Before this year's surge, MicroStrategy was not well-known to most investors, but as it was included in the NASDAQ 100 Index, the company is becoming a focal point. Analysts are optimistic, noting that given the positive outlook for Bitcoin and the company's strategy of using leverage to build Bitcoin positions, there is more room for the stock price to rebound. However, some investors believe that the significant rise is not sustainable, partly due to the leveraged strategy.

The annual increase far exceeds that of Bitcoin.

As MicroStrategy continues to increase its investments in Cryptos, the company's stock price generally reflects the trend of Bitcoin. However, due to its leveraged strategy, the company's stock price increase far exceeds that of Bitcoin (Bitcoin's increase since the beginning of the year is approximately 125%).

MicroStrategy purchased its first batch of Bitcoin in 2020 at a trading price close to $11,000 each. Interestingly, just seven years ago, then CEO Michael Saylor stated that Bitcoin had 'little time left.' In a recent interview with CNBC, the current Chairman Saylor described MicroStrategy as a Bitcoin financial operation company. Since 2020, the company has purchased Bitcoin 45 times, with a total holding of 444,262 coins, accounting for over 2% of the total Bitcoin supply of 21 million coins, making the company the second-largest holder of Bitcoin, just behind Blackrock's iShares Bitcoin Trust (IBIT).

MicroStrategy uses an indicator called Bitcoin yield to assess the success of its investments. Bitcoin yield can be broadly understood as the change in Bitcoin ownership per share of the company. At the end of last year, the company held 189,150 Bitcoins, assuming a diluted share count of 207,636 shares, resulting in a ratio of 0.91. As of December 23, the company's Bitcoin holdings surged to 444,262, with outstanding shares at 280,828, leading to a ratio of 1.576. Thus, the year-on-year percentage change between these two ratios, which is the Bitcoin yield, reached 73.1%.

Bitcoin Leveraged Game.

MicroStrategy uses a small amount of Bitcoin reserves as collateral to issue shares or zero-coupon debt in order to purchase a large amount of Bitcoin through simple arbitrage. The company announced in October that it plans to raise $42 billion over the next three years using these methods and is accelerating toward this goal.

The company increasingly relies on issuing Stocks to purchase Bitcoin, but when it opts for Convertible Bonds, bond purchasers can gain the option to convert them into company Stocks at a certain price, which is almost equivalent to a Call.

Saylor told CNBC: "When we issue Bonds, we issue, for example, 3 billion dollars of zero-coupon debt, secured by 0.6 billion dollars of Bitcoin, maturing in five years. Then we Buy 3 billion dollars of Bitcoin and get 2.4 billion dollars of arbitrage profit. But in the next five years, our investment will double or triple because the Assets we purchased appreciate faster than the S&P 500 Index."

Bernstein Analysts believe that "MicroStrategy is playing a Bitcoin leverage game." Analysts state that the longer debt maturity provides the company with some cushioning against immediate repayment or fluctuations in Bitcoin prices. Furthermore, even if MicroStrategy has to issue Stocks to repay Convertible Bonds, the dilution effect of these Stocks on the company’s equity is limited.

Not everyone is Bullish.

However, not everyone believes that MicroStrategy's performance is sustainable. Take the short-selling institution Citron Research as an example, which is still Bullish on Bitcoin but has built a short position in MicroStrategy as a hedge, essentially betting that the stock price will decline.

Citron stated in a November post: "We have great respect for Saylor, but even he must know that MicroStrategy has overheated." Citron also added that MicroStrategy's Trading volume is "completely detached" from Bitcoin's fundamentals.

Mike Novogratz, CEO of Galaxy Digital, told CNBC that due to leverage effects, he expects that the correction of Bitcoin-related stocks like MicroStrategy will be greater than that of the Cryptos themselves.