MicroStrategy invests 1.75 billion euros in BTC! Economists criticize: It's just a Ponzi Scheme

Large-scale purchase of BTC, questioned for prudence

The U.S. business intelligence company MicroStrategy has been making waves in the market for the past two months by crazily buying about 17.5 billion US dollars worth of BTC. Data shows that the company quickly raised funds through the issuance of zero-coupon convertible bonds, additional stock offerings, and converted all of it into BTC, becoming one of the most active "BTC whales" in the market. However, this strategy has drawn warnings from many economists and analysts, with some bluntly calling it a "Ponzi scheme," emphasizing that as long as the price of BTC stagnates or falls, the entire structure will face the risk of collapse.

MicroStrategy, led by its CEO Michael Saylor, has repeatedly increased its BTC holdings, causing divergent views among investors. Some believe that Saylor has a long-term vision, intending to treat BTC as 'digital gold' to create long-term value for the company and shareholders. Others criticize this practice of continuously purchasing BTC through leveraged financing as fundamentally risky and not a sound corporate financial strategy.

Analysts criticize it as a high bet on the "bullish trend of BTC"

Economist Jacob King wrote on the social platform X, criticizing MicroStrategy's approach as 'resembling a Ponzi scheme.' King pointed out that the company raises cash through debt and equity financing, then converts it all into BTC. As the price of BTC rises, the stock price, company market value, and financing capabilities further increase, creating a 'positive feedback loop.' However, the premise of this loop is that the BTC price will always rise. Once the BTC price stagnates or experiences a large drop, the debt burden carried by MicroStrategy will become a huge liability. The shrinking asset value raises doubts about debt repayment abilities, potentially forcing the company to sell BTC and leading to a vicious cycle.

Image source: Jacob King King pointed out that MicroStrategy's practice of raising cash through debt and equity issuance, and then converting it all to BTC, is akin to a "Ponzi scheme"

Bitcoin skeptic and renowned American economist Peter Schiff has also harshly criticized MicroStrategy's strategy. He emphasizes that BTC does not have the characteristics of producing income like real estate, and does not have cash flows such as rent to repay interest or principal. Borrowing funds to purchase BTC is like building a staircase in the air, relying on the assumption of endless appreciation. If the market reverses, the company will face unbearable losses.

Saylor and Bull Supporters: We are the Vanguard of Digital Gold

In the face of criticism, MicroStrategy and the Saylor camp still believe in the rationale of this strategy. Saylor has even compared buying BTC to buying Manhattan real estate a hundred years ago, saying that even though the price has risen, it is still a quality long-term investment. Supporters like Robert Kiyosaki, the author of 'Rich Dad Poor Dad,' praise Saylor as a 'genius' and believe that the wealth accumulated through BTC will benefit shareholders and the company.

However, economists and skeptics are not convinced. They question whether micro-strategies can ultimately withstand the inevitable cyclical fluctuations of BTC, and remind investors not to be deceived by the temporary high returns and glamorous stories. Especially recently, although BTC has reached a new milestone of about $100,000, if regulations and market conditions change next year, the price trend remains uncertain.

Are prophets always lonely? Micro-strategies have long been questioned.

MicroStrategy's stock price once performed strongly due to its large holdings of BTC, and it even successfully joined the Nasdaq-100 Index as a star company in that camp. However, critics believe that the final judgment still needs time to verify: leveraged buying strategies may be profitable in a hot market, but if the market cools down, the company may be forced to sell BTC at a low price to repay debt and interest, quickly depleting corporate capital and causing significant losses to shareholders.

Overall, the spectacle of MicroStrategy splurging 17.5 billion USD to buy BTC has attracted significant attention and sparked major controversy. The company, which originated from traditional analytical software, has now become a massive leveraged player in the BTC market. With the future of the cryptocurrency market still full of variables, can this strategy overcome the 'Ponzi suspicion' and stand firm on the global stage of crypto investment? Investors, industry observers, and economists will continue to closely monitor.

[Disclaimer] There are risks in the market, and investment should be cautious. This article does not constitute investment advice. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific situation. Investing on this basis is at your own risk.

'MicroStrategy smashes 17.5 billion magnesium to buy BTC! Economist harshly criticizes: It's just a Ponzi scheme' This article was first published in 'Crypto City'