MicroStrategy Just ENDED Bitcoin Mining Stocks Forever. #Finance

all right let’s talk about what micro strategy and Mara are doing and why it is absolutely hosing a lot of the other Bitcoin mining companies this is not a a a jab at those two companies for the strategy they’re employing this is more me explaining what’s going on because

it’s important to understand what’s going on if you want to be a retail investor in this industry I can make this guarantee to you today no legitimate investor in their right mind is choosing to sell their Holdings in Bitcoin mining stocks when the price of Bitcoin has risen to $94,000

it makes zero fundamental sense because right now the business fundamentals the business dynamics of Bitcoin mining companies are healthier and better than they have been in a very very long time this tells us that all of the cell pressure is actually coming from short pressure there’s a lot

of Short Selling taking place on the Bitcoin mining companies that don’t have exposure to these convertible Bond offerings now to understand what’s going on we need to know what a bond is you see if you choose to buy a bond let’s say you buy a bond for $100 at a 5% interest rate

you’re essentially guaranteed that at the end of that term at the whenever that Bond expires you’re essentially guaranteed your initial investment of the $100 back plus the 5% interest payment so it’s a relatively low risk investment now you stack on top of that the convertible

portion and it adds another Dynamic and another layer to this entire situation it means that if the share price of the company you’re you’re investing in Rises to a certain level you have the ability to convert your Debt investment into Equity

investment so a convertible Bond offering can be thought of like a call option it’s a call option on the stock that you’re getting exposure to let’s take micro strategy for example just the other day Michael sailor announced they upsized their offering of 0% convertible

Bonds due in 2029 from $1.75 billion to $2.6 billion including a $400 million green shoe option and it was priced at a 55% conversion premium if you just got lost hang with me I’m going to do my best to explain this I just got done telling you that with Bonds

you’re typically paid an interest rate however with micro strategy these Bonds carry a 0% interest rate so if you choose to buy these Bonds you’re only guaranteed your initial investment back when these Bonds expire in 2029 you’re

not getting any interest payment which means that you’re actually net going to lose money by holding these Bonds to to Inflation Inflation averages 2 to 3% every single year so you’d be losing 2 to 3% of your purchasing power every year

that you hold these Bonds so why would people buy it well it’s because it’s a convertible note and as a result of that it’s a called option on the stock he says that it was priced at a 55% conversion premium that essentially means that the strike price on this

call option is 55% higher than what micro stri y stock is trading at today so if micro strategy stock gains 55% from here until 2029 these holders of these convertible Bonds can choose to convert their Debt into Equity and get direct exposure to

the stock of the company this gets really exciting for investors if we say by 2029 micro strategy doubles it gains 100% well all of a sudden these Bond holders just like a call option can get exposure to the Equity at a significant discount to whatever the market price would be if

micro strategy doubled from here until 2029 because remember they have the right to convert their Debt Holdings into Equity at that discount at a 55% conversion premium to what the price is today it’s right around $500 today so why is there so much demand for

this well it’s because of that call option that’s technically tied to this but it’s also because there’s a lot of bond only funds out there such as in pensions that look to boost their returns and they can technically get past the written laws by getting

Equity exposure through Bond packages and there is billions of dollars of out there that that are looking to do this that are looking to boost their return now what this means is and especially because this convertible bond has a 0% interest rate on it this means that you have

significant long exposure where you really really really really want and actually need micro strategy stock to go up significantly in order for you to make money on this Bond if micro strategy fails to gain this 55% by 2029 again remember you’ve technically lost money to

Inflation so historically remember convertible Bonds are not a new thing they’ve existed for years and years and years but historically because if you hold these Bonds you are net long by quite a bit you would hedge your position by actually

short selling the stock that way you can Arbitrage some Profit you can be right in the middle where you’re just you’re you’re basically raking in those interest payments every single year but remember with micro strategy there’s a 0% interest payment on this

so even if you Arbitrage in the middle of this Bond you’re still losing to Inflation so as a bond holder if you can’t hedge an Arbitrage Profit on this specific stock micro strategy because this is an industry where there is an extremely volatile

underlying asset you can choose to short sell the other companies that exist in the industry so another way to put this is there’s no way to lose if micro strategy gains the 55% or more you make a lot of money on the long side now if you choose to hedge this position by Short Selling other

Bitcoin mining stocks that don’t have similar instruments if the price of Bitcoin Falls and this industry feels a lot of pain you’re going to make Profit on the short side and get your initial investment in micro strategy back so this is a win-win scenario but it only

presents itself because there is an underlying volatile asset that every company in this space is exposed to that Dynamic doesn’t exist in most other Industries and especially the

volatility of Bitcoin doesn’t exist in most other Industries I can actually give you an example of this arbitraging that’s taking taking place um we just talked about how Mara

announced a a new round of convertible Debt offerings and They’re copying the micro strategy Playbook but they talk about in the press release that they’re going to repurchase existing 20206 convertible notes which means that they think that the the purchasers and the

holders of the 2026 notes that have hedged their Equity price risk will have to unwind all or part of their hedge positions by buying Mara’s or Mara’s common stock essentially meaning that Mara knows that they have been there’s been a lidp put on their stock from

this exact thing happening so let’s look at the 2026 convertible notes that Mara is buying back and let me zoom in really quick so you can see this a little better these 2026 notes were issued in November of 2021 and they mature on December 1st of 2026 the interest rate very similar to micro

strategy was only 1% but the holders of this convertible Debt just like the company itself told us was able to Arbitrage this they were able to Arbitrage their long exposure by shorting Mara’s stock now in turn if you are arbitraging a convertible and you’re hedging

that long exposure by going short on the underlying Equity it also decreases the likelihood that you are going to be able to convert your Debt into Equity at a Profit that’s why a lot of the holders in the newly issued micro

strategy Bonds and the newly issued Mara Bonds are not short selling micro strategy in Mara they’re short selling the other players in the industry that have yet to undertake similar convertible Bond offerings that way they’re not hurting their chances

of the conversion actually taking place Profitably now the problem that Mara ran into is that the initial conversion price was $767 if you look at Mara stock today it’s up big as a result of the most recent convertible Bond announcement but they’re at $22.71 the

likelihood that Mara would hit $76 by the end of 2026 is very low so essentially any of these holders that still hold these 2026 convertible Bonds they’re going to lose money to Inflation because that call option is going to expire worthless so they’re

stuck with getting their initial investment back plus well the 1% interest payment that they’ll theoretically get which offsets maybe half of the Inflation but net net they’re losing purchasing power by holding these notes so what are they doing they double down on the

short position because that way I know my call option is worthless but I can still Profit I can still Profit by short selling the stock that’s why Mara has approached these Bond holders and said we’re going to repurchase these notes from you now on the

same page we can look at some newly issued convertibles 2031 notes these are not the ones that were just issued a couple days ago these were issued in August of this year but these pay 2% interest and the conversion price is $18.89 well already already the holders of these 2031

Bonds can exercise their call options and get significant return because they can get they can get Mara stock Mara stock keep saying Mera I think technically it’s Mara they can get Mara stock for $18.89 and the market price is $22.6 cents so they’re already highly

Profitable on that call option that’s attached to those convertible notes now what do Mara and micro strategy do with the proceeds they raise they turn around and they buy more Bitcoin which has the potential to add an extremely large amount of value to the company’s

Balance Sheet over the coming years if the price of Bitcoin goes higher hence it makes the call option on this convertible Debt even more attractive to hold all of this should tell you that big money is very bullish on bitcoin for the next 5 to 6 years otherwise

you wouldn’t have billions of dollars flowing to 0% convertible Debt they believe strongly that these these companies will appreciate tremendously in value over the coming years and that they will Profit tremendously as a result of that in the call option

they have on the convertible Debt so if you’re one of these Bitcoin mining companies that is on the unfortunate side of the pair trade where these convertible Debt holders of Mara and micro strategy are short selling your company what can you do to fight back

against that that and really help your shareholders I have a few ideas today uh if you have any ideas let me know in the comments section first of all you could join the party you can issue your own convertible Debt at 0% Interest Rates and all of a sudden

you’re probably not going to have your stock short sold because those holders are going to take their short off your company and double down their short on the other companies in the space that don’t have the convertible Debt my next idea is the company actually selling

puts of its own stock which sounds ludicrous but the reason I think this is a good idea is because it’s it’s taking advantage of that short selling pressure and you know what happens if the stock price Falls and you have sold puts on your own company you can buy back your stock for a

cheaper price which means that the overall Shares outstanding decreases and it is natural buying pressure that is guaranteed to come into your stock that’s an important note to make also that that um all short sellers eventually have to be a buyer of your company that’s

the way Short Selling works you borrow Shares sell them into the Markets and then you buy them back for a Profit but selling puts in a way would put a floor

on your stock price and hurt the Arbitrage Profit potential that these Bond holders have if they short sell your company and they short sell your stock so selling puts I think it’s a great idea and worst case scenario if your stock price doesn’t fall and you can’t

buy back stock you just get to rake in those premiums by selling those puts that’s extra cash you can add to your Balance Sheet my third idea is that these companies actually need to reverse split their stock the way it is today all of these companies in the Bitcoin mining

space have hundreds of millions of Shares outstanding there is immense Liquidity but if you take if you get rid of that Liquidity it gets really really difficult to short sell a stock so I don’t think reverse splitting a stock is the worst

idea if you want to take some of this short selling pressure off of your company now the fourth option is a little bit more natural you have to find a way to create immense buying pressure in your company and that could be again those three options I just laid out or it could be a huge huge

announcement where you increase the value of the company tremendously because investors say there’s no way I cannot own this company if Bitcoin does well that could be developing a ton of infrastructure that could be making a game-changing announcement how you’re going to own your own

energy Assets and you’re not going to be reliant on grid power anymore that could be many many things now if you’re a retail investor what do we need to do well we need to stay patient we need to stay patient you know there’s a lot a lot of demand for this stuff

right now eventually the Capital that’s interested in in owning this convertible Debt is going to dry up the buyers are going to have bought and not much extra fresh Capital is going to be available to come into these instruments and if the

price of Bitcoin does well naturally those arbitragers can shift the amount of stock that they’re short selling to Arbitrage they can shade the long side they can shade the short side they don’t have to be directly in the middle so at a certain point maybe it’s when Bitcoin hits

$100,000 there’s a decent chance that those arbitragers will take off some of their short pressure and go actually extra long on bitcoin you need Bitcoin to make outsized moves and make make those moves rapidly now I have also discussed how how Bitcoin mining stocks are risk

Assets we need risk appe to increase which yes could happen as Bitcoin approaches $100,000 but ultimately you just have to stay patient don’t lose your mind things are going to work out okay short term there’s a lot of shenanigans going on but everything ends up working

out if you have any questions about this I know it’s super complicated there’s probably portions that I meant to mention and I forgot to mention if you have any questions about this let me know down in the comments section I’ll try and answer you um if you have any thoughts to add

also let me know in the comment section with that have a great rest of your day stay blessed keep 10 toes ground in your chin up peace out