What could go wrong?

When asset prices soar, common sense is ignored. There seems to be a lot of irrational craziness on Wall Street these days, but that doesn’t mean Bitcoin (BTC-USD) holders lack common sense.

In fact, I respect the individuals and companies that bought Bitcoin at $16,000 late last year. It’s easy to say this in retrospect, but it was the right time to invest in cryptocurrency.

But buying large amounts of Bitcoin now is a completely different story. But as MicroStrategy (NASDAQ:MSTR) unfolds its not-so-micro strategy of buying Bitcoin at high prices, investors have to wonder whether management has common sense or a rare case of indiscretion.

Another day, another Bitcoin breakout

Is it a blessing or a trap that Bitcoin is traded all day and night? For those who want to celebrate new all-time highs, 24/7 Bitcoin trading is clearly no problem.

Lately, it seems like every day (or at least every few days) the price of Bitcoin is hitting another record high. Last time we checked, the cryptocurrency was on the verge of hitting $73,000.

Any excuse will suffice as a catalyst for now. The latest Bitcoin pump comes alongside a report from the Wall Street Journal that “the UK’s Financial Conduct Authority will allow exchanges to offer exchange-traded bonds backed by cryptocurrencies to institutional investors.”

Of course, this is a similar move to the U.S. Securities and Exchange Commission (SEC) approval of a spot Bitcoin exchange-traded fund (ETF) earlier this year. I wonder if it’s really that surprising that UK regulators are approving cryptocurrency-based funds.

It was bound to happen sooner or later, but when markets are in a good mood, positive surprises don’t even have to be surprising anymore. As long as Bitcoin is in the headlines, someone or something is ready to hit the “buy” button.

Clearly, MicroStrategy is hitting the “buy” button without hesitation. Founder and Chairman Michael Saylor’s recent X post summarizes the company’s latest cryptocurrency shopping activity.

There is a lot to unpack here, so let’s get into it in earnest.

Cryptocurrency Strategy: Borrow to Get Rich?

MicroStrategy acquired an additional 12,000 bitcoins and now holds 205,000 bitcoins, according to a graphic shown in Saylor’s post. It can’t exactly be claimed that MicroStrategy bought the last batch of Bitcoin at the highest level. But at around $68,477 per Bitcoin, one could accuse Saylor and his company of chasing price.

Of course, Bitcoin enthusiasts would probably argue that buying at $68,477 was a great move. Eventually, they are likely preparing for the cryptocurrency to reach $100,000 or $250,000 or more.

Nonetheless, value seekers may cringe at the thought of Bitcoin growing in value as it rises vertically. Meanwhile, clear-minded investors may be questioning how MicroStrategy has recently chosen to pay for its Bitcoin.

Again, you can refer to Saylor’s post for clarification. As you can see, he reported that MicroStrategy purchased $821.7 million worth of Bitcoin “using convertible notes and excess cash proceeds.”

If you only have excess cash, it will be easier to apply. Piling on parabolic volatility assets may not be the best use of surplus capital, but at least it’s money MicroStrategy can afford to lose.

The area of ​​concern is the “use of convertible bond proceeds.” For simplicity, we can consider “convertible bonds” as corporate bonds. Of course, you will have to repay it with interest.

These details aren’t in Saylor’s X post, but can be found in MicroStrategy’s press release. Almost as proudly as Saylor announced MicroStrategy’s latest Bitcoin purchase, the company also unveiled an offering of $800 million in 0.625% convertible senior notes due in 2030.

MicroStrategy borrows and buys, and the market celebrates.

Maybe it’s just a sign of the times. Regardless of whether MicroStrategy’s borrowing and spending strategy makes sense, the market enthusiastically sent MSTR stock up 5.5% following the announcement.

This helped MicroStrategy stock surpass $1,500, a three-fold increase in price over the past year. As a result, prospective investors have a decision to make.

If you’re participating in MicroStrategy’s Bitcoin holdings and aren’t opposed to the company’s shameless lending, you may choose to buy MSTR stock now. Or, you can stay on the sidelines, admire MicroStrategy’s buying binge near its all-time highs, and perhaps avoid the coming disaster.