep saying due to trillions cap we will likely go down less % wise this time but I think it will likely be about what it was last time or only slightly less. If 126K ends up being cycle top I see 40K handle for almost certain in bear cycle but we shall see. Personally after holding Bitcoin for each prior cycle, I’ve seen this so many times I no longer get freaked on huge dips, I see the growth slowing as we get bigger but I still believe Bitcoin will continue higher long term.
!PIZZA !LADY
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Even if it looks like a pyramid scheme is no different than most corporate debt. Where they put their stocks as collateral to get more credit and extend the debt. In that sense every company is a pyramid scheme, when their stock is going down they can just buy back the stock making the remainder go up in price.