MicroStrategy is taking a big gamble; will it win this time?

MicroStrategy's operations in the first quarter can be described as a tragedy:

Number of Bitcoins purchased in the first quarter: 80,715 coins

Total expenditure: $7.66 billion

Average price: $94,922 per Bitcoin

Bitcoin price on the document submission date: approximately $76,400

The unrealized loss on the Bitcoins held in the first quarter exceeded $5.9 billion

Fortunately, the strategy increased its holdings between April 7-13, purchasing 3,459 BTC at an average price of $82,631, but this is just a small part of the risk.

The real risk to the market comes from the newly issued STRF by the strategy - a new type of perpetual preferred stock with a 10% annual cash dividend.

It is important to know that MicroStrategy has a core problem:

Using non-cash-generating assets (Bitcoin) to pay off fixed debts that require cash payments (bond interest, preferred stock dividends). The cash flow from its core software business is insufficient to cover these growing obligations, especially after issuing the high-interest (10%) STRF preferred stock.

This mismatch makes the company exceptionally vulnerable during Bitcoin price declines or sideways movements, as well as during liquidity crises.

This is seen as a dangerous signal by some traditional institutions for a simple reason: in the current macroeconomic environment, offering a 10% fixed cash dividend for a non-financial or high-growth startup typically indicates financing difficulties or extremely high risk premiums.

This implies that the market may consider investing in this company to be highly risky, requiring extremely high returns to compensate, which further exacerbates its cash flow pressures.

MicroStrategy is executing a big gamble; if Bitcoin prices rise significantly in the coming years and the (Micro)Strategy company can successfully manage its debts, then Michael Saylor will be hailed as a 'strategic genius.'

However, if the Bitcoin market enters a long-term bear market or faces a severe liquidity crisis, this strategy could lead to catastrophic consequences, with destructive power far exceeding all previous black swan events.

I am optimistic about this cycle; it is highly likely to win.