Forward the Original Title: How did MicroStrategy’s Michael Saylor develop a Bitcoin strategy for Microsoft?

MicroStrategy is an enterprise analytics software company founded in 1989 and listed on NASDAQ in 1998. Initially, its core business revolved around providing business intelligence (BI), data analytics, mobile software development, and cloud computing services. However, MicroStrategy’s unique approach to Bitcoin investment has brought it into the global spotlight. In August 2020, under the leadership of its chairman Michael Saylor, the company announced a $250 million investment to purchase approximately 21,400 Bitcoins, making it the first publicly traded company to implement a Bitcoin-based capital strategy.

Subsequently, MicroStrategy not only incorporated Bitcoin into its balance sheet but also continued to acquire more Bitcoin, even borrowing at interest rates as low as about 1% or 0% through stock and bond issuance to fund these purchases. This strategy contributed to the rise in Bitcoin’s price, which in turn further boosted MicroStrategy’s stock price. The company’s approach has allowed it to attract substantial capital in the financial markets, with its stock price becoming closely linked to Bitcoin’s price, effectively serving as an amplifier for Bitcoin’s value. While this strategy has yielded high returns, it comes with significant risks, particularly due to Bitcoin’s volatility and regulatory uncertainties.

As of now, MicroStrategy holds over 386,700 Bitcoins, accounting for approximately 1.8% of the global Bitcoin supply, making it the largest publicly traded corporate holder of Bitcoin. Despite reporting losses for three consecutive quarters and underperforming in financial results, MicroStrategy has become one of the U.S. stock market’s top-performing “super stocks” this year, effectively functioning as a Bitcoin proxy or a leveraged Bitcoin equity play.

On December 2, 2024, Michael Saylor released a promotional video targeting Microsoft, in which he discussed Bitcoin’s strategic significance. He emphasized that Microsoft, as a global leader in technological innovation, must not miss the next major technological wave—Bitcoin as digital capital.

Although Microsoft’s board explicitly opposed the proposal in a filing submitted to the SEC, citing that the company’s management had previously evaluated the topic and concluded that corporate funds require stable and predictable investments to ensure liquidity and operational funding, this temporary opposition does not detract from the insights in Michael Saylor’s video. The video explores the transition from traditional capital to digital capital and the potential impact of Bitcoin on corporate balance sheets.

Video link: https://www.YouTube.com/watch?v=cH2t6VOdgkE

Note: The opinions expressed in this article are solely those of Michael Saylor and MicroStrategy. This article does not constitute financial instrument issuance or legal, tax, financial, investment, or other advice or recommendations.

1. The Next Wave of Technology Revolution – Digital Capital

From the early days of personal computers, graphical user interfaces, and the internet, to mobile computing, cloud computing, and artificial intelligence, Microsoft has consistently stood at the forefront of technological revolutions. Michael Saylor stated: “Microsoft cannot afford to miss the next wave of technological innovation, which is being driven by Bitcoin and the concept of Digital Capital.”

The greatest digital transformation of the 21st century is the transformation of capital into a digital form, and Bitcoin represents this transformation—Digital Capital.

As digital capital, Bitcoin has already surpassed a market value of $2 trillion, making it the seventh-largest asset in the world, following gold, Nvidia, Apple, Microsoft, Amazon, and Google. Bitcoin stands out as the fastest-growing (BTC 62% ARR vs. MSFT 18% ARR), most popular, most intriguing, most digitalized, most functional, and most globalized asset class.

2. The Global Shift Towards Digital Capital

Globally, approximately $900 trillion in wealth is distributed across various asset classes, with $450 trillion allocated to utility-providing assets and $450 trillion serving as long-term capital for value storage and capital preservation.

However, due to multiple risk factors such as regulation, taxation, competition, economic cycles, political instability, and climate challenges, more than $10 trillion in wealth is diluted annually. As a result, an increasing number of investors are transitioning long-term capital (the $450 trillion) into Bitcoin—a form of digital capital—to serve as a tool for value storage and capital preservation.

Compared to traditional capital, digital capital offers economic and technological advantages. For instance, Bitcoin provides ownership similar to real estate but without the liabilities associated with visible and immovable assets.

Bitcoin represents a revolutionary advancement in value storage and capital preservation. Unlike consumable assets such as luxury cars and yachts, which have lifespans of 1 to 10 years, or traditional financial assets with lifespans of up to a century, Bitcoin, governed by code, can potentially have a lifespan spanning thousands of years.

3. The Impact of Bitcoin on the Balance Sheets

Michael Saylor predicts that by 2045, 21 years from now, Bitcoin’s market value will grow from $2 trillion in 2024 to over $200 trillion. This growth is driven by digital, political, and economic forces, including 750 Exahash, 20 Gigawatts of energy, $850 billion in investments, 400 million Bitcoin holders, and 622 million cryptocurrency users.

Against this backdrop, Michael Saylor suggests: “Microsoft should adopt digital capital as its primary driver.”

Bitcoin is an asset class that companies can hold on their balance sheets. It has the best performance metrics while remaining uncorrelated with other balance sheet assets.

Since August 10, 2020, when MicroStrategy implemented its Bitcoin strategy, Bitcoin has outperformed Microsoft by a factor of 10. The returns generated by using profits to purchase Bitcoin far exceed those from stock buybacks or holding bonds, as evidenced by MicroStrategy’s soaring stock price.

By 2024, Bitcoin has become an institutional-grade asset and is now a viable alternative to corporate bonds for publicly traded companies.

4. Welcome to the Bitcoin Crypto Renaissance

We are witnessing a majority of Bitcoin supporters among the members of the current U.S. government and leadership, as well as during the recent U.S. elections. The White House, Senate, House of Representatives, and Wall Street are all backing Bitcoin. Similarly, a vast majority of political and business leaders are expressing their support for Bitcoin. Moreover, there is growing momentum advocating for the inclusion of Bitcoin in the U.S. strategic reserves.

U.S. President Trump made it clear at a conference: “Never sell your Bitcoin.”

Michael Saylor predicts that by 2025, the following events will further drive the adoption of digital capital represented by Bitcoin: Wall Street ETFs, Fair Value Accounting by the Financial Accounting Standards Board (FASB), a pro-Bitcoin President and Cabinet, over 250 crypto-supportive members in Congress, a Bitcoin Strategic Reserve Bill, the repeal of SAB 121, an end to the crypto wars, a digital asset framework, and Bitcoin-standard companies.

5. How Should Microsoft Choose?

Currently, with over $70 billion in cash, Michael Saylor believes Microsoft has two paths:

Strategy 1: Cling to the past by following traditional financial strategies based on treasury bonds, buybacks, and dividends. This approach aims to spread $100 billion across various assets, increasing investor risk and slowing growth. Over the past five years, Microsoft has lost $200 billion in capital, and its buybacks and dividend distributions have also amplified risk factors

Strategy 2: Embrace the future with an innovative financial strategy centered around Bitcoin as a digital capital asset. Bitcoin provides the best way to eliminate these risk factors, reduce investor risk, and accelerate growth.

Bitcoin is an asset (not a company) and is free from counterparty risks posed by competitors, nations, enterprises, creditors, cultures, or currencies.

What if you could purchase a $100 billion company growing at 60% annually with just 1x revenue? What if this company were more profitable than your own? And what if you could easily replicate this process year after year, indefinitely? Bitcoin represents a universal, permanent, and profitable target.

Michael Saylor uses his open-source Bitcoin24 model to evaluate Microsoft’s Bitcoin strategy options. This model predicts asset growth and Bitcoin adoption over the next 21 years and serves as a framework for assessing Bitcoin strategies for individuals, companies, institutions, and nations.

Microsoft’s current business model assumptions are:

• $3.0 trillion enterprise value (~26x enterprise value/EBITDA)
• $27 billion in net cash on the balance sheet
• $70 billion in cash flow growing at 10% ARR
• 30% of cash flow goes to dividends
• 40% of cash flow allocated to buybacks
• 2024 stock price = $420 per share

The Bitcoin24 model assesses how Bitcoin adoption could impact these metrics. If Microsoft adopts a Bitcoin strategy (Bitcoin baseline = 30% ARR), accelerating the conversion of its dollar cash flows into Bitcoin would strengthen its capital structure.

The following is the assumption that the Bitcoin strategy will increase Microsoft’s stock price.

Adopting Bitcoin at scale could increase Microsoft’s per-share contribution by $155–$584, potentially adding $1–$4.9 trillion to the company’s market value while reducing the risks associated with diversified asset investments for shareholders.

6. Conclusions on Bitcoin Adoption

Based on these findings, Microsoft has the potential to thrive under a Bitcoin-centered model. It is recommended that Microsoft consider adopting a Bitcoin strategy to align with the interests of all stakeholders.

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