Peter Schiff warns: When equities no longer offset, MicroStrategy will have to bear greater Bitcoin losses

Recently, renowned economist Peter Schiff made a notable prediction about the future of MicroStrategy. He stated that within the next five years, the company will face Bitcoin losses far exceeding the current 3%. Currently, BTC is trading around $68,070 with a 24-hour increase of +0.39%.

What is equity and why is it important for MicroStrategy?

To understand Schiff’s warning, it’s first necessary to grasp the concept of equity (owner’s equity/shares). Equity represents the portion of MicroStrategy’s capital that remains after deducting liabilities. The company has used its own equity—its own capital—as collateral to borrow funds and purchase Bitcoin. This is the key point Schiff has consistently criticized.

MicroStrategy isn’t just buying Bitcoin with cash. Instead, they employ a complex financial mechanism: using the company’s stock as collateral, borrowing money, and then using the borrowed funds to buy more Bitcoin. This model is called “all-in Bitcoin with leverage”—using financial leverage to amplify the Bitcoin position.

Why does Peter Schiff criticize MicroStrategy’s financial strategy?

Peter Schiff is well known for his skeptical stance on Bitcoin, but his comments on MicroStrategy are more than just personal opinions. He sees this financial model as containing systemic risks. When using equity as collateral, any significant price fluctuation will impact the value of that collateral.

Schiff doesn’t say BTC will go to zero, but he believes Bitcoin cannot operate sustainably within a traditional credit system. The issue isn’t Bitcoin’s long-term potential, but how MicroStrategy uses debt to acquire an asset with highly volatile value. The entire structure depends on one condition: BTC must not experience a prolonged deep decline.

Five years from now: When Bitcoin stagnates, will equity be enough to rescue?

Schiff’s five-year forecast isn’t based on the assumption that BTC will crash. Instead, he bets on the market experiencing a sideways or prolonged correction cycle. If that happens, no matter how “good” Bitcoin is technologically, MicroStrategy’s financial model will face enormous pressure.

The reason is simple: when buying Bitcoin with debt and equity, the company must pay interest on the loan. If BTC doesn’t increase in value or even declines, equity will gradually erode. The interest payments will accumulate, and the position will become increasingly risky. The betting approach becomes more a matter of survival than Bitcoin’s inherent value—and this is Schiff’s sharp insight.

It must be acknowledged that Schiff has been wrong many times in the past when Bitcoin surged. But financial markets always contain black swan events—unexpected surprises that cannot be predicted. Bitcoin may be correct in the long-term strategy, but how you bet on it truly determines your survival.

The lesson here isn’t just for MicroStrategy. Anyone using high leverage to buy any asset is playing a risky game, where their equity is always in the most vulnerable position when markets fluctuate.