Crypto markets have been facing a rough week amid rising concerns over Bitcoin’s pullback. Amidst the volatility, Michael Saylor and his firm Strategy are once again in the spotlight. Peter Schiff, a prominent gold advocate and Bitcoin critic has recently criticised Strategy’s model, highlighting the risks in it.
Schiff Calls MSTR’s Business Model a ‘Fraud’
Schiff believes that MSTR’s entire business model is a fraud and has also challenged Saylor to debate him on this claim at the Binance Blockchain Week in Dubai this December.
Schiff argues that MSTR’s business model relies on income-oriented funds buying its “high-yield” preferred shares. He believes that those yields will never actually be paid. “Once fund managers realize this they’ll dump the preferreds & MSTR won’t be able to issue any more,” he said adding that this would trigger a “death spiral” for the company.
Regardless of Bitcoin’s future, Schiff is convinced that Strategy will end up bankrupt. These comments have sparked a lot of criticism from the community including Jeff Dorman, CIO of Arca.
Dorman Pushes Back
In an X post, Dorman criticised the “stupid, inaccurate takes” about Strategy’s risk profile. He argues that the claims being spread are simply wrong and can be disapproved easily.
“It takes <5 minutes talking to any debt/equity expert to understand that he will never have to sell his BTC unless Bitcoin has already fallen so far that his selling is an irrelevant afterthought,” he said.
Dorman also notes that the belief that one person will buy forever is mistaken. He added that Saylor is no longer a marginal buyer of Bitcoin, compared to ETFs. “But MSTR selling BTC is not even remotely a concern,” he added.
Why MSTR Is Not a Danger to BTC
Dorman explains why Strategy is not at risk. He cites Saylor controlling about 42% of the voting power, which makes activist takeovers almost impossible.
Moreover, he added that none of Strategy’s debts include covenants which would force it to liquidate bitcoin, its interest payments remain low and manageable, and its core software business continues to generate cash. Dorman also points out that companies almost never fail simply because debt comes due as lenders typically extend the terms.
“If you follow anyone saying MSTR is a risk to BTC, tell them to call me,” he said .
Bitcoin, MSTR Face Volatility
This comes as Bitcoin continues its dip below the $100,000 mark, currently trading at $95,331. It is down 10% over the past week. Strategy’s stock also continues to face volatility amidst the recent downturn. It is currently trading at $199.75, down over 50% in the past 6 months.
Its mNAV had recently dropped below 1, but has since recovered to 1.19.
Is a New Bitcoin Purchase Coming?
Meanwhile, Saylor has hinted in a recent post on X that the company has a “big week” ahead, suggesting that more Bitcoin purchases may be on the way. In a recent interview with CNBC, Saylor has said that the announcement would be “pleasantly” surprising.
This has added to the growing anticipation that MSTR could soon expand its already significant Bitcoin holdings.
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