MicroStrategy (MSTR) is at the center of a heated debate after Peter Schiff branded the company’s business model a scam. Schiff warned that MSTR’s reliance on high-yield preferred stocks and income-oriented funds is unsustainable and predicts it could eventually go bankrupt.
However, analysts and traders argue that MSTR’s strategy could still offer unique leveraged Bitcoin exposure, potentially accelerating the split in market sentiment.
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Schiff slams MSTR as a ‘fraud’, but analysts say MSTR could outperform Bitcoin
Schiff said MicroStrategy’s preferred stock financing model could cause a “death spiral,” and Goldbug called the company’s entire business model a scam.
Schiff’s sentiments stem from concerns about MicroStrategy’s business model, which relies on income-focused funds buying the company’s “high-yield” preferred stock. Schiff said the advertised yield may never actually be paid.
“Once the fund managers realize this, they will sell off the preferred shares, they can no longer issue MSTRs, and the death spiral begins,” he said.
MicroStrategy ceased issuing new convertible notes in February 2025 and instead transitioned to a preferred stock offering (STR Series) that began in September 2025.
These preferred stocks carry significantly higher interest rates, suggesting investors are looking for stronger incentives amid tight market conditions.
Schiff’s extensive discussion highlights the structural risks inherent in the company’s approach. His argument is that even if Bitcoin rises, MSTR’s debt-driven model could fail and put the company at risk of bankruptcy.
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Cryptocurrency trader KillaXBT highlighted a potential black swan scenario. According to the analyst, a 50-60% drop in BTC could lead to stricter lending rules, collateral requirements, and forced sales of Bitcoin, especially if liquidity dries up.
He likened MicroStrategy to a bunch of cards built on Bitcoin, noting that leverage amplifies both profits and losses, and that a major market correction could strain the company’s ability to raise capital.
Analysts defend MSTR’s leverage model
Despite the warnings, some investors see MSTR as a more leveraged Bitcoin trade than a standard exchange-traded fund. Adam Livingstone argued that MSTR combines 1:1 Bitcoin exposure with annual increases in BTC per share, which is a form of convexity that increases returns without liquidation risk.
He laid out a 10-year hypothesis that $100,000 in IBIT would grow to $1.38 million, while the same investment in MSTR could reach $3.56 million. This is a 158% improvement in performance.
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Rohan Hirani, another popular user on Twitter, added that the MSTR premium exists because investors are buying management teams with global capital access that can efficiently earn additional BTC. This is in contrast to simply buying Bitcoin.
He emphasized that MSTR’s 2025 preferred stock offering balances execution risk with long-term upside and is key to more sustainable financing.
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Funding momentum and market trends
MicroStrategy has been gradually transitioning from convertible bonds to high-yield preferred stocks (STR series) since September 2025, reflecting cautious investor sentiment amid tight markets.
As of this writing, the company holds 641,692 BTC at an average cost of $74,085 per coin, retaining around 26% unrealized gains even if BTC reverts sharply.
Analysts note that MSTR effectively functions as a leveraged Bitcoin ETF, with its stock price highly dependent on both Bitcoin price and successful fundraising.
Despite temporary setbacks, such as last week’s decline in MSTR Bitcoin premiums, investors are highlighting the company’s strategic position in the digital credit market as a long-term value driver. MSTR’s model is risky but provides a double exposure.
Increase in Bitcoin price and increase in BTC per share.
MicroStrategy’s hybrid strategy must weather volatility, maintain fundraising momentum, and outperform its Bitcoin exposure to allay skeptic concerns. Nevertheless, the company is a notable example of a corporate Bitcoin strategy that balances exploited opportunity with systemic risk.
