Child articles mentioned in the post:

- MSTR’s business model, describing how the company operates as a "Bitcoin treasury" and what does it mean for its solvency. You can read it here: https://illya.sh/threads/microstrategy-is-dependent-on-refin...

- Why MicroStrategy can’t replay its debt using equity/stock. You can read it here: https://illya.sh/threads/microstrategy-cant-repay-its-debt-i...

- How Strategy pays for its interest, which currently accounts to ≈$40M/year. You can read it here: https://illya.sh/threads/how-microstrategy-pays-interest-on-...

- How Strategy's marketing is misleading regarding MSTR’s risk, liquidity and solvency. You can read it here: https://illya.sh/threads/strategy-invents-financial-metrics-...

Gold as a percentage of balance sheet size in Central Banks (ranked):

+ Japan (MoF + BoJ): ≈2.4%

+ China (PBoC): ≈4.5%

+ U.S. (Fed gold certificates): ≈15.9%

+ European Union (ECB + Eurosystem): ≈19.4%

+ Russia (BoR): ≈36.1%

Conclusions you can take from here:

- China's current gold reserves are small relative to its central bank balance sheet and ambitions for the renminbi, so the PBoC is likely to keep buying gold for years to move closer to a gold-backed reserve-currency profile.

- Russia has accumulated large reserves that will allow a strong expansion of ruble credit once trade normalizes, likely triggering a rally in Russian capital markets.

- The EU is relatively well-positioned but should both grow its gold reserves and deepen its capital markets (e.g., via CMU) to strengthen the euro’s appeal as a reserve currency.

The short answer is that MSTR finances its debt service via a mixture of:

- Software business cashflow

- Existing reserves & short-term investments

- Capital market instruments, such as issuing new equity or debt

- Asset liquidation (Bitcoin sales)

A longer answer is in the article.

Some think that they define a single rate - namely the overnight lending rate - i.e. the rate at which the banks lend to each other overnight.

In reality, the Fed steers the prevailing interest rates in the economy by explicitly setting the following set of interest rates:

the FED sets a target interest rate range and 4 main explicit interest rates:

1. Overnight Reverse Repo Rate (ON RRP)

2. Interest on Reserve Balances (IORB)

3. Discount Rate - also known as Lending Rate

4. Standing Repo Facility (SRF)

The article explains how each one operates and how together they define a "corridor" for the target federal funds rate.

MicroStrategy Is Dependent On Refinancing Capacity, Not Bitcoin Price

MSTR won't have to sell Bitcoin if BTC price goes down, they'll have to sell Bitcoin if they're unable to acquire funding along the maturity of their debt wall.

MicroStrategy is essentially a leveraged trade on Bitcoin, based on the following cycle:

1. Acquire funding via debt or equity

2. Buy Bitcoin

3. Repeat

This cycle works for as long as MSTR is able to obtain funding. Once funding becomes unavailable (i.e. market isn't willing to lend at favorable interest rates), funding must come from asset liquidation (i.e. the sale of Bitcoin).

$90B is a lot of gold for sure! :D

But the total amount of gold seized worldwide is much smaller than Bitcoin (using today's spot prices). There is a popular argument that Bitcoin is better than gold because it's harder/impossible to seize, which is simply not true.

Also, I meant to share this article, not the one linked by this post: https://illya.sh/threads/multiple-governments-have-seized-bi...

It's on the same topic, but more detail.

I meant to post this link: https://illya.sh/threads/multiple-governments-have-seized-bi...

Okay, I don't think there is way to change it now

If you think that Bitcoin is harder to seize than gold, you are probably wrong. At least according to the data. In the history of Bitcoin's existence, much much more Bitcoin has been seized than Gold. You don't need to compromise cryptographic primitives to seize Bitcoin.

In the past 10 years, ≈$90B in Bitcoin has been seized vs ≈$3B for gold (using today's market prices)

I miscopied the URL. I'm trying to delete this, but don't think I can.

If you think that Bitcoin is harder to seize than gold, you are probably wrong. At least according to the data.

In the history of Bitcoin's existence, much much more Bitcoin has been seized than Gold. You don't need to compromise cryptographic primitives to seize Bitcoin.

In the past 10 years, ≈$90B in Bitcoin has been siezed vs ≈$3B for gold (using today's market prices)