Jeff Park - Deep Wall Street Quant Analysis of Why MSTR has no ceiling.

https://x.com/coryklippsten/status/1868370815986581851?s=12

Let’s break down the reasoning step-by-step and translate it into simpler terms:

The Big Picture: The central argument is that MicroStrategy (MSTR) is more than just a company that holds a lot of Bitcoin. It’s a unique kind of investment vehicle that, because of how it’s structured and financed, ends up playing several unusual roles at once in the financial markets—roles that are normally considered contradictory. Specifically, MSTR becomes both a beneficiary of cheap credit (long global carry) and a beneficiary of Bitcoin’s volatility and scarcity (short global carry). In other words, MSTR is positioned at a strange intersection where it can exploit the dysfunctions and oddities of the current financial system.

Context: Understanding the Corporate Debt Market ($10 Trillion Market): • Traditional corporate debt (bonds, loans) is different from equities (stocks). Two key differences:

Non-fungibility: Debt must constantly be issued and refinanced. Bonds mature, and companies have to roll them over. This is different from shares, which exist indefinitely.
Illiquidity: Good-quality corporate debt isn’t always easy to trade at large scale without affecting the price.

Because good debt is hard to come by, it’s “scarce.” Investors who manage credit (bond funds, pension funds) prize “good paper” (high-quality bonds), as it’s difficult to find and hold. This scarcity gives well-structured debt intrinsic “holding value.”

Why MSTR’s Position is Unique:

Long Global Carry: • “Carry” in finance generally refers to earning a yield from holding an asset (like earning interest from bonds). • We live in a world of “financial repression”—interest rates are low, and yields on bonds are very thin. Even “junk” bonds (risky debt) pay relatively low returns compared to historical norms. • Investors desperately need yield, but they’re forced by regulations and mandates to invest in certain ways. Credit investors can’t easily own Bitcoin directly due to their fund rules, so they look for ways to get exposure indirectly. • MSTR, by holding large amounts of Bitcoin and having a capital structure that includes debt, becomes a target for these investors. They’re willing to provide cheap financing (buy MSTR’s bonds) or pay up for MSTR’s shares to get that Bitcoin exposure they otherwise couldn’t. This structural mismatch “subsidizes” MSTR’s equity returns—credit investors (long global carry) indirectly pump value into MSTR because they can’t hold BTC directly but still want some piece of that upside.
Short Global Carry (via Bitcoin’s Volatility): • Bitcoin is extremely volatile but also extraordinarily liquid. Liquidity plus scarcity is a unique combination. • Typically, something that’s scarce isn’t also easy to trade. But Bitcoin is both. This breaks normal financial assumptions and provides MSTR, as a holder, exposure to something “short global carry”—meaning MSTR can benefit from that volatility and scarcity in ways that traditional assets cannot. • By being tied to Bitcoin, MSTR benefits when volatility increases because it can amplify returns on the equity side. It’s as if MSTR taps into a reservoir of raw financial energy that’s not available in stable, low-yield markets.
Long Epistemic Incongruence (the benefit of “Bitcoin could go to zero” perception): • This is the trickiest part. MSTR benefits not just from Bitcoin potentially going to the moon, but also from the idea that it might go to zero. • Why would the possibility of crashing to zero help? Because when both extremes (zero and infinite growth) remain plausible to the market, the market charges a huge “implied volatility premium” when pricing MSTR options and shares. • Essentially, the uncertainty about Bitcoin’s ultimate fate keeps option prices (and thus MSTR’s implied volatility) high. High volatility can be monetized. So, MSTR thrives when people are passionately divided—some think Bitcoin is worthless, some think it’s priceless. This tug of war creates the conditions for huge swings and high implied volatility, which MSTR, as a heavily levered Bitcoin proxy, can exploit.

Putting It All Together: • MicroStrategy’s valuation and strategy are less about the simple metrics like how many Bitcoin it holds (mNAV) or the yield it could theoretically generate. • It’s more about the complex dynamics of volatility, interest rates, and the ability of MSTR’s finance team to manage their capital structure wisely. • They need to roll over debt, buy back bonds at good prices, and maintain the delicate balancing act that lets them profit from this bizarre set of market conditions.

Hints at a Meta Level: • Betting on MSTR is akin to betting that the current financial system is broken in weird ways. • MSTR’s unusual position relies on systematic distortions: low yields, regulatory constraints, and the difficulty of accessing Bitcoin. • It’s like GME (GameStop) on steroids because it plays at the same emotional and structural tensions in markets—only more so. • As long as the financial system remains repressed (low rates, scarce yield) and Bitcoin remains volatile and scarce, MSTR has “no ceiling.”

Why “No Ceiling”? • If Bitcoin is infinitely scalable upwards (no gravity), and the financial system keeps funneling cheap leverage (financial repression), then MSTR, as a leveraged bet on Bitcoin, can theoretically keep going up without a traditional limit. • This isn’t a guarantee, but the reasoning is: as long as these conditions hold, there’s no inherent cap.

In Short: • MSTR is a unique investment “hack” that exploits market quirks. • It is both long and short “global carry” due to how it interacts with bonds, credit investors, and Bitcoin volatility. • Uncertainty about Bitcoin’s ultimate fate fuels implied volatility, which MSTR can tap into. • The core idea: If you believe the financial system is broken and that Bitcoin’s volatility and scarcity can continue indefinitely, MSTR is positioned to ride that chaos upward—potentially without limit.