MSTR's Tribulation: Shorting and Palace Intrigue

Article by Lin Wanwan
Lately, holders of MSTR (MicroStrategy) are probably losing sleep.
This "Bitcoin central bank," once elevated to a pedestal, has seen its stock price go through a bloodbath. As Bitcoin rapidly retraced from its all-time high of $120,000, MSTR's stock price experienced a significant plunge, dropping by over 60% in market value in a short period, with the possibility of even being removed from the MSCI stock index.
The price pullback and stock price halving are just superficial. What truly has Wall Street on edge is that more and more signs indicate that MSTR is being dragged into a currency power struggle.
This is not an exaggeration.
Over the past few months, many seemingly unrelated events have started to connect: JPMorgan Chase was accused of significantly increasing its short position against MSTR; users experienced delivery delays when transferring MSTR stocks from JPM; the derivatives market has been frequently suppressing Bitcoin; discussions on the policy side about the "Treasury stablecoin" and the "Bitcoin reserve model" have rapidly heated up;
Moreover, these are not isolated incidents.
MSTR is standing on the fault line between two U.S. monetary systems.
On one side of the power struggle is the old system: the Federal Reserve + Wall Street + commercial banks (with JPMorgan Chase at its core); on the other side is the emerging new system: the Treasury Department + stablecoin system + a financial system collateralized by Bitcoin for the long term.
In this structural conflict, Bitcoin is not the target but the battleground of the power struggle. MSTR is the key bridge in the conflict: it converts the traditional institutions' dollar- and debt-based structures into Bitcoin exposure.
If the new system is established, MSTR is the core switch; if the old system solidifies, MSTR is the node that must be suppressed.
Therefore, MSTR's recent sharp decline is not just a simple asset fluctuation; behind it are three overlapping forces: the natural adjustment of the Bitcoin price; the vulnerability of MSTR's own risk structure; and the spillover of conflict caused by the internal power shift in the U.S. dollar system.
Bitcoin has strengthened the Treasury Department's future monetary architecture and weakened the Federal Reserve's architecture. The government faces a tough choice: if it wants to maintain the opportunity for low-priced accumulation, it needs to let JPM continue to suppress Bitcoin.
So the tactics to hunt MSTR are systemic. JPMorgan Chase understands this game too well because they are the ones who set the rules. They put MSTR on the dissecting table, clearly distinguishing its veins (cash flow), skeleton (debt structure), and soul (market faith).
Here we break down four possible “death poses” that MSTR may face, also known as the four death warrants meticulously prepared by the Old Order for MSTR.
Posture One: Seizing the Opportunity
This is the most intuitive and talked-about pattern in the market: if BTC keeps plummeting, MSTR leverages up, the stock price keeps dropping, leading to a loss of refinancing ability, ultimately resulting in a chain collapse.
This logic is straightforward but not the core issue.
Because everyone knows that “If BTC drops too much, MSTR will be in trouble,” but few people know: to what extent does MSTR go from “solid as a rock” to “unstable.”
MSTR's asset-liability structure has three key numbers:
Total BTC holdings exceed 650k coins (approximately 3% of Bitcoin's total supply)
The average position cost is about $74,400
Some debt carries implicit price risk (although not liquidation, it affects net assets)
Many stories of "MSTR going to zero" treat it as the forced liquidation style seen in exchange contracts, but in fact: MSTR does not have a liquidation price, but it does have a "narrative liquidation price."
What does that mean?
Even if creditors won't liquidate his position, the market will liquidate his stock price. When the stock price drops to a certain level, he won't be able to issue more debt or convertible bonds to continue filling the position.
The old forces like JPMorgan are collaborating to short MSTR through the U.S. stock options market. Their tactic is simple: take advantage of the Bitcoin pullback, aggressively dump MSTR, and sow panic. They have only one goal: to break Michael Saylor's myth.
This is MSTR's first tipping point: the Bitcoin price drops to a level where the outside world is no longer willing to give him money.
Posture Two: Debt Collection
Before discussing convertible bonds, we first need to understand how MSTR CEO Michael Saylor's “magic” changed.
Many novices think MSTR just buys coins with the money it earns, which is wrong. MSTR plays an extremely bold “leverage arbitrage game.”
Saylor's core strategy is: issue Convertible Notes, borrow dollars, buy Bitcoin.
MSTR has raised a whopping $2.08 billion in high-value funds this year, a scale that is extremely rare in annual fundraising for US public companies. The funding sources are $11.9 billion from common stock, $6.9 billion from preferred stock, and $2 billion from convertible bonds.
It may sound ordinary, but the devil is in the details.
The interest on these bonds offered to investors is extremely low (some even less than 1%). Why would investors buy them? Because these bonds include a "call option." If MSTR's stock price rises, the bondholders can convert the bond into stock, making a huge profit; if the stock price does not rise, MSTR will repay the principal and interest at maturity.

This is the famous "flywheel": issuing bonds to buy coins, the coin price rises, MSTR's stock price soars, bondholders are happy, the stock has a high premium, issuing bonds again, buying more coins.
This is the so-called "upward spiral." However, wherever there is an upward spiral, there is a death spiral.
This kind of thunderstorm move is called "forced deleveraging in a liquidity drought."
Imagine, if in some future year, Bitcoin enters a long period of consolidation (no need for a crash, just consolidation). At this time, the old bonds mature. The bondholders take a look: MSTR's stock price has fallen below the conversion price.
Bondholders are not philanthropists; they are vampires on Wall Street. They will never choose to convert the bond into stock at this time but will coldly say, "Pay up. Cash out."
Does MSTR have cash? No. Its cash has been converted to Bitcoin.
At this point, MSTR faces a desperate choice: either borrow new debt to repay old debt. However, because the coin price is low, market sentiment is poor, the interest on new bonds will be frighteningly high, directly devouring what little cash flow from the software business.
Or, sell coins to repay debt.
Once MSTR is forced to announce "selling Bitcoin to repay debt," it is like launching a nuclear bomb into the market.
The market will panic: "The dead bull is surrendering!" Panic leads to a drop in the coin price, the coin price drop leads to a sharp decline in MSTR's stock price, the stock price drop leads to more bonds unable to convert, more bondholders demanding repayment.
This is a "Soros-style" sniper moment.
This type of rug pull is the most dangerous because it doesn't require a Bitcoin crash to trigger; it only needs "time." When the debt maturity date coincides with a quiet market period, the sound of the funding chain breaking will be even crisper than shattering glass.
Posture Three: Heart-Wrenching
If the second posture is "out of money," then the third posture is "out of trust."
This is currently MSTR's biggest risk and the blind spot most overlooked by retail investors: Premium.
Let me do some math for you. You buy a share of MSTR now, let's say for $100. But within that $100, only $50 worth of Bitcoin is actually included; the remaining $50 is what?
It's air. Or to put it more nicely, it's "faith premium."
Why is everyone willing to pay double the price to buy Bitcoin?
In a spot ETF like BlackRock's IBIT, before it came out, institutions had no choice but to buy stocks. Even after the spot ETF came out, people continued to buy because they believed Saylor could "sustain the coin" through debt issuance, running a pure hoarding narrative.
However, this logic has a fatal Achilles' heel.
MSTR's stock price is built on the narrative that "I can borrow cheap money to buy coins." Once this narrative is broken, the premium will revert.
Imagine, though, if Wall Street continues to suppress, and the White House forces MSTR to show its hand. What if the SEC suddenly issues a document saying "public companies holding coins are not compliant"? In that instant, everyone's faith collapses.
This type of rug pull is called the "Davis double kill."
At that moment, the market will ask itself a soulful question: "Why should I spend $2 to buy something worth $1? Can't I just buy BlackRock's ETF? It's still 1:1."
Once this thought becomes a consensus, MSTR's premium will quickly revert from the current 2.5x, 3x back to 1x, and even drop to 0.9x (discount) due to its operational risks as a company entity.
This means that even if Bitcoin's price hasn't dropped a cent, MSTR's stock price could be halved directly.
This is the collapse of narrative. It's not as bloody as a debt default, but it's more soul-crushing. You watch your Bitcoin holding stay steady, but your MSTR in your account shrinks by 60%, making you question your life choices. This is called "valuation slaughter."
Posture Four: Close the Door and Beat the Dog
The fourth posture, the most covert, the least known, but also the most ironic.
What is MSTR doing desperately now? It is desperately chasing a large market cap, trying to squeeze into more indices, like the already squeezed MSCI stock index and the Nasdaq, such as the S&P 500.
Many people cheer, "Once it's in the S&P 500, there will be trillions of passive funds that must buy it, and the stock price will become a perpetual motion machine!"
As the saying goes, fortune comes before a fall.
Because by entering the U.S. stock index, MSTR is no longer a simple scam stock; it has become a screw in the U.S. stock financial system. Wall Street is shorting MSTR with its left hand and releasing news of MSTR being kicked out of the index with its right hand, causing retail panic selling.
MSTR is now out of its own control. It wanted to use Wall Street money, only to be locked in by Wall Street's rules.
It wanted to rise through Wall Street's rules, but in the end, it may also die from Wall Street's rules.
Epilogue: Palace Intrigue Fate
Michael Saylor is a genius, but also a madman. He saw through the essence of fiat currency depreciation and seized the dividend of the times. He transformed a mediocre software company into a Noah's Ark carrying the dreams of billions of gamblers.
But his Bitcoin holdings have far exceeded what this company itself can bear.
Many in the market are already speculating that the U.S. government may directly invest in MSTR in the future.
Either by directly replacing MSTR's equity with U.S. Treasury bonds, supporting MSTR to issue nationally endorsed preferred shares, or even by direct administrative intervention, forcibly boosting its credit rating.
The climax of this drama is not yet fully over; the power struggle between the old and new U.S. financial orders is still ongoing. MSTR's structure is fragile, long in volatility, short in time.
As long as Wall Street unscrews one of MSTR's screws, then the four postures we mentioned above: price collapse, debt default, premium disappearance, index strangulation, will all cause MSTR's structure to become imbalanced in a short period of time.
But on the flip side: when the chain is in full swing, it could become one of the most dynamic targets in the global capital markets.
This is both MSTR's allure and its peril.
Sources:
1. Trump‘s Gambit: The Quiet War Between the White House and JPMorgan
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