What’s Flying Higher Than Bitcoin? The Software Company Buying Up Bitcoin

Bitcoin prices have surged about 40% since Election Day. MicroStrategy has climbed even faster.

The software company turned itself into a bitcoin buying machine in 2020 and now holds some $37 billion worth of tokens. For many individual investors, the stock is a more popular bitcoin play than the cryptocurrency itself and they are willing to pay up for it.

With a $91 billion market value, MicroStrategy is trading at more than twice the value of its underlying bitcoin. The shares have soared more than sixfold this year and 77% since Nov. 5, with traders betting that the digital-assets industry will flourish under President-elect Donald Trump . Bitcoin prices are hovering just below $95,000, after trading near $100,000 last week.

“MicroStrategy found a way to outperform bitcoin,” Michael Saylor , the company’s founder and executive chairman, said in an interview. “The way that we outperform bitcoin, in essence, is we just lever up bitcoin.”

And Saylor says he is just getting started. He unveiled an audacious plan just days before the election to hire investment banks to raise $42 billion in capital over three years through stock and bond offerings to buy more tokens. His company had $4.3 billion in convertible debt outstanding as of Oct. 29.

MicroStrategy’s mix of bitcoin maximalism and Wall Street-style financial engineering has paid off for its investors, but skeptics question whether it is sustainable.

Saylor’s heavy use of leverage, or borrowed money, to buy bitcoin backfired during the 2022 crypto-market meltdown when the collapse of Sam Bankman-Fried ’s FTX dragged bitcoin prices below $16,000. Quarter after quarter, MicroStrategy incurred mounting losses tied to bitcoin and Saylor stepped down as CEO, a position he had held since 1989.

“This stock has become detached from reality,” said Andrew Left, a prominent short seller and founder of Citron Research.

Left describes himself as bullish on bitcoin itself and praised MicroStrategy in 2020 when it first began amassing bitcoin. But in a Thursday post on X , Left said he had taken out a bet against MicroStrategy, which caused its stock to tumble.

Some analysts warn MicroStrategy’s stunning run-up is part of a broader investor euphoria for speculative assets and will inevitably collapse. David Trainer, founder of research firm New Constructs, said MicroStrategy is a bad business by conventional metrics—for instance, it has posted a net loss for the past three quarters.

Michael Saylor’s heavy use of borrowed money to buy bitcoin backfired during the 2022 crypto-market meltdown. Photo: Alyssa Schukar for WSJ

“It’s symptomatic of a market that has become obsessed with believing in get-rich-quick schemes,” Trainer said. “If you like bitcoin, go buy bitcoin. But don’t invest in a company that’s losing money and also buying bitcoin, because then you’ve sort of doubled your risk.”

Some traders say a key part of the stock’s appeal is its volatility, which can help amplify their gains over a short period.

Garrett Shirey , a barber in Florence, Ala., bought one share of MicroStrategy at $436.53 in his retirement account Tuesday afternoon and sold it at $472.40 Wednesday morning, notching a quick profit.

Restricted from purchasing bitcoin in his Roth IRA account, the 39-year-old crypto enthusiast has had to settle for bitcoin proxies like MicroStrategy stock and bitcoin exchange-traded funds. He holds some shares of the Bitwise Bitcoin ETF .

“I don’t think bitcoin went up 8% in the last 24 hours, but MicroStrategy did,” said Shirey, who has been investing in cryptocurrencies since the pandemic.

Saylor said he came up with the bitcoin strategy in 2020 when Covid-19 forced lockdowns and the Federal Reserve cut interest rates to zero. MicroStrategy was competing with tech giants such as Microsoft and falling behind. The company was under pressure to return cash to shareholders through stock buybacks and dividends.

“It was either a fast death or a slow death, or take a risk, do something out of the box,” he said.

Saylor has often boasted about MicroStrategy’s volatility. “When you embrace volatility, then you’re outperforming the S&P,” he said during last month’s earnings call.

MicroStrategy’s volatility has helped it find ready buyers for its repeated issuances of convertible bonds—debt that can eventually be converted into shares, if the stock price rises to a specified level. Such bonds are often purchased by hedge funds that protect themselves against a collapse in the stock’s price by going short, or placing a bet that the stock will fall. Such funds generally don’t focus on whether the company is a good long-term investment, and instead seek to profit from the volatility of its stock.

MicroStrategy is an attractive trade for convertible-bond arbitragers, said Vadim Iosilevich, a veteran hedge-fund trader in New York.

“We can definitely agree that the volatility will be there,” he said.

Some investors are turning to ETFs that seek to amplify the return of MicroStrategy shares using borrowed money or derivative contracts. One such fund, the Defiance Daily Target 2x Long MSTR ETF aims to double the daily return of the stock and has attracted $1.8 billion in assets since it launched in August. Other funds allow traders to make inverse bets.

Chase Furey , a 25-year-old trader in Newport Beach, Calif., said he started buying bitcoin-related stocks including Coinbase Global, MicroStrategy and BlackRock’s bitcoin ETF in October. Hoping to turbocharge the gains, he moved all of his investments, worth about $112,000, into the Defiance ETF instead and has grown his portfolio to about $400,000.

The Harvard graduate, who studied economics in college, convinced his parents to let him manage $700,000 of their retirement assets. He said he came up with a “less dangerous and smarter” plan for them, investing 27% of their portfolio in the Defiance ETF and the rest in MicroStrategy shares. The money has more than doubled to $1.8 million, he said.

“I think bitcoin could hit $400,000 and I think MicroStrategy could possibly 10x from where it is now by the end of next year, so that’s kind of my game plan with that,” he said.

Even some bitcoin bulls have expressed unease about the risks investors face by betting on MicroStrategy. Mike Novogratz , the billionaire CEO of crypto-trading firm Galaxy Digital , warned in an interview on CNBC Thursday that bitcoin could fall 20% after peaking at $100,000—in part because of leveraged bets on MicroStrategy available through some exchange-traded funds.

“The crypto community is levered to the gills right now, so there will be a correction,” Novogratz said.

There has rarely, if ever, been so much tech talent available in the job market. Yet many tech companies say good help is hard to find.

What gives?

U.S. colleges more than doubled the number of computer-science degrees awarded from 2013 to 2022, according to federal data. Then came round after round of layoffs at Google, Meta, Amazon, and others.

The Bureau of Labor Statistics predicts businesses will employ 6% fewer computer programmers in 2034 than they did last year.

All of this should, in theory, mean there is an ample supply of eager, capable engineers ready for hire.

But in their feverish pursuit of artificial-intelligence supremacy, employers say there aren’t enough people with the most in-demand skills. The few perceived as AI savants can command multimillion-dollar pay packages. On a second tier of AI savvy, workers can rake in close to $1 million a year .

Landing a job is tough for most everyone else.

Frustrated job seekers contend businesses could expand the AI talent pipeline with a little imagination. The argument is companies should accept that relatively few people have AI-specific experience because the technology is so new. They ought to focus on identifying candidates with transferable skills and let those people learn on the job.

Often, though, companies seem to hold out for dream candidates with deep backgrounds in machine learning. Many AI-related roles go unfilled for weeks or months—or get taken off job boards only to be reposted soon after.

Playing a different game

It is difficult to define what makes an AI all-star, but I’m sorry to report that it’s probably not whatever you’re doing.

Maybe you’re learning how to work more efficiently with the aid of ChatGPT and its robotic brethren. Perhaps you’re taking one of those innumerable AI certificate courses.

You might as well be playing pickup basketball at your local YMCA in hopes of being signed by the Los Angeles Lakers. The AI minds that companies truly covet are almost as rare as professional athletes.

“We’re talking about hundreds of people in the world, at the most,” says Cristóbal Valenzuela, chief executive of Runway, which makes AI image and video tools.

He describes it like this: Picture an AI model as a machine with 1,000 dials. The goal is to train the machine to detect patterns and predict outcomes. To do this, you have to feed it reams of data and know which dials to adjust—and by how much.

The universe of people with the right touch is confined to those with uncanny intuition, genius-level smarts or the foresight (possibly luck) to go into AI many years ago, before it was all the rage.

As a venture-backed startup with about 120 employees, Runway doesn’t necessarily vie with Silicon Valley giants for the AI job market’s version of LeBron James. But when I spoke with Valenzuela recently, his company was advertising base salaries of up to $440,000 for an engineering manager and $490,000 for a director of machine learning.

A job listing like one of these might attract 2,000 applicants in a week, Valenzuela says, and there is a decent chance he won’t pick any of them. A lot of people who claim to be AI literate merely produce “workslop”—generic, low-quality material. He spends a lot of time reading academic journals and browsing GitHub portfolios, and recruiting people whose work impresses him.

In addition to an uncommon skill set, companies trying to win in the hypercompetitive AI arena are scouting for commitment bordering on fanaticism .

Daniel Park is seeking three new members for his nine-person startup. He says he will wait a year or longer if that’s what it takes to fill roles with advertised base salaries of up to $500,000.

He’s looking for “prodigies” willing to work seven days a week. Much of the team lives together in a six-bedroom house in San Francisco.

If this sounds like a lonely existence, Park’s team members may be able to solve their own problem. His company, Pickle, aims to develop personalised AI companions akin to Tony Stark’s Jarvis in “Iron Man.”

Overlooked

James Strawn wasn’t an AI early adopter, and the father of two teenagers doesn’t want to sacrifice his personal life for a job. He is beginning to wonder whether there is still a place for people like him in the tech sector.

He was laid off over the summer after 25 years at Adobe , where he was a senior software quality-assurance engineer. Strawn, 55, started as a contractor and recalls his hiring as a leap of faith by the company.

He had been an artist and graphic designer. The managers who interviewed him figured he could use that background to help make Illustrator and other Adobe software more user-friendly.

Looking for work now, he doesn’t see the same willingness by companies to take a chance on someone whose résumé isn’t a perfect match to the job description. He’s had one interview since his layoff.

“I always thought my years of experience at a high-profile company would at least be enough to get me interviews where I could explain how I could contribute,” says Strawn, who is taking foundational AI courses. “It’s just not like that.”

The trouble for people starting out in AI—whether recent grads or job switchers like Strawn—is that companies see them as a dime a dozen.

“There’s this AI arms race, and the fact of the matter is entry-level people aren’t going to help you win it,” says Matt Massucci, CEO of the tech recruiting firm Hirewell. “There’s this concept of the 10x engineer—the one engineer who can do the work of 10. That’s what companies are really leaning into and paying for.”

He adds that companies can automate some low-level engineering tasks, which frees up more money to throw at high-end talent.

It’s a dynamic that creates a few handsomely paid haves and a lot more have-nots.

What’s Flying Higher Than Bitcoin? The Software Company Buying Up Bitcoin

MicroStrategy shares are a more popular bitcoin play than the cryptocurrency itself for many individual investors

A divide has opened in the tech job market between those with artificial-intelligence skills and everyone else.

Playing a different game

Overlooked