World-Class Economist Calls Out Flaw In MicroStrategy’s Bitcoin Bet, Says ‘Death Spiral’ Is Coming

Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

MicroStrategy, a publicly traded business intelligence company, is facing new heat as world-class economist Peter Schiff unleashes a blistering takedown of the firm’s all-in Bitcoin (BTC) bet. As the price of Bitcoin slides below key levels, Schiff has warned that MicroStrategy’s model cannot sustain itself, arguing that a critical flaw could push the company into a “death spiral.” His claims have sparked a fierce debate within the crypto community, with many outrightly dismissing his perspective as exaggerated, while others closely monitor the market as pressure intensifies. 

MicroStrategy To Face Bitcoin-Fueled Death Spiral

Schiff’s latest criticism centers on MicroStrategy’s use of preferred shares to accumulate additional Bitcoin. He argues that the company’s business model only works if income-oriented funds buy into high-yield preferred shares, yet he insists the promised yields are simply a fantasy. 

According to him, once institutional buyers realize that the returns cannot be paid out, they will exit the investment, preventing MicroStrategy from issuing more shares. In his view, this could trigger a death spiral he believes is already unfolding. 

Notably, Schiff’s warning was met with immediate frustration from crypto community members who argued that MicroStrategy does not depend on preferred shares for survival. The commenter dismissed the possibility of a death spiral, insisting that the shares are merely a tool for expanding the business intelligence company’s Bitcoin stash and are not tied to operational stability. 

Schiff fired back, saying that without the ability to produce Bitcoin yield, MicroStrategy has nothing valuable to offer investors. His remarks came at a tense moment in the market. The price of Bitcoin had fallen toward $90,000 while gold hovered near all-time highs at $4,000, reinforcing the global economist’s long-held belief that gold is superior to BTC. 

Adding more fire, he stressed that the leading cryptocurrency had crashed 40% from its record highs and pointed out that the drop looks even worse when compared to gold, which has been performing fairly well. Moreover, with the MSTR stock down more than 50% over the past six months, the timing of his verbal attack on MicroStrategy couldn’t be more perfect for the skeptic. 

MicroStrategy Faces Trouble As Stock Falls Below BTC

Co-founder of EasyA, Don Kwok has highlighted a major risk with MicroStrategy’s stock trading below Net Asset Value (NAV). This means that the company’s market cap is lower than the value of its Bitcoin holdings. Historically, no treasury company has stayed below NAV for long without consequences.

Kwok explained that MicroStrategy’s business model works only if MSTR trades at a premium NAV. When it falls below, issuing new shares dilutes shareholder exposure because the company gives away more ownership that it receives in Bitcoin. He warned that if the stock continues to decline, it could lead to further losses, potentially increasing market volatility.

Featured image created with Dall.E, chart from Tradingview.com

Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.