MicroStrategy is a ‘desperate’ Ponzi scheme: analyst

Analyst Jacob King called MicroStrategy’s Bitcoin-focused business model a “giant scam” and claimed it was unsustainable and doomed to collapse.

King, a Whalewire newsletter contributor, published this criticism of MicroStrategy in a detailed post on X. King argued that MicroStrategy’s strategy of issuing bonds to buy Bitcoin (BTC) is a “giant pyramid scheme.”

King explained that the company’s model is based on a feedback loop: Issuing debt or equity to buy Bitcoin raises the price of the cryptocurrency, which increases MicroStrategy’s market value.

MicroStrategy’s business model is a giant scam and relies on a reflexive cycle: it issues debt or equity to buy BTC, which drives up the price of BTC. This increases MSTR’s market cap, increases its index weighting and attracts more sheep investors. It occurs at a higher valuation… pic.twitter.com/Owyi7mCHAO

— Jacob King (@JacobKinge) December 17, 2024

This higher valuation allows the company to raise more capital and enable the purchase of more Bitcoin. King warned that the entire cycle depends on the price of Bitcoin continuing to rise.

“When Bitcoin stagnates or crashes, watch the entire structure collapse,” King wrote. He compared MicroStrategy’s addiction to Bitcoin’s value to an addict’s addiction to Bitcoin’s supply, describing the approach as “pure desperation.”

Michael Saylor’s hypocritical stance on Bitcoin

King’s criticism extended to Michael Saylor, MicroStrategy’s co-founder and executive chairman. He accused Saylor of tying the company’s future to an unsustainable strategy and highlighted the stark contrast between Saylor’s current enthusiasm for Bitcoin and his previous skepticism.

“In 2013 [Saylor] King called Bitcoin ‘useless’. “He now has MicroStrategy’s entire future tied up in an unsustainable feedback loop of constant price increases.”

The analyst went further, suggesting that MicroStrategy’s collapse could leave financial scandals like FTX and Enron behind. MicroStrategy has consistently defended its Bitcoin-centric strategy, arguing that it provides long-term value to shareholders.

King’s criticism comes as Bitcoin is trading at $104,300, reflecting an increase in its value.