MicroStrategy, Leverage, and the Bullish Waiting Game

Summary

The December 08, 2025 episode of the Tim Kotzman Podcast features James Van Straten analyzing MicroStrategy’s leveraged Bitcoin treasury strategy and its current “bullish waiting game.” He explains how deep share-price drawdowns, MNAV discounts, and perpetual preferred instruments interact with ETF-driven demand and underreported leverage across Bitcoin markets. The discussion highlights emerging digital credit structures, the gradual normalization of institutional Bitcoin exposure, and the generational dynamics shaping risk-taking and adoption.

Take-Home Messages

1. Leveraged Corporate Treasuries: MicroStrategy’s balance sheet shows how aggressive Bitcoin accumulation via debt and preferreds magnifies both upside potential and solvency risk.
2. MNAV as Sentiment Gauge: Persistent discounts or premiums to market value to net asset value provide a real-time window into market fear and greed around listed Bitcoin proxies.
3. ETF-Based Demand Shift: Resilient ETF assets under management suggest a new cohort of long-horizon holders, changing how corrections, liquidations, and recoveries play out.
4. Digital Credit Experiments: Perpetual preferreds and related instruments are testing whether Bitcoin treasuries can tap fixed income demand without sacrificing long-term coin reserves.
5. Slow-Burn Institutional Adoption: Banks, sovereign wealth funds, and large asset managers are positioned to expand Bitcoin access over several years, turning today’s volatility into a longer strategic transition.

Overview

James Van Straten explains how strict UK pension rules pushed him to use MicroStrategy as a proxy for Bitcoin exposure in August 2020. He traces how Michael Saylor’s initial $500 million cash allocation into Bitcoin rapidly evolved into a broader corporate strategy centered on aggressive balance-sheet deployment. Over time, that strategy layered in convertible debt, at-the-market (ATM) equity issuance, and new perpetual preferred instruments, turning MicroStrategy into a leveraged Bitcoin operating company rather than a conventional software firm.

Van Straten highlights that MicroStrategy’s share price currently sits about 70% below its all-time high and trades close to a 1.15x market value to net asset value multiple, which he characterizes as “max fear” territory. He stresses that, despite this drawdown, the company remains solvent, with its first major convertible put date roughly 18 months away and several refinancing options still available. In his view, the key question for investors is whether this window is long enough for higher Bitcoin prices and a richer MNAV multiple to restore confidence in the capital structure.

The conversation shifts to market structure, where Van Straten contrasts today’s ETF-led flows with earlier cycles dominated by offshore derivatives and retail speculation. He notes that spot ETF assets under management have barely declined despite multiple 30% or larger drawdowns, which he interprets as evidence of a new cohort of long-horizon “diamond hand” holders. At the same time, he repeatedly warns that true leverage remains underreported, with API-driven liquidations and cross-venue margin calls still producing sudden, cascading price moves.

Van Straten then explores what he calls “preferred digital credit,” describing MicroStrategy’s perpetual preferred offerings as a live experiment in connecting Bitcoin treasuries to fixed income demand. He points to similar initiatives at firms like Marathon and MetaPlanet, and he expects a second phase in which corporates generate modest, relatively low-risk yield on their Bitcoin rather than selling coins outright. Looking ahead, he anticipates that the real inflection will come as banks, sovereign wealth funds, and other large allocators normalize Bitcoin exposure through ETFs, structured notes, and eventually direct account integration, even as younger investors continue to approach the asset through a lens of financial nihilism and high-risk leverage.

Stakeholder Perspectives

1. Corporate treasurers: Balancing the appeal of a MicroStrategy-style leveraged Bitcoin strategy against solvency, refinancing, and reputational risks during deep drawdowns.
2. Institutional investors: Interpreting MicroStrategy’s MNAV behavior, preferred instruments, and ETF flows as signals about broader market appetite for listed Bitcoin exposure.
3. Regulators and policymakers: Assessing whether leveraged corporate treasuries, underreported market leverage, and novel preferred structures introduce new forms of systemic or conduct risk.
4. Banks and sovereign wealth funds: Evaluating when and how to integrate Bitcoin into product shelves and balance sheets while meeting regulatory, liquidity, and governance constraints.
5. Retail and younger investors: Navigating a landscape where financial nihilism, leverage, and proxy vehicles intersect with long-term narratives about saving and wealth preservation in Bitcoin.

Implications and Future Outlook

The episode’s focus on MicroStrategy underscores how aggressively leveraged corporate Bitcoin treasuries could become a new locus of systemic and governance risk. If firms increasingly emulate Saylor’s playbook, supervisors and investors will need tools to evaluate solvency under prolonged price weakness, shifting funding costs, and evolving ETF-driven liquidity. Clearer disclosure standards around MNAV, refinancing timelines, and preferred-instrument covenants would help stakeholders distinguish robust balance sheets from fragile, yield-chasing structures.

Van Straten’s description of resilient ETF assets under management and gradual institutional uptake signals a slower but potentially more durable adoption path than prior retail-driven manias. As banks, sovereign wealth funds, and large asset managers expand their use of ETFs, options, structured notes, and eventually balance-sheet positions, Bitcoin may begin to resemble a core macro asset rather than a peripheral speculative tool. Over the next three to five years, the depth and behavior of this institutional base will likely determine whether Bitcoin’s volatility moderates, amplifies, or simply changes character in response to new forms of leverage and regulation.

The rise of preferred digital credit and yield-generating strategies around Bitcoin treasuries also raises questions about who ultimately bears risk when things go wrong. If younger, financially pessimistic investors funnel savings into leveraged proxies and complex capital stacks, mis-selling and concentration risks could emerge well before many regulators appreciate the scale of exposure. Thoughtful policy design that preserves open access to Bitcoin while clarifying product labeling, suitability, and capital treatment will shape whether this innovation stabilizes the system or amplifies future crises.

Some Key Information Gaps

1. How resilient is MicroStrategy’s balance sheet to prolonged periods where its share price trades near or below 1x MNAV during large Bitcoin drawdowns? This question is important because it addresses the systemic and shareholder risk embedded in the leading corporate Bitcoin treasury model, which serves as a bellwether for others.
2. How large is the true aggregate leverage in Bitcoin markets when off-exchange and API-driven liquidation mechanisms are accounted for? This question matters because underreported leverage has direct consequences for market stability, investor protection, and the design of risk controls across venues.
3. How stable is ETF-based Bitcoin demand across different macro shocks compared with prior cycles dominated by retail spot and derivatives traders? This question is central because the new ETF cohort shapes liquidity, price discovery, and the resilience of corrections, informing both portfolio construction and macroprudential oversight.
4. Under what conditions can Bitcoin-linked perpetual preferreds achieve sufficient liquidity and ratings to attract mainstream fixed income investors? This question is crucial because Saylor’s preferred programs function as a prototype for a broader digital credit market whose viability depends on credible structures and investor protections.
5. What role will sovereign wealth funds play in future Bitcoin demand relative to corporate treasuries and ETFs? This question is significant because sovereign wealth participation would alter the scale, geographic distribution, and geopolitical implications of Bitcoin adoption over the medium term.

Broader Implications for Bitcoin

Institutional Leverage and Bitcoin’s Systemic Role

As more firms experiment with leveraged Bitcoin treasuries, the asset’s risk profile will increasingly depend on corporate funding structures rather than just spot market dynamics. Over the next decade, supervisors may need to treat large Bitcoin treasuries as systemically relevant exposures, akin to concentrated positions in foreign exchange or commodities. This shift would tie Bitcoin more tightly into prudential regulation, stress testing, and cross-border coordination frameworks.

Evolution of Bitcoin-Linked Credit Markets

Perpetual preferreds and other Bitcoin-linked instruments hint at a future in which credit markets routinely price claims on digital reserves alongside traditional collateral. If these markets mature, bond investors, rating agencies, and risk managers will need robust methods to value Bitcoin-backed claims through full cycles, not just bull markets. In turn, the quality of these methods will influence whether Bitcoin becomes a trusted foundation for global credit or remains a niche source of speculative yield.

Generational Attitudes and the Future of Savings

The financial nihilism Van Straten describes among younger investors points to a deeper breakdown in confidence in conventional savings vehicles and career-based wealth building. This cohort may treat Bitcoin and Bitcoin-linked proxies as both protest tools and primary savings channels, bypassing traditional pensions and mutual funds. Policymakers and educators who ignore this shift risk entrenching a parallel financial system whose incentives, risks, and social contract differ sharply from legacy arrangements.

Convergence of Banking, ETFs, and Native Bitcoin Markets

As banks integrate ETFs, structured notes, and eventually direct Bitcoin access into standard accounts, the boundary between traditional finance and native Bitcoin markets will blur. This convergence will reshape liquidity pathways, with shocks in one segment rapidly transmitting through custody chains, derivatives, and balance sheets worldwide. Over time, the interplay between regulated banking channels and permissionless Bitcoin infrastructure will help determine whether the global monetary system becomes more resilient, more fragile, or simply more complex.