MicroStrategy, a company known for its significant Bitcoin holdings, has become a hot target among hedge funds seeking to capitalize on cryptocurrency volatility. To finance its growing stash, the company recently sold $21 billion worth of convertible bonds. The move is part of a multilayered strategy that involves hedging against price fluctuations in the underlying asset.
Notably, retail investors who have seen MicroStrategy’s stock surge over 500% this year are also buying up these bonds to support their own Bitcoin investments. This demand has benefited companies like MicroStrategy, which can now tap into the enthusiasm of retail investors while also catering to the needs of hedge funds that seek to profit from market-neutral arbitrage bets involving cryptocurrency volatility.
Hedge fund managers, such as Eli Pars of Calamos Advisors, are among those buying these convertible bonds. They use this investment strategy to generate returns by exploiting the increased price swings in cryptocurrencies like Bitcoin. By diversifying their portfolios and taking advantage of market volatility, hedge funds aim to maximize their gains while minimizing losses.
Source: https://www.bloomberg.com/news/articles/2024-12-05/convertible-bond-arbs-are-making-microstrategy-wall-street-s-hottest-trade