Microstrategy (NASDAQ: MSTR) continues its incredible run as the company sells more debt and equity to buy more Bitcoin (CRYPTO: BTC). Shares were up as much as 16% in trading on Wednesday and are up 12.5% near the end of trading on Wall Street.

On Monday, the company announced it had acquired 51,780 Bitcoin for approximately $4.6 billion at an average price of $88,627.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

On Wednesday, the company announced the pricing of $2.6 billion of 0% convertible senior notes due in 2029. The notes could convert into cash or stock at a conversion price of $672.40, depending on "the occurrence of certain events."

Microstrategy is using its lofty stock price to sell shares and acquire Bitcoin at what the company perceives to be a discount. As Microstrategy becomes a pure Bitcoin play, if the enterprise value of the company exceeds the value of the Bitcoin on the balance sheet, it will issue shares to buy Bitcoin. That's the phase they're in right now, and it's a feedback loop, creating demand for Bitcoin, which increases the value of the balance sheet.

This is an arbitrage strategy that will work until it doesn't. Microstrategy has shown there's an acquisition price for Bitcoin but note a sale price if the enterprise value falls below the Bitcoin value on the balance sheet.

While the current strategy is working, it's not guaranteed to work forever. Bitcoin is extremely volatile, and it's possible the price falls rapidly if Microstrategy's stock drops. That can create a situation where the stock is underwater on the value of Bitcoin it holds, and the biggest buyer of Bitcoin (Microstrategy) will stop buying.

And with leverage now being used in big numbers, the downside risk is just as big as the upside potential for Microstrategy long term.

Before you buy stock in MicroStrategy, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and MicroStrategy wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $900,893!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.