MicroStrategy (MSTR) has crafted a high-convexity investment vehicle that leverages recursive Bitcoin buying, amplifying gains as Bitcoin's price rises, making it an attractive yet risky option for investors with high conviction and risk tolerance.

This strategy involves issuing equity or debt during bullish markets to acquire more Bitcoin, creating a feedback loop that increases holdings and boosts stock performance, with a leverage ratio around 9% as of May 2025.

Investors can also access MSTR's Bitcoin exposure through preferred shares like STRK and STRF, which offer high dividend yields and conversion rights tied to MSTR's equity appreciation, along with convertible bonds that provide embedded call options to enhance returns during upward trends.

Market speculation, regulatory advantages, and expectations of continued Bitcoin accumulation have driven MSTR's stock to trade at a 112% premium to its net asset value, supported by a capital structure that includes preferred shares and convertible debt.

Since August 2024, MSTR's aggressive '42/42' capital-raising plan has raised $28.7 billion, enabling it to significantly expand its Bitcoin holdings from 226,000 to over 555,000 BTC.

The sustainability of MSTR's model hinges on ongoing Bitcoin price appreciation, investor confidence in its ability to issue debt and preferred stock, and the efficient accumulation of Bitcoin, which becomes more costly as holdings grow.

Risks include potential liquidity crises during prolonged bear markets, increased complexity and dilution from convertible securities, and dependence on Bitcoin's continued upward trajectory.

Unlike leveraged ETFs, which suffer from leverage decay due to daily rebalancing, MSTR avoids this issue by issuing new capital during bullish periods, resulting in a convex payoff that accelerates gains with Bitcoin's appreciation.

MSTR demonstrates superior risk-adjusted returns, with a Sharpe ratio of 1.82, outperforming the S&P 500, thanks to its asymmetric payoff structure that captures upside in Bitcoin while mitigating downside risks through premiums and structured securities.