BRAUNSCHWEIG — There are a select group of people who sense a financial crash coming long before others have the slightest clue. Julian Habekost may be among them.
On a Friday last month, just before 9 a.m., the 34-year-old is sitting in his apartment in the central German city of Braunschweig and checks the Bitcoin price on his laptop. The cryptocurrency has dropped by nine percent in the past 24 hours. “Oh yes,” Habekost says. “That’s wonderful.”
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Convinced that Bitcoin only generates temporary bursts of hype that collapse again and again, the German computer programmer believes that sooner or later everyone will understand that bitcoin is essentially a lottery that will sink to almost nothing.
That moment is still far off. Even though the price has fallen by more than 20% in just four weeks, it is still around 75,000 euros, well above the average price of the past five years. Each major plunge has been followed by a recovery. And there are reasons to believe Bitcoin is not going anywhere: countless individuals have invested in it, along with institutional investors and even governments.
Uneven fight
But Habekost is so sure of his view that he is taking on a powerful opponent: the man whose company holds around three percent of all Bitcoins, probably more than anyone else. This man is Michael Saylor, 60, living in the United States. Saylor believes in Bitcoin despite the recent losses. On the X platform he regularly posts pictures of himself as a warrior in a snowstorm or as a medieval knight. “Hold on,” he writes, and “Never give up.” Thousands of users reward him with likes.
Habekost versus Saylor: an uneven fight. The German has a few hundred followers on social media, while the American has 4.7 million. Habekost is a small investor. Saylor is a billionaire. Habekost knows a lot about Saylor, who likely knows nothing about him.
Having earned a doctorate in computer science at the University of Edinburgh, the German works as an IT developer. Saylor is the CEO and founder of Strategy Inc., a software company based in Virginia. In their spare time, the German and the American engage in a contest fought with highly complex financial instruments.
Michael Saylor’s weapons are convertible bonds and preferred shares. This becomes clearer when tracing how he became such a massive Bitcoin holder. Until 2020, Saylor made his money with software. Then he reinvented himself. Distressed by the COVID-19 lockdowns and convinced that government rescue packages would undermine traditional currencies like the dollar, he saw Bitcoin as a better alternative. Saylor’s company bought Bitcoin for the first time: 21,454 units for around $250 million. It marked the beginning of a long buying spree: he has since made 87 more purchases.
His company owns roughly 650,000 Bitcoins, worth nearly 57 billion dollars.
Today, software is a side business for Saylor. His company owns roughly 650,000 Bitcoins, worth nearly $57 billion. Crypto conferences treat him like a star, which makes sense. Each time Strategy buys Bitcoin, it pushes the price up and benefits every Bitcoin holder.
Saylor raised a large share of the necessary capital on the financial markets. Strategy issued special securities: preferred shares with fixed dividends between 8 and 10.5%. It also issued separate convertible bonds. Buyers receive a fixed interest rate over the term and can choose at maturity whether to convert the bonds into shares. The bonds are essentially bets on the future that have so far yielded little.
Most of Strategy’s bond conversion prices lie far above the current share price, and conversion would produce a loss. Strategy has raised several billion dollars through a bond maturing in 2029. For investors to find conversion worthwhile, the share price would have to more than triple.
Even that seems far-fetched to Julian Habekost. But he has other concerns about Saylor’s business model. He noticed that the securities prospectuses state that Strategy intends to use proceeds from the sale of preferred shares and convertible bonds not only to buy Bitcoin, which is Saylor’s central objective, but also to pay dividends on other preferred shares. In other words, Saylor plans to use money raised from new investors to compensate existing ones. The promised dividends add up to several hundred million dollars per year, more than Strategy earns from its software business.
This becomes much more troubling if Bitcoin’s price falls. Strategy’s balance sheet would then show a growing mountain of debt and liabilities while its assets shrink. Investors could lose confidence in Strategy’s financial instruments, which might force the company to sell Bitcoin to pay dividends, interest, and maturing bonds.
Junk status
Habekost is not alone in seeing this risk. The rating agency S&P, for instance, rates Strategy at B-minus, which counts as junk status. While Strategy has so far managed its bond maturities “prudently,” and the dividends due are still small relative to the company’s Bitcoin holdings, S&P recently noted that Strategy will likely have to rely on issuing more shares and bonds to finance interest payments, dividends, and maturing debt. There is a risk that Strategy will be forced to sell Bitcoin precisely when the price is crashing. This could push the company into restructuring its convertible bonds and preferred shares, a situation S&P says it would consider a default.
Other financial players share similar concerns, including MSCI, the company that designs stock indices such as the MSCI World, which many investment funds follow. Anyone who owns an ETF tracking the MSCI World is indirectly invested in Strategy. This benefits Saylor. But MSCI is now threatening to remove from its indices all companies whose assets consist of more than 50% cryptocurrencies. Such a decision would likely reduce interest in Strategy stock. Already, the combined market value of Strategy shares is lower than the value of the Bitcoin it owns, a clear vote of no confidence.
Habekost believes Strategy’s business model resembles a Ponzi scheme.
For the young programmer in Braunschweig, the conclusion is obvious. He believes Strategy’s business model resembles a Ponzi scheme. These schemes, also known as pyramid schemes, are named after the American Charles Ponzi, who sold securities in the early 20th century and promised extraordinary returns. At first, investors believed him and poured in so much money that Ponzi was able to pay out handsome profits to early participants. But as more investors grew suspicious and demanded their money back, the whole structure collapsed.
Habekost is convinced that Strategy is headed for a similar fate. If Saylor is forced to sell Bitcoin to cover dividends and interest, the price of the cryptocurrency will drop even further. Investors would then refuse to supply him with new funds. And if Saylor can no longer sell his bonds, Strategy could be crippled.
Hedge professionals
In his contest with Saylor, the German computer scientist has acquired his own set of weapons: different complex financial products known as put options. These instruments are also bets on the future, but of a different kind. Put options allow their holders to sell a specific stock at a future date for a price agreed upon today. If the agreed price is below the market price, the option is worthless. If it is above the market price, the option becomes more valuable. Professionals use them to hedge against falling prices.
Habekost, however, is using them to bet on Saylor’s collapse. For instance, he bought warrants that allow him to sell Strategy shares for $200 each in December 2026. Right now, the share price is $170. If it drops further, Habekost’s options will become increasingly valuable. He has invested 12,800 euros in these options, and their value has already doubled. For the moment, the small investor has the wind at his back in his race against the Bitcoin billionaire.
Naturally, one wonders what Michael Saylor would have to say about all this: the risks identified by S&P, the accusation that his business model resembles a Ponzi scheme. Die Zeit repeatedly requested an interview with Saylor, without success. He has also not responded to written questions. But perhaps such worldly concerns do not interest the billionaire, who prefers entertaining his followers with bold declarations and AI-generated images. One of his most recent posts on X shows him in a video set during the moon landing.
