Michael Saylor’s Dilemma: Why Strategy's Success Became Its Risk

Tim Enneking is the Founder and Managing Partner of Psalion, an institutional-grade firm generating yield on digital assets via segregated managed accounts. Its recently-launched Psalion Lend product allows family offices, corporate treasuries and qualified investors access to liquidity without selling their assets. He has invested in crypto for thirteen years and previously ran what Preqin ranked the best-performing hedge fund in the world in 2021. Visit Psalion.com for more information or to reach out to the team.

Let me say something that may not be popular in this corner of the market. This is the end of the beginning for Bitcoin. The beginning is over. That is neither good nor bad. It had to happen, and it is happening. Two things tell me so, and the second one leads straight to the most important company in this sector and could spell problems for the industry until it gets sorted out.

The four-year cycle is dead

The four-year cycle was never magic. It was mechanics. Every four years the “halving” cut what miners earn for a block in half, and when ninety percent of all Bitcoin was still unmined, that supply shock moved the entire market. That world is gone. Fewer than a million coins are left to mine, under five percent of the total. Miners no longer drive the train, and very little of consequence happens on the Bitcoin blockchain itself anyway. All credit to the ordinals and runes crowd for trying, but the base layer was never built to do tens of thousands of transactions a second, and it never will. So the engine that powered the cycle is retired and anyone still trading the calendar is trading a vestige of the past.

Bitcoin grew up into a risk-on asset, and I hate it

Here is the part I dislike: Bitcoin is now treated as a risk-on asset by nearly everyone who buys it. It should be a haven, uncorrelated, living its own life regardless of the day-to-day noise in the world. Instead, it moves with oil and gold and equities. I keep a Bitcoin price monitor on my screen all day, and for the last several months, my tell for news out of Iran has been a sudden move in Bitcoin. I check, and sure enough, something happened in Iran. There is no fundamental reason for Bitcoin to be correlated to oil. There just isn't. But enough large institutions have to categorize it somewhere, and it certainly is not risk-off, so into the risk-on bucket it goes, and the belief becomes self-fulfilling.

I have a rule that I somewhat tongue-in-cheek call Enneking's Law (all credit for Mr. Moore). The profile of the average Bitcoin investor changes every eighteen months. We went from bleeding-edge software engineers and libertarians, eventually to small institutions, and now to large ones. What the big holders believe now moves the market. And that hands us a new and less comfortable dynamic: a shrinking pool of available coins, and a growing concentration of them in a few very large hands.

Which brings me to Strategy

Strategy owns roughly 845,000 Bitcoin, over four percent of every coin that will ever exist. I don’t think it is healthy for one identifiable entity to hold that much, and I think the way it got there makes it worse.

Strategy is buying Bitcoin generally at the wrong times, because it buys when it can raise money rather than solely when the price is right. That approach worked fine to build a massive balance sheet. The flywheel is wonderful on the way up. It artificially buoys the price, and it hands you a multiple of Bitcoin's return. But the same leverage that lifts the price on the way up crushes it harder on the way down. It is a long squeeze. When the market turns, the leveraged holder has to sell into weakness or raise more equity at inopportune times, and the whole sector pays for it.

Saylor has done smart things. Selling only a small number of BTC recently was smart. He called it “inoculating the market”, and he’s right: the first time a giant holder sells or signals it will sell, the market trembles – but it generally quickly recovers its composure, and the next sale hurts less. But query with why that move was necessary at all. It’s only clever because Strategy has too many Bitcoin to move without moving the market. That smart play is forced by a problem of its own making – and Strategy may have to sell many more BTC. That is what I mean when I say Saylor has become his own worst enemy.

The irony I keep coming back to is that I believe Bitcoin's price would be higher without Strategy's buying, not lower. Spread those same purchases across many hands and you get a steadier, deeper, healthier market, one that doesn’t flinch based on one entity's actions. Concentration this large, built on ever-growing leverage, is not a healthy dynamic for the sector.

This is a diagnosis, not an obituary

None of this means Strategy is finished. It means Strategy has to change, and its current shape is not a viable long-term business. You can’t build a company on the sole premise that one asset goes up forever and all you do is keep cashing in on it. That is not much of a company. There are ways out, and they all rhyme with the same word: diversify. Add a real operating business that generates cash (again!). Generate yield on the Bitcoin, an idea Saylor spent years resisting and, to his credit, has dropped outright opposition to. Use the balance sheet to buy into the ecosystem and spread the risk (as many miners have already done). Any of those options is healthier than just sitting on the asset and knowing that the longer you sit, the more your eventual selling will hurt the very market you helped inflate.

You can already see the competitive pressure doing its work. Strategy moved to a semi-monthly dividend on STRC in part because Strive pays a daily one. The preferred instruments are real, and they have generated a lot of the buy-side BTC bid lately, but a fourteen percent effective yield exists for a reason, and a preferred that has to be defended by selling more shares or more Bitcoin is a treadmill, not a foundation.

The healthier path, for everyone

Here is where I'll be especially constructive, because the answer to concentration and forced selling is not to hoard and pray. It’s to make Bitcoin productive without surrendering it.

Most holders face the same trap. They’re Bitcoin-rich and unwilling to sell, partly out of conviction and partly because the tax bill on a low basis is brutal. That’s the George Washington problem. He was once called the richest man in North America because of his land, and he was chronically short of cash, because land had no mechanism for monetization short of selling. Bitcoin doesn’t have that excuse. You can borrow against it and put the proceeds to work, you can earn on it while you hold, etc.

That’s the entire thesis behind what we do at Psalion. On the yield side, we provide Bitcoin liquidity to automated market makers and earn in Bitcoin through transaction fees, a market-neutral strategy we have run for over five years, across billions of dollars in allocations, without a single negative day. On the lending side, Psalion lets you borrow against your Bitcoin at extremely competitive rates and, crucially, you keep your own keys. The Bitcoin stays in your wallet, frozen as collateral, never transferred to us. That’s the difference between putting your position to work and giving it away.

The point is not that Strategy is doomed. The point is that the era of buying an asset and doing nothing but holding it, whether you are the largest treasury in the world or an individual with a thousand coins, is ending. The beginning is over. What comes next is bigger, and as always, I would rather build for tomorrow than mourn the supposed “good old days”. Those days almost always sucked compared to the present.

This article reflects the views and analysis of Tim Enneking and is informational and educational only. It is not investment, legal, tax, or accounting advice, and it is not an offer or solicitation to buy or sell any asset. Digital assets carry significant risk.

Visit Psalion.com or contact Tim's team to learn how Psalion generates yield on institutional Bitcoin holdings and structures Bitcoin-backed loans with self-custody preserved.