-snip-
Thanks for the stats. My source was an
article on investing.com which was skeptical about MSTR's prospects. They didn't claim that institutionals were the majority of the investors, but that a sub-group of institutionals depending on fixed-income products seem to be important for the company's business model because they can't access to other (cheaper) means to gain exposure to BTC, so MSTR has (had) a monopoly in that field.
The crucial question remains: Who should buy MSTR shares if 1) one can buy Bitcoin directly and 2) one can buy ETFs if you want a leveraged exposure or don't have access to BTC spot, if both of these options are cheaper than MSTR regarding the risk premium? 21 Capital should have the same problem. The only really important reason I can see is indeed volatility just due to the risk premium, but you could simply increase your leverage on ETFs.
Here's a cite from that article:
Tom Lee is correct in that investors limited solely to fixed-income investments, now have a way to gain exposure to Bitcoin. However, there are much better options for anyone else wanting to own Bitcoin. As we noted earlier, MicroStrategy’s stock valuation is at least double that of the Bitcoin it holds. And, as a reminder, its software business has almost no value. One could even argue it has a negative value. Accordingly, investors who want to buy Bitcoin should just buy Bitcoin or the numerous Bitcoin ETFs available. Furthermore, investors can buy call options on Bitcoin or Bitcoin ETFs, which essentially is what the convertible debt is.
I have seen also justifications for the premium based on the assumption that MSTR could lend the BTC or enter "staking" agreements, i.e. "make their BTC work" to generate income, but I think the potential income from that source is probably limited. And Google's AI states that they currently do
not lend out their BTC (source from late 2024, though).
Regarding the second assumption:
Wrong assumption again. Why should it stay the same? Has the bitcoin demand stated the same over the years?
I clarified that further down in the previous post. The assumption that demand stays the same is important for projections involving other variables, before you start speculating on demand evolution.
Demand can of course increase due to a lot of factors. But it is then because a new competitor enters? It is possible, because both players (MSTR and 21 Capital) will intensify their marketing activity due to increased competition, and in addition 21 Capital could offer some terms which cater to those who have doubts about MSTR's terms or simply don't like Saylor, for example. But I think these effects are probably relatively small, above all if one again thinks about the question above: who's exactly the intended public?
The comparison with Bitcoin demand here doesn't make sense in this context because the Bitcoin (circulating/total) supply is predictable. The focus of my post was the influence of the market entry of 21 Capital, not some other factors which could influence demand.