10th June 2025 > > BlackRock & MSTR.

tl;dr

The CCC is back, you lucky people. I am going to try very hard once again to banish a bugbear of mine, constantly parroted by those of little knowledge or understanding. There is a risk in Strategy’s strategy, but it is not the one you think it is.

Market Snap

Market Wrap

Would it help if I go off-line more often?

This commentary business is fraught with risk. For example, one research firm made this statement just eight hours ago:

“Markets are holding their breath for Wednesday's inflation data as BTC stalls at major resistance at $107k and altcoins struggle to find momentum.”

Curious Cryptos’ Commentary – A bugbear of mine

You cannot count the number of times you hear the ill-informed, the uneducated, the uninquisitive, repeat statements that go much like this:

“BlackRock owns huge stakes in all major companies, and it controls them”.

“BlackRock owns 663,000 BTC, approximately 3% of the total”.

Let me please be able to say this for one last time ever:

BlackRock does not own anything at all.

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BlackRock markets ETFs to retail and institutional investors. When investors want to buy or sell a specific ETF, they do so with entities known as APs (Authorised Participants), who are typically the large investment banks. Those desks will continually be buying and selling the ETFs, whilst also buying and selling the underlying, taking as little market-risk as possible in this Frank-Dodd era, whilst earning the bid-offer.

At any point in time those desks can interact with BlackRock, by delivering the underlying, and receiving the ETF in exchange, or vice versa. When that happens, BlackRock issues the ETF to the AP, or vice versa, but note that BlackRock is the passive actor in this transformation of risk from underlying into an ETF.

BlackRock has no market exposure to any stocks or any BTC. It doesn’t even act as the custodian for the stocks or BTC represented by the ETFs it issues – that is all contracted out to specialists in those fields, Coinbase for example. BlackRock has no commercial interest in any financial market at all – it is simply a very large, very efficient, marketing organisation for ETFs.

I have had this conversation with so many people over the years. When I correct them, they nod silently in what I assume is agreement. I guess that at least 50% of the time, they then immediately go back to claiming “BlackRock owns X”.

It drives me nuts, for they are merely advertising their ignorance to the world. If you ever say it in my presence, please never darken the doors of CC Towers again.

Curious Cryptos’ Commentary – Strategy (MSTR)

Long a favourite of mine, MSTR continues to accumulate BTC at an extraordinary rate. With an actual holding of 214,400 at the time of press (compared to say, choosing a name at random, BlackRock which holds precisely zero BTC for those who do not know otherwise) this is a touch over 1% of the total potential supply, and destined to only get bigger, bringing its own philosophical issues to the table.

A common theme, particularly amongst naysayers, is that this provides a material risk to BTC, in the event that MSTR becomes a forced seller of BTC.

Now, they would have a point, if MSTR was using leverage, because leverage has to be unwound, either willingly or, more usually, unwillingly. Given that MSTR’s business away from BTC is minimal, then at some point, by definition, MSTR would have to sell BTC.

But, get this.

MSTR uses no leverage.

It cannot be a forced seller.

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“What?” I hear the naysayers say. “Of course, MSTR uses leverage, that’s how it buys BTC.”

And in a very strict interpretation of that statement, it is true. But it is using its shareholders’ leverage, not its own. So, the conclusion that it must willingly or forcibly sell BTC at some point is, well, how shall I put this nicely, bollocks. Which is ironic really, because that’s the word naysayers are frequently forced to use when confronted with graphs of BTC price action, especially on mornings like this.

MSTR raises funds in a number of ways, which we will briefly discuss.

The most obvious one is to issue equity in exchange for cash.

Probably the tool it uses most is to issue convertible bonds with zero percent interest, convertible into equity at a later date at a pre-agreed strike price, so this looks much like the first method.

MSTR is also an avid user of preferred shares. Preferred shares have no voting rights, but in exchange they come with a predetermined “dividend” in the form of a percentage of the original notional invested, often 10%. Which on paper sounds juicy, but this payment is at the discretion of MSTR, and – remarkably – is non-cumulative. All you know as a preferred shareholder is that in any one specific year, you must be paid before ordinary shareholders, though I doubt there are many buyers of MSTR shares who are doing so on the basis of an expected dividend stream in the near future. Note also that any share price appreciation rapidly eats into that 10% headline rate as it is based on investment notional, not the current share price.

Which does raise the question as to why anyone would buy the preferred shares, to which the answer is – I haven’t got a clue.

The point is, that MSTR need never be a forced seller, so don’t let anyone tell you otherwise.

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The moral of this tale is that if you do just a little bit of homework, lay down just a little bit of groundwork, you have an edge over 90% or more of the other participants in all financial markets. Do the hard graft, and you have an edge over 99% or more. That’s how you make corn.