Michael Saylor's MicroStrategy Will Struggle When Bitcoin's Volatility Falls, Says Arthur Hayes — I Would Not Trade MSTR At All

Michael Saylor's MicroStrategy Will Struggle When Bitcoin's Volatility Falls, Says Arthur Hayes — I Would Not Trade MSTR At All

Arthur Hayes Criticizes MicroStrategy’s Bitcoin Debt Strategy, Predicts Challenges Ahead

Arthur Hayes, co-founder of cryptocurrency exchange BitMEX and Chief Investment Officer at Maelstrom Fund, has raised concerns about MicroStrategy Inc.'s (NASDAQ: MSTR) Bitcoin (BTC) acquisition strategy, which heavily relies on issuing debt. Hayes predicts that declining Bitcoin volatility could spell trouble for the company.

What Happened?

In an interview with Benzinga, Hayes criticized MicroStrategy’s approach of using convertible debt and fixed-income securities to fund Bitcoin purchases. He highlighted that the strategy hinges on the volatility of Bitcoin and MicroStrategy’s stock.

“These instruments are attractive because both the stock and the Bitcoin they buy are highly volatile,” Hayes said.

Bitcoin’s Recent Rally

Bitcoin has surged nearly 50% in the last three months, buoyed in part by Donald Trump’s recent presidential victory. This rally has significantly impacted MicroStrategy, whose stock has gained 62% during the same period, largely due to its extensive Bitcoin holdings.

However, Hayes cautioned that the company’s reliance on volatility could backfire. “When Bitcoin’s volatility declines, especially after a major crash, it will be challenging for MicroStrategy to attract interest in these types of debt. At that point, the game is up,” Hayes warned.

Despite his bullish stance on Bitcoin, Hayes revealed he avoids trading MicroStrategy stock, stating there are better ways to go long or short on Bitcoin.

Diverging Opinions

Hayes isn’t alone in expressing concerns. Economist Peter Schiff previously noted that MicroStrategy’s ability to repay convertible note holders could be at risk if Bitcoin’s price drops significantly. Similarly, Martin Shkreli, famously known as “Pharma Bro,” labeled the strategy a “big bubble” and disclosed a short position on the stock.

Conversely, Anthony Scaramucci, CEO of SkyBridge Capital, defended MicroStrategy’s strategy. He argued that fears of forced Bitcoin liquidations are overblown and that the company’s commitment to Bitcoin aligns with long-term growth prospects.

Why It Matters

MicroStrategy’s bold Bitcoin strategy has divided opinions in the financial and cryptocurrency sectors. As Bitcoin’s volatility continues to shape its value, the sustainability of debt-driven acquisition strategies like MicroStrategy’s remains a critical point of debate.