1
00:00:00,129 --> 00:00:03,510
MicroStrategy just lost $17 billion in three months

2
00:00:03,570 --> 00:00:06,690
and almost no one's talking about what happens next. Michael Saylor has

3
00:00:06,810 --> 00:00:10,211
bet everything on Bitcoin. He's borrowed a billion. He's convinced

4
00:00:10,251 --> 00:00:13,691
the world that he's a genius. He's told everyone that Bitcoin is the future and

5
00:00:13,711 --> 00:00:16,892
that MicroStrategy is the smartest play in

6
00:00:17,272 --> 00:00:20,872
the market. But here's what he's not telling you. If Bitcoin falls

7
00:00:21,093 --> 00:00:25,373
to $13,000, which it can, and likely at some point will, MicroStrategy

8
00:00:25,393 --> 00:00:28,514
goes bankrupt. And when it does, it's going to take Bitcoin down with it. It's

9
00:00:28,534 --> 00:00:32,216
going to be like a domino effect. It's going to be forced liquidations, margin calls,

10
00:00:32,396 --> 00:00:35,738
like a house of cards falling down in crypto. And it's starting to

11
00:00:35,778 --> 00:00:38,901
wobble. And I've been warning you about this for months and months and months. And now

12
00:00:38,921 --> 00:00:42,243
it's starting to happen. In this video, I'm going to explain to you exactly why

13
00:00:42,303 --> 00:00:45,786
MicroStrategy is on the edge of collapse. and

14
00:00:45,826 --> 00:00:49,487
what happens to Bitcoin when it does. I'm Lloyd James Ross, seven-figure

15
00:00:49,527 --> 00:00:52,788
investor and entrepreneur, and I've helped thousands of business owners and

16
00:00:52,828 --> 00:00:56,048
professionals turn financial stress into success. If

17
00:00:56,068 --> 00:00:59,409
you're stuck in old money habits, overwhelmed by investing, or unsure where

18
00:00:59,429 --> 00:01:02,750
to start, this is for you. I'll give you the mindset and

19
00:01:02,810 --> 00:01:06,590
strategies to take control, grow your wealth, and achieve financial

20
00:01:06,670 --> 00:01:10,131
freedom. It's time to make your money work for you. Firstly, what

21
00:01:10,191 --> 00:01:13,992
is microstrategy? Well, incidentally, now it's just called strategy. Okay,

22
00:01:14,052 --> 00:01:17,754
now it owns, I believe 687,000 Bitcoin.

23
00:01:18,314 --> 00:01:21,956
And the investment strategy is to borrow convertible notes,

24
00:01:22,517 --> 00:01:25,918
and then buy Bitcoin. So it's a highly levered bet on

25
00:01:25,958 --> 00:01:29,400
an asset in a speculative bubble, an asset that doesn't produce any income.

26
00:01:29,860 --> 00:01:33,681
And assets like this, assets... Strategies

27
00:01:33,721 --> 00:01:37,403
like this, I should say. Strategies like this, where you're borrowing money

28
00:01:37,984 --> 00:01:41,846
to buy a non-income producing speculative asset. In

29
00:01:41,866 --> 00:01:45,548
the history of mankind, they have never survived.

30
00:01:47,469 --> 00:01:50,641
So, that's the first part. And then

31
00:01:50,661 --> 00:01:53,903
we've got to look at the history of Michael Saylor, the character, right?

32
00:01:54,223 --> 00:01:57,365
We've got to look at the history of what has happened to MSTR, which

33
00:01:57,425 --> 00:02:00,666
is MicroStrategy in the dot-com bubble. Remember, if

34
00:02:00,686 --> 00:02:04,108
you go back, he lost $6 billion in one day. He nearly sunk the

35
00:02:04,148 --> 00:02:07,510
company due to an accounting scandal. And the

36
00:02:07,570 --> 00:02:10,992
company was, well, it's never technically insolvent. The SEC brought

37
00:02:11,032 --> 00:02:14,994
a charge against them and he had to pay a huge personal penalty. So would

38
00:02:15,034 --> 00:02:18,116
you trust someone like that who's got that history? Would you trust him

39
00:02:18,136 --> 00:02:21,869
with your money? And so far, this last 12 months,

40
00:02:22,670 --> 00:02:25,753
MSTR has fallen by 50%. Why is it

41
00:02:25,793 --> 00:02:29,076
falling? Let's jump into the detail. Here's what's happening. Here's

42
00:02:29,096 --> 00:02:32,499
a full breakdown. At its simplest form,

43
00:02:32,699 --> 00:02:36,502
micro strategy structure obeys one immutable rule.

44
00:02:36,943 --> 00:02:40,346
Equity equals assets minus liabilities. You

45
00:02:40,366 --> 00:02:44,049
don't have to be an accounting genius to understand this, that

46
00:02:44,189 --> 00:02:47,658
equity is assets minus liabilities. That's very important

47
00:02:47,818 --> 00:02:51,382
to understand before I jump into this. So here's the thing, when assets

48
00:02:51,503 --> 00:02:55,187
are volatile and liabilities are fixed, equity

49
00:02:55,227 --> 00:02:58,992
becomes a levered option. So

50
00:02:59,052 --> 00:03:03,385
if at some point liabilities exceed assets, Basically,

51
00:03:03,545 --> 00:03:06,828
you're insolvent. There is no equity left. It's wiped out and

52
00:03:06,848 --> 00:03:11,252
that's accounting. I imagine having Static

53
00:03:11,732 --> 00:03:15,155
liabilities, which is what happens when you also get a mortgage It's a static

54
00:03:15,215 --> 00:03:18,779
repayment to the bank and your asset prices are very volatile

55
00:03:18,799 --> 00:03:22,002
and move a lot You can quickly go insolvent. You can get margin called as well.

56
00:03:22,022 --> 00:03:25,225
Okay, so just just a very important distinction to

57
00:03:25,245 --> 00:03:28,766
kick off with now I want to explain here

58
00:03:28,846 --> 00:03:32,628
illustratively, very, very simply, so you don't tune out. I

59
00:03:32,648 --> 00:03:35,769
want to make this very simple, all right? I want to explain to you a

60
00:03:35,809 --> 00:03:39,091
scenario where this can happen. So I want to strip down to first

61
00:03:39,131 --> 00:03:42,633
principles, all right? First accounting principles. So let's assume,

62
00:03:43,113 --> 00:03:46,595
for the sake of this exercise, that the Bitcoin

63
00:03:46,635 --> 00:03:50,517
holdings of MST are, I know they're 687,000, but for this exercise, let's

64
00:03:50,537 --> 00:03:53,660
say they're 200,000. And let's say the Bitcoin price for

65
00:03:53,700 --> 00:03:57,184
argument's sake right now is 50,000, just to make the numbers

66
00:03:57,244 --> 00:04:00,567
nice and simple. So the total asset value of the holdings that

67
00:04:00,588 --> 00:04:03,791
they have is 200,000 times 50,000. Let's call it 10 billion, which

68
00:04:03,811 --> 00:04:07,195
it is. Let's say it's 10 billion. Even though I know it's more, stay

69
00:04:07,235 --> 00:04:10,439
with me. And let's say then the total debt that has

70
00:04:10,459 --> 00:04:13,975
been borrowed to buy that Bitcoin is $7 billion.

71
00:04:14,295 --> 00:04:17,577
So right now, it's got, and let's say it's got even assets, it's

72
00:04:17,597 --> 00:04:20,960
got a software, incidentally, MSTR has got a software business, an actual

73
00:04:21,000 --> 00:04:24,262
business, and let's say that's worth a billion dollars. So for the argument's sake

74
00:04:24,302 --> 00:04:28,646
here, the starting position of this MSTR example is

75
00:04:28,846 --> 00:04:32,449
assets of $11 billion, total liabilities of $7 billion.

76
00:04:33,186 --> 00:04:36,371
The equity is 11 minus seven, which is four. So that

77
00:04:36,431 --> 00:04:40,157
implies right now, as this example suggests, that

78
00:04:40,418 --> 00:04:43,563
it's got asset leverage over equity of 2.75 times. So it's basically got

79
00:04:43,603 --> 00:04:49,506
2.7 times, the

80
00:04:49,586 --> 00:04:53,269
equity in leverage. Does that make sense? That's

81
00:04:53,309 --> 00:04:56,771
important to understand. Now, in this example, if Bitcoin

82
00:04:56,831 --> 00:05:00,433
falls by 50%, which is actually not an extreme correction

83
00:05:00,473 --> 00:05:03,615
by Bitcoin standards, done it before, right? In fact, historically, it's

84
00:05:03,635 --> 00:05:07,018
dropped by 70 to 85% in a bear market. So

85
00:05:07,158 --> 00:05:10,259
50% is probably conservative. Now, if we go back to

86
00:05:10,300 --> 00:05:14,161
our example, the new Bitcoin price might be 25,000 from 50 to

87
00:05:15,101 --> 00:05:18,843
25. Yes. So the new asset value is not 11 billion,

88
00:05:18,863 --> 00:05:22,084
but 5 billion. So let's have a look at our original example. You've now

89
00:05:22,124 --> 00:05:25,205
got the Bitcoin asset at five. You've got other assets at one. So

90
00:05:25,225 --> 00:05:28,687
you've got total assets of 6 billion and liabilities of

91
00:05:28,767 --> 00:05:31,968
seven. Uh-oh. Uh-oh. The

92
00:05:32,028 --> 00:05:35,289
equity is negative 1 billion. So the equity is wiped

93
00:05:35,329 --> 00:05:39,737
out. Bye-bye. So this is insolvency. On

94
00:05:39,777 --> 00:05:43,099
a mark to market basis, it's insolvent. So this isn't a real

95
00:05:43,119 --> 00:05:46,221
life example. It could happen. I know what you're thinking. They don't

96
00:05:46,241 --> 00:05:49,423
have to sell, but here's why that's false. This is

97
00:05:49,483 --> 00:05:53,446
where people misunderstand economic law versus

98
00:05:53,706 --> 00:05:56,777
intention or hype. I know you want to

99
00:05:56,817 --> 00:06:00,701
believe in it. I get it. But debt introduces what's

100
00:06:00,721 --> 00:06:04,303
called external constraints. Because once the equity price

101
00:06:04,343 --> 00:06:08,246
collapses, the credit risk explodes, bond

102
00:06:08,286 --> 00:06:11,549
prices fall, refinancing costs spike, and

103
00:06:11,629 --> 00:06:14,752
counterparties tighten the terms. So they're not going to have the same terms of

104
00:06:14,772 --> 00:06:17,874
their convertible bonds that they're raising to buy Bitcoin. It's going to

105
00:06:17,914 --> 00:06:21,337
get way harder. The rates are going to be higher. The

106
00:06:21,357 --> 00:06:24,519
constraints will be more. And so it's not gonna be like it is

107
00:06:24,539 --> 00:06:27,982
now and that's what happens because credit risk increases. Yeah, this

108
00:06:28,042 --> 00:06:31,765
is what's called a Minsky moment in financial instability

109
00:06:32,685 --> 00:06:36,168
So here's the hypothesis in action. Here's what I think will happen So

110
00:06:36,208 --> 00:06:39,991
the initial stability creates the leverage but leverage creates fragility

111
00:06:40,851 --> 00:06:45,015
and the fragility then creates collapse right, so

112
00:06:45,375 --> 00:06:49,158
if we look at the The

113
00:06:49,238 --> 00:06:52,589
issue of volatility versus the debt. So if

114
00:06:52,629 --> 00:06:55,771
an asset price is volatile, it means the asset price moves a lot like

115
00:06:55,791 --> 00:06:58,874
this. And Bitcoin is known for that. It's a

116
00:06:58,914 --> 00:07:02,778
very volatile asset. So when you have a volatile asset against

117
00:07:02,818 --> 00:07:05,901
a steady debt instrument, you're going to have a

118
00:07:05,981 --> 00:07:09,224
myriad of different things that can happen, right? So as I said,

119
00:07:09,264 --> 00:07:12,547
Bitcoin is one of the most volatile assets in financial history, period. That's why people

120
00:07:12,587 --> 00:07:15,790
love it because they're making all these trades and they're trying to, you know, volatility is a friend of

121
00:07:15,810 --> 00:07:19,192
the trader for sure. But debt instruments obey one different law.

122
00:07:19,292 --> 00:07:23,833
Debt's fixed, interest is fixed, and maturity dates are fixed. So

123
00:07:23,853 --> 00:07:27,274
this violates a fundamental risk matching principle.

124
00:07:28,474 --> 00:07:31,655
And it's this. You cannot safely fund a

125
00:07:31,715 --> 00:07:36,636
hypervolatile asset with fixed liabilities. That

126
00:07:36,816 --> 00:07:40,453
mismatch guarantees stress. And

127
00:07:40,493 --> 00:07:43,777
here's what happens. Convexity then starts to turn against

128
00:07:43,797 --> 00:07:47,681
them. What do I mean by that? Let me explain it. Micro strategy or strategy structure

129
00:07:48,542 --> 00:07:51,985
has what's called negative convexity. So here's what I mean. On

130
00:07:52,005 --> 00:07:55,409
the way up, meaning as Bitcoin goes up

131
00:07:55,469 --> 00:07:58,612
in value, up in price, gains are capped by dilution and

132
00:07:58,652 --> 00:08:01,820
debt servicing. So on the way down, That means they can

133
00:08:01,840 --> 00:08:05,443
service their debt okay. On the way down, losses accelerate faster

134
00:08:05,463 --> 00:08:09,365
than Bitcoin itself. Yes, this is because the

135
00:08:09,445 --> 00:08:13,128
asset will fall linearly, yeah? Equity falls

136
00:08:13,168 --> 00:08:16,390
then exponentially because of the leverage. That's why. So

137
00:08:16,690 --> 00:08:20,473
when you have leverage like it does, it amplifies gains.

138
00:08:21,033 --> 00:08:24,714
But when you have losses, it amplifies losses. Debt itself doesn't

139
00:08:24,754 --> 00:08:28,156
fall, it's a static liability, but the assets will fall way faster than

140
00:08:28,176 --> 00:08:31,557
the price correction because of the debt. It amplifies losses and people don't even realize

141
00:08:31,577 --> 00:08:34,778
this. This is what happened in the 2008 real estate collapse in

142
00:08:34,818 --> 00:08:38,160
America. You know, People are like, oh yeah, I love property because

143
00:08:38,200 --> 00:08:41,902
it's leverage and it goes up. Leverage only works when the asset price rises. When

144
00:08:41,942 --> 00:08:45,083
it goes down, it amplifies losses. And I didn't tell you this. This is what

145
00:08:45,143 --> 00:08:48,725
happened to all of the crypto bros recently when they all got liquidated

146
00:08:48,765 --> 00:08:52,247
and jumped off buildings because they were like 100x leveraged. And

147
00:08:52,287 --> 00:08:55,829
it fell by 1% or 3%. And they just got liquidated because it amplifies losses.

148
00:08:55,889 --> 00:08:59,956
And people don't realize this, right? That's why the equity collapses

149
00:09:00,677 --> 00:09:04,419
long before the Bitcoin bottoms. The Bitcoin, that's

150
00:09:04,820 --> 00:09:07,922
before BT bottoms. This is why, right? Because you gotta

151
00:09:07,942 --> 00:09:11,844
remember, micro strategy is equity. People are buying shares

152
00:09:11,944 --> 00:09:15,367
in a company, that's equity. They're not buying Bitcoin

153
00:09:15,407 --> 00:09:18,869
directly. They're buying a levered Bitcoin position

154
00:09:18,929 --> 00:09:22,592
in shares. So it

155
00:09:22,632 --> 00:09:26,750
can be massively, it will, it

156
00:09:26,790 --> 00:09:30,152
will implode if the price adjusts like

157
00:09:30,292 --> 00:09:33,674
it has in the past. I think it's only a matter of time, frankly, right? Just quickly,

158
00:09:33,854 --> 00:09:36,935
if you're ready to take control of your finances but feel stuck on where to

159
00:09:36,975 --> 00:09:41,418
start, I have a solution. My book, Money Buys Happiness, simplifies

160
00:09:41,458 --> 00:09:45,380
investing and wealth building with practical steps to help you achieve financial

161
00:09:45,480 --> 00:09:48,641
peace. Get your copy via the link in the show notes and let's get your

162
00:09:48,701 --> 00:09:52,157
money working for you. Now back to the episode. So,

163
00:09:52,857 --> 00:09:56,599
the debt doesn't need a default to destroy the equity at all. All

164
00:09:56,679 --> 00:10:00,060
it needs is a bit of refinancing pressure. The underlying process by

165
00:10:00,100 --> 00:10:04,061
which Michael Saylor is trying to make money is this, effectively,

166
00:10:04,381 --> 00:10:07,582
in its simplest form. He's borrowing money from

167
00:10:07,622 --> 00:10:12,442
institutions that are convertible notes, okay? And

168
00:10:13,222 --> 00:10:16,983
whilst he can't be margin called on that, those particular notes, they

169
00:10:17,063 --> 00:10:20,564
attract an interest charge. Because if you're lending money to someone, even Michael Saylor,

170
00:10:20,864 --> 00:10:24,125
you're going to ask them to pay you some interest on the borrowings, yes? On the loan.

171
00:10:24,305 --> 00:10:27,586
That's how it is. That's finance. It's the oldest business in the world, money

172
00:10:27,626 --> 00:10:30,827
lending. So you lend money to MicroStrategy. And you're going

173
00:10:30,847 --> 00:10:34,048
to have to get paid interest on that. So here's what MicroStrategy does. It doesn't sell any

174
00:10:34,128 --> 00:10:37,389
Bitcoin to pay it because that would then curtail the price rise of Bitcoin and

175
00:10:37,409 --> 00:10:40,670
it would go into a negative convexity. But here's what does

176
00:10:40,710 --> 00:10:43,891
happen. They borrow money, right, and they

177
00:10:43,991 --> 00:10:47,553
repay the preferred stock dividends to the shareholders,

178
00:10:48,193 --> 00:10:52,514
the coupon rate back to the bondholders, I should say. They pay the

179
00:10:52,634 --> 00:10:55,975
interest based on the borrowings. And that's why a lot of people are calling

180
00:10:56,015 --> 00:10:59,196
it a Ponzi scheme, because they're borrowing money to buy an asset and they're paying

181
00:10:59,216 --> 00:11:03,797
the interest on the borrowings with the borrowings. Yeah,

182
00:11:04,077 --> 00:11:07,558
it's wild, right? And of course, the strategy is

183
00:11:07,598 --> 00:11:10,738
to borrow more, buy more Bitcoin, price goes up, borrow more, buy

184
00:11:10,758 --> 00:11:14,499
more Bitcoin, price goes up, etc, etc, etc. But here's the thing. Whenever

185
00:11:14,539 --> 00:11:18,122
that happens, the two things are happening. One, they're getting more leverage. Two,

186
00:11:18,442 --> 00:11:21,824
they're also issuing more shares and they're actually diluting the current equity

187
00:11:21,864 --> 00:11:25,106
holders. That's why you've seen a huge fall of 50% lately, because

188
00:11:25,126 --> 00:11:28,308
people are realizing they're diluting the value of the

189
00:11:28,368 --> 00:11:32,173
shares. especially because

190
00:11:32,213 --> 00:11:35,696
the asset value is falling. So the actual value of the shares,

191
00:11:35,796 --> 00:11:38,978
if Bitcoin falls, is also falling. And then you're

192
00:11:38,998 --> 00:11:42,621
getting all this debt. So the debt to equity ratio is just flipping. It

193
00:11:42,681 --> 00:11:46,424
is just getting wildly high, okay? Anyway, so

194
00:11:46,844 --> 00:11:50,227
these bonds that they're getting, they will mature. So these

195
00:11:50,387 --> 00:11:53,930
convertible notes have a term. So they mature. And then as

196
00:11:54,010 --> 00:11:57,192
it gets riskier, the interest rates will get higher when they refinance. And as

197
00:11:57,253 --> 00:12:01,034
Bitcoin continues to get lower, the credit spread widens. Okay,

198
00:12:01,375 --> 00:12:04,719
the risk becomes more. And then new debt

199
00:12:04,759 --> 00:12:08,443
that they get to buy more Bitcoin becomes prohibitively expensive. Then

200
00:12:08,663 --> 00:12:12,148
equity issuance becomes massively diluted, which is exactly what I just said and exactly what's

201
00:12:12,168 --> 00:12:15,632
happening. And then the asset sales become the only option

202
00:12:15,652 --> 00:12:20,692
to service that debt. And that means they've got to sell Bitcoin. And

203
00:12:20,732 --> 00:12:24,373
that means the forced selling is gonna

204
00:12:24,413 --> 00:12:28,275
create this massive domino effect, right? Here's the thing, forced

205
00:12:28,295 --> 00:12:31,796
selling is not, at that point, is not price sensitive. And this is critical

206
00:12:31,816 --> 00:12:35,137
to understand. Voluntary sellers, they'll

207
00:12:35,157 --> 00:12:38,279
wait for a good price, then they sell. But forced sellers, like in

208
00:12:38,299 --> 00:12:41,660
this scenario, they'll sell at any price. They

209
00:12:41,680 --> 00:12:45,281
don't care, they've got debt to service. It's like a liquidation

210
00:12:45,301 --> 00:12:48,723
sale, it's a fire sale. So once MicroStrategy starts to sell

211
00:12:48,823 --> 00:12:52,594
Bitcoin, the liquidity thins, order

212
00:12:52,614 --> 00:12:56,115
books, you know, the price overshoots downward,

213
00:12:56,135 --> 00:13:00,276
the reflexivity starts to kick in. And what

214
00:13:00,296 --> 00:13:03,818
that means is price changes alter the fundamentals, right?

215
00:13:03,858 --> 00:13:07,039
So it alters, more or less what it means is

216
00:13:07,579 --> 00:13:11,740
lower prices because of the selling create lower prices. That's what it means. And

217
00:13:11,800 --> 00:13:15,161
why this can drag it down further is because then Bitcoin starts to fall in price, especially

218
00:13:15,181 --> 00:13:18,823
if you've got a massive, massive company like this selling large holdings

219
00:13:18,863 --> 00:13:22,264
to cover itself. you're gonna have a bit of a domino effect

220
00:13:22,304 --> 00:13:25,585
on the price of Bitcoin itself. And this just starts to quantify and

221
00:13:25,685 --> 00:13:29,207
cascade the losses of strategy more and

222
00:13:29,267 --> 00:13:32,428
more and more and more. It just can't continue to do its old

223
00:13:32,468 --> 00:13:36,069
strategy, right? They're gonna change the name of the company to the

224
00:13:36,089 --> 00:13:39,791
strategy doesn't work anymore, Inc. So here's what happens. Bitcoin

225
00:13:39,811 --> 00:13:43,632
drops 60%, the equities, listen to this. If Bitcoin drops

226
00:13:44,012 --> 00:13:47,294
60%, the equity is obliterated by

227
00:13:47,434 --> 00:13:50,651
E, Zero. What are they lending money on

228
00:13:50,671 --> 00:13:53,912
then, right? They're insolvent. 70% debt

229
00:13:53,952 --> 00:13:57,354
coverage is then questioned. Like, hey, you can't even cover your debts. We're in trouble here. And

230
00:13:57,374 --> 00:14:00,996
then 80% liquidation risk. It becomes existential. And

231
00:14:01,016 --> 00:14:04,197
we know that Bitcoin can fall by 80%. So this strategy ain't

232
00:14:04,237 --> 00:14:07,899
so good. I mean, can you honestly believe

233
00:14:08,539 --> 00:14:12,041
that this strategy is going to continue as it has for the next 20 years? Honestly,

234
00:14:12,161 --> 00:14:17,703
truly, really? You don't think at any point that

235
00:14:17,963 --> 00:14:21,744
shitcoin is not going to go through an 80% correction? You

236
00:14:21,784 --> 00:14:24,885
don't think that? Even though it has? That's what you're betting on here. And

237
00:14:24,945 --> 00:14:28,485
it's levered. I mean, anyone who owns shares in this company, man,

238
00:14:28,505 --> 00:14:32,186
I think you deserve to lose money. I hope you don't, but it's

239
00:14:32,206 --> 00:14:35,587
not looking good. So as I said, Bitcoin's

240
00:14:35,607 --> 00:14:40,408
already done that multiple times. So it's going to happen again. And it's

241
00:14:40,428 --> 00:14:43,629
just going to get worse because the leverage is more and more and more and more

242
00:14:43,669 --> 00:14:46,793
and the dilution is more and more and more and more. So

243
00:14:46,893 --> 00:14:50,396
it's gonna trigger some sort of like algorithmic selling. There'll

244
00:14:50,436 --> 00:14:53,638
be redemptions, there'll be contagion, and it's never gone

245
00:14:53,658 --> 00:14:56,940
through a credit crunch ever, in its current

246
00:14:56,980 --> 00:15:00,082
form, with its current strategy. So this

247
00:15:00,102 --> 00:15:03,484
is how it'll overshoot, and it'll just get worse. So

248
00:15:03,544 --> 00:15:06,967
here's the economic law that basically ends it all. The entire structure

249
00:15:07,007 --> 00:15:10,869
collapses under what's called the Irving Fisher's debt

250
00:15:10,909 --> 00:15:14,452
deflation theory. Bit of a mouthful, isn't it? But hear me out. When

251
00:15:14,472 --> 00:15:17,754
asset prices fall, The debt

252
00:15:17,774 --> 00:15:21,396
burden rises and then it forces liquidation which drives prices

253
00:15:21,436 --> 00:15:26,620
even lower and cascades. Yeah, that's exactly what kind of happens, right? So

254
00:15:27,300 --> 00:15:30,842
Micro strategy is long. Listen up long

255
00:15:31,223 --> 00:15:34,825
the most volatile asset ever. It's leave it with

256
00:15:35,005 --> 00:15:38,467
fixed debt Which is dependent on rising prices

257
00:15:38,527 --> 00:15:42,430
to remain solvent that's Yeah,

258
00:15:42,590 --> 00:15:45,994
that's not investing, that's speculation leverage. Because it's a speculative asset

259
00:15:46,314 --> 00:15:51,700
and it's leverage. Simple, right? So here's the bottom line. Bitcoin itself,

260
00:15:52,380 --> 00:15:57,365
like as the underlying asset itself, it doesn't need microstrategy. But

261
00:15:57,465 --> 00:16:01,209
microstrategy needs Bitcoin to keep rising for the strategy

262
00:16:01,349 --> 00:16:05,000
to play out. That asymmetry really

263
00:16:05,040 --> 00:16:08,104
guarantees one There's a lot of

264
00:16:08,144 --> 00:16:11,648
pain coming for selling before any recovery deeper

265
00:16:11,668 --> 00:16:16,454
drawdowns a lot of dilution potential insolvency You

266
00:16:16,474 --> 00:16:20,279
know, so Bitcoin may survive but leverage Bitcoin

267
00:16:20,319 --> 00:16:23,706
companies don't So it's not bearish, it's just financial physics

268
00:16:23,726 --> 00:16:27,269
more or less. And you can't break, this is first principles economics. You

269
00:16:27,329 --> 00:16:30,571
can't argue with it. So I don't even think, it's not a matter of if, but

270
00:16:30,611 --> 00:16:33,994
a matter of when. It's gonna be so interesting. And the fact that the stock's already

271
00:16:34,054 --> 00:16:37,537
fallen by 50% suggests the market's already seen this. Because

272
00:16:37,637 --> 00:16:40,799
markets afford, they're like a

273
00:16:40,859 --> 00:16:44,021
glimpse of the future. It already knows these things before you do. So it's

274
00:16:44,061 --> 00:16:47,244
saying, hey, don't think these shares are worth much

275
00:16:47,304 --> 00:16:50,406
anymore because we can see this coming apart. That's what the market's telling you with the

276
00:16:50,426 --> 00:16:53,728
stock price. That's why people are selling. That's why there's so much selling pressure

277
00:16:53,768 --> 00:16:56,930
on this stock. And so I look, all I

278
00:16:56,950 --> 00:17:00,293
wanted to do with this episode is suggest that in many

279
00:17:00,353 --> 00:17:03,575
regards, there's Ponzi like features to how

280
00:17:03,615 --> 00:17:07,157
they're borrowing money to pay the coupon rate of the debt they're taking just

281
00:17:07,197 --> 00:17:10,479
to buy a speculative asset. And you can see with the convexity that once

282
00:17:10,519 --> 00:17:13,601
Bitcoin falls by 80%, boom, it's game over. I'll do

283
00:17:13,641 --> 00:17:16,904
another episode when it happens. And if it doesn't happen for 30 years, you'll

284
00:17:16,944 --> 00:17:20,486
see me here with probably gray hair, grey beard going,

285
00:17:20,526 --> 00:17:23,747
Marco's strategy is going to like flat. I'm happy to do it. I'm

286
00:17:23,767 --> 00:17:26,988
happy to be wrong. I don't think I am. So I

287
00:17:27,028 --> 00:17:30,149
just want to do this episode because I think people are misunderstanding what this is.

288
00:17:30,369 --> 00:17:33,570
And it's a very good example of why fundamental investing that

289
00:17:33,610 --> 00:17:37,432
I preach and talk about is so much more effective. than borrowing

290
00:17:37,472 --> 00:17:40,654
against a speculative asset. Okay. So I hope that makes sense. If you've enjoyed this,

291
00:17:40,855 --> 00:17:44,197
what do you think? Do you think it's a Ponzi scheme? Do you think it's going to, do you, are

292
00:17:44,377 --> 00:17:47,520
you betting the house on this? This is your thing. If it is comment below, let me

293
00:17:47,540 --> 00:17:50,722
know. And if it ain't and you agree with me, give me some love in the comments and

294
00:17:50,742 --> 00:17:53,965
I'll come and talk to you there and hit the subscribe button. Share this with a friend if they need to see

295
00:17:54,005 --> 00:17:57,308
it and I'll see you in the next episode. Thanks for listening to Money Grows on Trees. If

296
00:17:57,348 --> 00:18:00,952
you enjoyed the episode, leave a five-star review on Apple Podcasts and

297
00:18:01,012 --> 00:18:04,396
Spotify and subscribe to us on YouTube so you never miss

298
00:18:04,436 --> 00:18:07,759
an episode. And if you're serious about building wealth, make sure to check out

299
00:18:07,799 --> 00:18:11,844
the links in the show notes and follow me on all social media platforms at