TL;DR
MicroStrategy’s heavy investment in Bitcoin is risky, especially if Bitcoin’s price drops. Remember, diversification is key, and correlation doesn’t equal causation.
Story
“MSTR to Zero? A Skeptical Look”
MicroStrategy (MSTR), a company heavily invested in Bitcoin, is facing scrutiny. Its net asset value (NAV) is double its Bitcoin holdings, a precarious position. Some argue Bitcoin’s value is tied to the M2 money supply, and since M2 growth is slowing, Bitcoin’s price might drop. This poses a huge risk to MSTR. The concern? If Bitcoin’s price falls significantly, MSTR, already over-leveraged, could face substantial losses. This situation reminds me of past financial crises where over-reliance on a single asset led to disaster. Remember the dot-com bubble? Companies betting big on internet stocks faced ruin when the bubble burst. Diversification is key. Don’t put all your eggs in one basket, especially a volatile one like Bitcoin. Some say Bitcoin is scarce and its price will naturally rise. But scarcity alone doesn’t guarantee value. Think of Beanie Babies. They were scarce but eventually lost most of their value. Also, relying on correlations, like the one between Bitcoin and M2, can be misleading. Correlation doesn’t equal causation. Just because two things move together doesn’t mean one causes the other. Ice cream sales and shark attacks both increase in the summer, but one doesn’t cause the other. They’re both related to warm weather. This reminds me of the housing crisis of 2008. Many believed housing prices would always go up. They didn’t. Blind faith in a single asset can be dangerous.
MSTR (MicroStrategy): A business intelligence company that has invested heavily in Bitcoin. NAV (Net Asset Value): The total value of a company’s assets minus its liabilities. M2 Money Supply: A measure of the money supply that includes cash, checking deposits, and easily convertible near money. Bitcoin: A cryptocurrency.
Advice
Don’t put all your eggs in one basket. Diversify your investments and be wary of relying solely on correlations when making financial decisions.
Source
https://www.reddit.com/r/wallstreetbets/comments/1hy800z/mstr_to_zero/