The Future of Capital Markets: Securitizing Bitcoin to Monetize Its Volatility
MSTR’s Bundling Wall Street’s Old Game with Bitcoin’s New Rules
Abstract: This paper examines how Strategy (formerly Microstrategy - MSTR) and Michael Saylor are leveraging traditional financial mechanisms to recreate a fully Bitcoin-collateralized banking system outside the purview of existing Bitcoin focused regulatory frameworks.
MSTR strategically uses equity issuance, convertible bonds, and implied volatility arbitrage to build a hybrid capital stack. That is, it layers multiple types of funding: debt, equity, and derivatives, on top of Bitcoin. In effect, Strategy is securitizing Bitcoin using the tools of traditional finance. It mimics central bank mechanics by creating (printing) funding sources through equity and debt issuance. These instruments support fixed-income and derivative structures; all anchored to the Bitcoin network. New valuation metrics such as mNAV are technically no different than the classical approach in traditional markets, Book Value. Like Tangible Common Equity (TCE) and Tier 1 Capital (CET1), mNAV is just a fancy term to describe Book Value of a company for a specific situation or a new financial structure/special situation. The overarching goal of these metrics is to provide a simple way to cut through the noise of price and provide a foundation for valuing a company’s assets and liabilities.
The Bitcoin bottleneck isn’t belief, it is need for modernizing regulations, compliance, covenants, and back-office friction. Strategy with MSTR is solving for this without waiting on approval for Bitcoin rails. This paper explores the implications for traditional finance (TradFi), Bitcoin maximalism, and a new monetary architecture.
In short, Strategy is attempting to reengineer the credit stack from first principles, with Bitcoin as the base layer.