TORONTO, June 10 (Reuters Breakingviews) - Michael Saylor has become the tycoon of chaos. The CEO of Strategy MSTR.O has built a perpetual bitcoin-buying machine fueled by hedge funds’ hunger for wild stock swings. His primary tool - the $280 billion market for bonds that can convert into shares - is big enough to support plenty of copycats. Right now, most of them aren’t living up to the original. A couple select firms are just erratic enough to have a shot, though.

Strategy proved that investors could be coaxed into supplying vast sums of money to stockpile bitcoin, even awarding the company a premium. Others have taken note. SoftBank-backed Twenty One Capital and Trump Media and Technology both raised funds last month to buy up the digital currency. Strive Asset Management's gambit extends to buying up companies trading below the value of their cash and using it to acquire more crypto. Some 116 public firms now hold the original digital currency, according to bitcointreasuries.net.

Strategy’s hoard is the largest, worth over $60 billion. Saylor has two edges on his imitators. First, liquidity: some $5 billion of shares changed hands on the average day over the past month, ensuring trades can be completed efficiently. Second, volatility: hedge funds need big price moves to make their trades profitable. Strategy’s shares swing twice as wildly as its average copycat’s when measured against bitcoin, and even more so than the cryptocurrency itself, according to a paper from researchers at University College London and others.

Hedge funds hand money to a bitcoin hoarder and receive convertible bonds, which can swap from debt to stock. The price they pay for these notes offers a glimpse of how much they think the related shares will swing around. Globally, convertibles have priced at an average implied volatility of 31%, Lazard calculated in 2018. In February, Strategy sold a $2 billion slug at an implied volatility in the high 40s, financial publication IFR reported.

Imitators’ operations are still nascent, but two of them, specifically, have potentially more to offer than Saylor’s firm. Like convertibles, the price of plain options on a stock also indicates a view on volatility. Right now, Strategy’s imply a level of 50%, according to LSEG. GameStop, the original meme stock recently turned bitcoin buyer, boasts an implied volatility of about 82%. The social-media company majority-owned by the U.S. president, Trump Media & Technology, weighs in at 67%.

Of course, the entire approach collapses if gyrations in bitcoin’s value become less violent, in turn subduing movement in the shares of Strategy and its followers. For now, though, the race is on.

CONTEXT NEWS

Strategy said on June 6 that it had priced an offering of 11.7 million perpetual preferred shares at $85.00 per share.

The company estimated it would raise about $979.7 million from the offering after expenses for buying bitcoin and other purposes.