Microstrategy and Bitcoin

[tecate]

In a further boost to bitcoin's formative claim as digital gold, $1.2 billion business intelligence company MicroStrategy announced today that it had recently purchased $250 million worth of bitcoin - making it the company's primary treasury reserve asset. CEO Michael Saylor stated:

"We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility, and community ethos of Bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value. Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it. We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fueled the rise of so many category killers in the modern era.”
"[Bitcoin] is a dependable store of value" he added.

CFO Phong Le:
"MicroStrategy believes that buying $250 million in Bitcoin will provide it the opportunity to earn better returns and preserve the value of our capital over time compared to holding cash."

 

[Gus1970]

In a further boost to bitcoin's formative claim as digital gold, $1.2 billion business intelligence company MicroStrategy announced today that it had recently purchased $250 million worth of bitcoin - making it the company's primary treasury reserve asset. CEO Michael Saylor stated:

May i suggest this to be a new thread? It would be useful to discuss how organisations are starting to use bitcoin and crypto in general

 

[tecate]

May i suggest this to be a new thread? It would be useful to discuss how organisations are starting to use bitcoin and crypto in general

It's a landmark move for sure. It's the first publicly listed company to make this allocation. Furthermore, the size of the allocation relative to the overall size of the company is not lacking in conviction. The expectation is that others will now follow.

 

[Gus1970]

Furthermore, the size of the allocation relative to the overall size of the company is not lacking in conviction

I would not be surprised if the share price of the company started following the bitcoin price trajectory as the company is 20% made of bitcoin

 

[tecate]

I would not be surprised if the share price of the company started following the bitcoin price trajectory as the company is 20% made of bitcoin

Upon that news yesterday, its share price jumped around 15%. This could also be an indirect way for people to gain exposure to bitcoin - for those that don't want to handle the asset directly themselves. Rather than buy into at a premium they can buy into Nasdaq-listed MicroStrategy instead.
The company bought 0.1% of bitcoin supply. Going forward, it won't be as easy for the others that follow them to emulate in terms of percentage.

Potential Implications for International Settlement
There's another aspect to all of this also. Lets say that other corporations follow suit. One of the biggest issues that these guys encounter is friction in terms of international settlement - as the current system involves intermediaries and counterparties - and counterparty risk and delay. These delays cost them a tonne of cash. Maybe they wouldn't have to access that system at all and can go direct? Bitcoin is deliberately basic from a programming point of view. However, my understanding is that it can still do smart contracts. If there is a need for certain conditions to be met in executing a transaction between two corporates, then it may be possible to write that in to a smart contract - with the bitcoin transaction executing upon fulfillment of those conditions.
In this way, the archaic international settlement / banking system can be avoided completely. Trades can then be done incredibly quickly and far more cost effectively.

This may well get tackled using other crypto's. Ethereum/Tezos/Cardano offer far better flexibility in terms of programmability for smart contracts. However, if corporates took to holding bitcoin as a hedge/store of value anyway, then it might make for greater motivation in making corporate-to-corporate international settlement via bitcoin directly possible instead.

 

[tecate]

In a further boost to bitcoin's formative claim as digital gold, $1.2 billion business intelligence company MicroStrategy announced today that it had recently purchased $250 million worth of bitcoin - making it the company's primary treasury reserve asset. CEO Michael Saylor stated:

MicroStrategy has completed the purchase of a further $175 million worth of bitcoin, bringing its total bitcoin holding to 38,250 btc (approx. $425 million).

Only 483 individuals / individual entities could possibly obtain this number of btc given bitcoin's fixed cap supply. The MSTR stock price has risen 9% following the news. Podcast with MicroStrategy founder and CEO, Michael Saynor where he explains the company's decision to switch from cash reserves to bitcoin.

 

[AnyAdvice]

MicroStrategy (US public company) now has a dedicated Bitcoin page on their corporate website with excellent articles and interviews. Being a skeptic is healthy as an investor however successful investors are open to pivot their opinion 180 degrees based on new information that challenges their initial skepticism (pragmatic vs dogmatic).



I'm glad there is still so much skepticism towards bitcoin. It's allowed me to build my holding since 2017. Finally, the number one information resource online for macro-economics, investing, and protecting your wealth is real vision. Take a look at their free content on youtube and I'd recommend paying for their subscription. You will not find these insights on CNN, CNBC, Bloomberg.....and certainly not on RTE, BBC.

2021/2022 is going to be very interesting. Protect your wealth and ensure you're "anti-fragile"

 

[tecate]

Are people still buying this rubbish?

By people, are you referring to the $1.2 billion public company (MicroStrategy) discussed in the posts above yours that has bought $425 million worth of bitcoin in 2020?

I put €20 into something called Ethereum I think.

If you believe something is 'rubbish', it doesn't seem in any way credible to me that you put 1 cent into it. Why would you do that?

I had a friend convinced that African countries were in talks with owns of some cypto to take over their ecomonies with huge investment. He put about €20k into it and it's not worth €5k now.

It has often been said that crypto has far more potential in Africa than probably any other part of the world. The crypto subject has been discussed ad nauseum here and I don't remember anyone saying that crypto was going to 'take over' an African economy. Notwithstanding that, it's patently clear that many of them would be much better off had they already adopted it (given flagrant mismanagement of their own sovereign currencies).

Both the number of crypto transactions and the value of those transactions to and from Africa has doubled over the course of the past year. Prior to covid getting in the way, Twitter & Square CEO Jack Dorsey had planned to temporarily relocate to Africa with plans to capitalise on the potential he sees for bitcoin within the continent. Ray Youssef of peer to peer crypto exchange Paxful shares that thesis, on the basis that crypto is being used there for payments rather than investment. Paxful's African trading volume grew by 57% in 2019.

A get rich quick merchant
He'll probably end up thinking he's downloading something from the treasury office in Republic of Congo and end up have any savings he has stolen in a cyber attack.

Sounds like your 'friend' isn't a good point of reference for the consideration of cryptocurrency as a proposition.

 

[DublinHead54]

I don't understand why a corporate treasurer would hold Bitcoin or be allowed to hold Bitcoin as a treasury reserve asset. The same logic applies as to why they don't hold Equities as a primary treasury/liquidity asset because of the volatility and risk associated.

 

[tecate]

I don't understand why a corporate treasurer would hold Bitcoin or be allowed to hold Bitcoin as a treasury reserve asset. The same logic applies as to why they don't hold Equities as a primary treasury/liquidity asset because of the volatility and risk associated.

Well, volatility continues to decrease year on year (admittedly a multi year process still). The argument could be made that in 2020, there's a much greater likelihood of major usd volatility than previously. There's also greater upside potential with bitcoin (asymmetric risk). Click on the podcast link in post #467 above to hear Michael Saylor's (MicroStrategy) rationale for buying into bitcoin.

 

[DazedInPontoon]

This huge MicroStrategy buy-in is wild. I actually think the podcast he did here https://www.youtube.com/watch?v=JibXLTDaj50&ab_channel=StephanLivera is better than the one tecate linked. It's more to the point and he's goes into more detail on some of the aspects.

DublinBay the time horizon on this is way longer than 6 months, he's seeing this as staying in bitcoin indefinitely. 500m is a huge warchest for this company and they don't expect to need the 425m that is in bitcoin anytime soon barring exceptional circumstances. He also says he accepts that it may fall 50% because it may rise 1000%.

One of the really interesting parts of the podcast starts about 26 minutes where he highlights that since it's a publicly traded company he had to get all the officers and directors on baord with the decision, it's fascinating to listen to him speak about this.

It's an hour long but I highly recommend the podcast episode, it's a great listen.

 

[DazedInPontoon]

Personally I wouldn't touch tether or trust that it's fully backed until I saw conclusive proof that it was. But I also think that assigning all of bitcoin's value to tether shenanigans makes no sense. It just looks like working backwards from having your mind made up and trying to convince yourself tether is the secret key that explains it all.

Three points to consider:
- Bitcoin had a value for years before tether existed, and when it had way worse infrastructure, on-ramps and orders of magnitude less users.
- Coinbase now has 35 million customers, and does not deal in tether.
- Saylor and MicroStrategy alone bought over $1b worth of bitcoin in the last 6 months. Nothing to do with tether, and that's just one guy and his company.

 

[tecate]

As per an interview on CNBC earlier, Blackrock (the World's largest asset manager with $7 trillion AUM) has confirmed that it has started to dabble in bitcoin.
Meanwhile, Michael Saylor of MicroStrategy confirmed that the company is seeking to borrow another $900 million with a view to investing it in bitcoin.

 

[DazedInPontoon]

Duke, the challenge has always been to distinguish the visionaries from the crazies, you will likely find a solid mix of both on an old thread like that.

Well, we don't have a USD price prediction from him/her/them, but there was a reference made to 'crazy high prices' as per this quote from 2010 ->

"When someone tries to buy all the world's supply of a scarce asset...."

If that someone is anyone I guess it's Michael Saylor. Microstrategy/him are still buying periodically with free or borrowed cash. He will be seen in the future as either a crazy or a visionary. Even though he was casually dismissing bitcoin as nonsense on twitter when I was 'getting it' he has now acquired almost 0.6% of the eventual 21m over the last couple of years since 'getting it' himself.

Issuing bonds at a low rate of return and buying bitcoin with the proceeds in a year where US inflation has been ~7% is to his credit so far.

(Sidenote: I have never liked the lotto analogy as the future price of bitcoin is not a random event, it is a product of supply and demand. Some random events may affect that on any particular day, but not the average long-term price. I would never play the lotto without expecting a loss - as a venture it has negative expected value.)

 

[DazedInPontoon]

Just realised that a week ago David McWIlliams actually had Michael Saylor on this podcast as a guest to talk Bitcoin. Worth a listen, DMW might be finally starting to get it.

 

[DazedInPontoon]

See when suckers get burned on a speculative mania investment & it goes deeply underwater.........those same people dont come back for a second helping of pain & suffering....

Do you think MicroStrategy and other institutional investors will continue accumulating or not?

 

[letitroll]

MicroStrategy

That lunatic, Michael Saylor, is going down with the ship no matter what happens & the bond holders will end up with his company in the process......even if it was revealed Jimmy Saville was Nakamoto tomorrow Saylor would double down........dont ever forget his public advise when it was $69k.....sell everything you own, sell your business, your family business and borrow money to buy bitcoin. Reckless & beyond reproach...he may have an IQ of 160 but the people who listen to him I assure you dont and listening to demonstrably intelligent people can be intoxicating for the average Joe - a not insignificant amount of people I can assure you listened to his advice to disastrous results

institutional investors will continue accumulating or not?

Institutions are but the servants of their customers........when bitcoin was going up up & away, institutions customers got interested in it and started asking Fidelity / Blackrock 'JPM etc. about it for their own accounts, FOMO is a very strong emotion.........so like any good business that wants to serve their customers (& not lose customers to others) they began to offer it (didn't hurt that commissions/brokerage fees are outrageous in this space as compared to equities i.e. high margin product).

This recent institutional participation in crypto.....which crypto bros take as a sign of legitimacy & that their 'visions' are coming true.....has got it wrong & back to front............the naïve see a Fidelity & say look they're getting 'into it', they're smart and they are now blessing & anointing it, it must be legit..........but the inverse is true.......institutions are only as smart as their customers, not the other way around. Remember Bank of Ireland's leadership knew developer lending/mortgage lending had lost control in the mid/late 2000's.....they held back as Anglo/AIB et al went crazy....their growth suffered and the institutional "me too" urge to participate in a mania gets to be too strong.....and even the prudent BOI began to lose its mind in 05/06/07 with lending, having resisted the urge for so long. Its not easy for say a Fidelity to stay on the sidelines think about Coinbase stealing their pension customers etc. So even the mighty Fidelity cracked.......so I would see institutional participation in crypto as the beginning of the end, as opposed to start of the beginning (but I would then )

But back to post #136..........whats the interest level in an asset class, with no intrinsic value or cash flows, after it drops say 90% in value peak to trough..........approximately 0 I would say.............So do institutions keep accumulating, only if their customers are unlike my Mark Twain cat above....and they like sitting on hot stoves even AFTER they've been burned.

 

[DazedInPontoon]

That lunatic, Michael Saylor, is going down with the ship no matter what happens & the bond holders will end up with his company in the process......even if it was revealed Jimmy Saville was Nakamoto tomorrow Saylor would double down........dont ever forget his public advise when it was $69k.....sell everything you own, sell your business, your family business and borrow money to buy bitcoin. Reckless & beyond reproach...he may have an IQ of 160 but the people who listen to him I assure you dont and listening to demonstrably intelligent people can be intoxicating for the average Joe - a not insignificant amount of people I can assure you listened to his advice to disastrous results



Institutions are but the servants of their customers........when bitcoin was going up up & away, institutions customers got interested in it and started asking Fidelity / Blackrock 'JPM etc. about it for their own accounts, FOMO is a very strong emotion.........so like any good business that wants to serve their customers (& not lose customers to others) they began to offer it (didn't hurt that commissions/brokerage fees are outrageous in this space as compared to equities i.e. high margin product).

This recent institutional participation in crypto.....which crypto bros take as a sign of legitimacy & that their 'visions' are coming true.....has got it wrong & back to front............the naïve see a Fidelity & say look they're getting 'into it', they're smart and they are now blessing & anointing it, it must be legit..........but the inverse is true.......institutions are only as smart as their customers, not the other way around. Remember Bank of Ireland's leadership knew developer lending/mortgage lending had lost control in the mid/late 2000's.....they held back as Anglo/AIB et al went crazy....their growth suffered and the institutional "me too" urge to participate in a mania gets to be too strong.....and even the prudent BOI began to lose its mind in 05/06/07 with lending, having resisted the urge for so long. Its not easy for say a Fidelity to stay on the sidelines think about Coinbase stealing their pension customers etc. So even the mighty Fidelity cracked.......so I would see institutional participation in crypto as the beginning of the end, as opposed to start of the beginning (but I would then )

But back to post #136..........whats the interest level in an asset class, with no intrinsic value or cash flows, after it drops say 90% in value peak to trough..........approximately 0 I would say.............So do institutions keep accumulating, only if their customers are unlike my Mark Twain cat above....and they like sitting on hot stoves even AFTER they've been burned.

I disagree with pretty much everything here, but I appreciate having this post quoted for posterity.

 

[Duke of Marmalade]

That lunatic, Michael Saylor, is going down with the ship no matter what happens & the bond holders will end up with his company in the process......even if it was revealed Jimmy Saville was Nakamoto tomorrow Saylor would double down........dont ever forget his public advise when it was $69k.....sell everything you own, sell your business, your family business and borrow money to buy bitcoin. Reckless & beyond reproach...he may have an IQ of 160 but the people who listen to him I assure you dont and listening to demonstrably intelligent people can be intoxicating for the average Joe - a not insignificant amount of people I can assure you listened to his advice to disastrous results



Institutions are but the servants of their customers........when bitcoin was going up up & away, institutions customers got interested in it and started asking Fidelity / Blackrock 'JPM etc. about it for their own accounts, FOMO is a very strong emotion.........so like any good business that wants to serve their customers (& not lose customers to others) they began to offer it (didn't hurt that commissions/brokerage fees are outrageous in this space as compared to equities i.e. high margin product).

This recent institutional participation in crypto.....which crypto bros take as a sign of legitimacy & that their 'visions' are coming true.....has got it wrong & back to front............the naïve see a Fidelity & say look they're getting 'into it', they're smart and they are now blessing & anointing it, it must be legit..........but the inverse is true.......institutions are only as smart as their customers, not the other way around. Remember Bank of Ireland's leadership knew developer lending/mortgage lending had lost control in the mid/late 2000's.....they held back as Anglo/AIB et al went crazy....their growth suffered and the institutional "me too" urge to participate in a mania gets to be too strong.....and even the prudent BOI began to lose its mind in 05/06/07 with lending, having resisted the urge for so long. Its not easy for say a Fidelity to stay on the sidelines think about Coinbase stealing their pension customers etc. So even the mighty Fidelity cracked.......so I would see institutional participation in crypto as the beginning of the end, as opposed to start of the beginning (but I would then )

But back to post #136..........whats the interest level in an asset class, with no intrinsic value or cash flows, after it drops say 90% in value peak to trough..........approximately 0 I would say.............So do institutions keep accumulating, only if their customers are unlike my Mark Twain cat above....and they like sitting on hot stoves even AFTER they've been burned.

I agree with pretty much everything here and we should all appreciate having this post for the here and now, to paraphrase @DazedInPontoon.

 

[Brendan Burgess]

I read a report in the FT about Microfinance and was going to start a thread entitled "Is there anything more stupid than Bitcoin?" when I found that MicroStrategy had been discussed in the middle of all the long threads, so I have moved them here into one thread.

https://cointelegraph.com/news/micro-strategy-will-eventually-unravel

MicroStrategy now owns $40 billion worth of BTC - it is its only asset. (They have a small lossmaking software company)
The Market Cap of Microstrategy is $90 billion

So if you buy $100 worth of MicroStrategy's shares you get $45 worth of Bitcoin.

If you think that Bitcoin is going to rise in value, why would you not just buy Bitcoin directly?

People actually bought €3b in bonds in MicroStrategy
They pay no interest
You can convert these bonds into MicroStrategy stock if the stock rises by 70%

If you think that Bitcoin is going to rise in value, why would you not just buy Bitcoin directly?