BTC Yield: MicroStrategy’s Winning KPI
MicroStrategy’s Bitcoin Yield KPI is not yet well understood, but as you’ll see in this article, it’s critical to their success.
Relentless delivery of their plan to recycle fiat into Bitcoin to yield a higher BTC per share is critical to their MSTR’s long-term game plan to achieve exponential growth, which appears unlikely to stop until a significant portion of global wealth shifts from fiat to the hardest form of capital storage (Bitcoin).
Bitcoin Yield Explained
BTC Yield is the rate of change in Bitcoin per share.
A higher BTC per share means that each share of MSTR builds a broader launchpad, ensuring they will be more valuable in the future, especially as BTC continues its ascent.
Importantly, BTC yield is compounding, which means MSTR intentionally targets exponential growth. A higher BTC yield (i.e., the rate of change of BTC per share) increases MSTR’s ability to buy more Bitcoin.
How MSTR Uses BTC Yield to Outpace the Market
As previously discussed, MSTR is difficult for the conventional financial system to value, particularly because it is not (yet) allowed to show its massive profits from BTC on its balance sheet.
Hence, they created Bitcoin Yield as a KPI to help people understand how they deliver against their plan.
Their 2024 Q3 earnings report noted that their BTC yield for 2024 YTD was 17.8% and outlined a 6% to 10% annual BTC yield target.
But this is a massive case of under promise and overdeliver! The chart below from MSTR Tracker shows that MSTR has aggressively increased its BTC per share.
To put this in perspective, the long-term BTC per share chart shows that the rate of change in BTC per share has increased rapidly in recent months. MSTR’s actual quarter-to-date BTC yield (as of 2 December 2024) was 38.7%, with a BTC Yield of 63.3% YTD.
Remember that the ATM strategy, which has enabled them to ramp up their fiat inflows dramatically, only started in early August 2024!
Accelerating the Ascent: BTC Yield and the Ballistic Growth Path
In our previous article, we looked at MSTR's trajectory with future changes in BTC price compared to the current MSTR BTC Per Share.
As you can see in the chart below, with a static BTC per share value (as of 2 December 2024), the projected MSTR fair value is well below the Ballistic Acceleration Model.
The obvious question is:
· what would it take for MSTR’s price to keep up with the ballistic acceleration model and
· is that realistic?
The answer is 0.343% per day (or a massive CAGR of 250% annually).
And yes, that’s well above their target of 6-10% per year!
But for context, Saylor's latest announcement noted that they had achieved a BTC Yeild of 2.55% in the past week.
This maths out to 0.36% per day compounding, ahead of the 0.343% per day required to match the Ballistic Acceleration Model forecast.
The chart below compares the two models, showing the following:
· MSTR price to date,
· Ballistic Acceleration Model and
· MSTR BTC Per Share Far Value model with the BTC Yield optimised to match the Ballistic Acceleration model (i.e. 0.343% growth per day).
The chart below shows the change in BTC per share required to keep up with the Ballistic Acceleration Model (note: the y-axis is a log scale).
It’s Exponential Baby!
But is this exponential growth completely insane?
Maybe?
But maybe not.
Many refer to Bitcoin’s growth as ‘exponential’ or ‘parabolic’. But if you say this on X, Giovanni will likely jump out from behind a tree and highlight that Bitcoin follows a power law growth pattern. It only goes into unsustainable exponential growth phases every four years, followed by a crash.
Over the long term, as the market cap grows, bitcoin's returns diminish. To keep following the power law trajectory, we need companies and countries to step in (which seems to be on the horizon).
But exponential growth is violent and unsustainable.
In a recent interview, Saylor said that once the $42b capital raising plan ended, they’d double it, then double it again, and then double it again (i.e., he plans to grow it exponentially, as market demand allows).
The chart below shows the rate change in BTC per share if we zoom into the current and projected BTC per share chart since 1 August 2024, when they started their ATMs, with the projected BTC Yield of 0.343% per day.
Fascinatingly, the overall exponential trend line isn’t a bad fit through the existing data. Maybe the Ballistic Acceleration Model is not so insane after all?
To be clear, neither of these models is magical; I’m just using two approaches to forecast MSTR’s future trajectory using historical data.
· The Ballistic Acceleration Model uses the 2nd order parabolic relationship between BTC and MSTR on a log-log scale.
· The MSTR Fair Value model uses the relationship between bitcoin value per share and factors in the possible future BTC Yield.
There is no such thing as a perfect forward-looking model. As we get more data, we can refine the regression coefficients further. But if you wait for a perfect model, it will be too late to benefit.
What Can Stop This Train?
Whether or not they can keep up with the BTC Yield depends on market demand for their convertible debt and other products they are developing.
In their earnings call, they indicated they are considering other dividend and fixed-coupon products to serve different market segments (beyond the traditional BTC enthusiast who can buy Bitcoin directly or on an exchange).
“There’s a saying on Wall Street: When the ducks are quacking, feed the ducks.” Michael Saylor
For completeness, the chart below shows the ballistic acceleration and fair value models (assuming a BTC Yield of 0.343% per day) along with the percentile bands.
The ride up will be volatile and bumpy, but that’s by design — volatility is vitality. It’s likely to be punctuated by sharp dips as MSTR hammers the ATM to extract more fiat. But then they will stop, driving the price up (rinse and repeat).
But, at least for the next year, with the US Strategic Bitcoin Reserve on the horizon, the traditional post-halving BTC bull run and many other factors, the likely trajectory is up and to the right.
How Long Can MSTR’s Bitcoin Run Last?
We cannot know the future, but we know that MSTR is relentlessly executing its plan. You either believe BTC is going to zero or infinity (against inflating fiat). And MSTR appears to be the fastest horse, well out in front of the pack.
Saylor’s followers have come to expect weekly updates on MSTR’s BTC per share, demonstrating that he has delivered on his promise to pursue BTC yield.
The Endgame: How Far Can MSTR’s BTC Strategy Go?
Exponential growth, like we’ve seen over the past few months with MSTR, is not sustainable. It has to slow down eventually.
But when?
As shown in the slide above, MSTR has an eye on a wide range of products to provide exposure to Bitcoin returns and accelerate the extraction of fiat in the transition to sound money in the coming months and years.
The stock market, gold, bonds, and real estate are attractive investments for long-term value creation or capital preservation. However, equity and real estate grow at the rate of the new money supply, meaning they are not productive assets and do not create value; they store wealth.
The smart money (e.g. options traders, hedge funds and high-speed algorithmic trading algorithms) will quickly follow the best returns, and the rest will eventually follow.
If I were Saylor — staring at this opportunity — I would be trying to win the game during the next bull run (i.e. before the end of 2025).
If he can move enough of the world’s capital to Bitcoin, other companies and countries will eventually follow. Then, at the end of the next cycle, there will be no safer place to run, and we may avoid the traditional fear/greed cycle.
However, once a large portion of the world’s wealth has migrated into Bitcoin, MSTR’s volatility will have to dissipate. At that point, they will own a significant portion of Bitcoin — the money of the future. We’ll have to wait until then to see how they capitalise on that potentially considerable opportunity.
Conclusion
MicroStrategy's aggressive BTC Yield strategy reflects a bold and calculated approach to maximising shareholder value in a rapidly evolving space.
By leveraging innovative financial instruments and continuously scaling its BTC per share, MSTR positions itself as a unique, forward-thinking entity in the investment landscape.
While the trajectory may seem volatile and ambitious, the underlying strategy of relentless execution backed by a strong belief in Bitcoin’s long-term potential could redefine market norms.
