In a recent appearance on CNBC’s “Squawk Box,” MicroStrategy’s executive chairman, Michael Saylor, discussed the company’s strategic move to purchase an additional 15,400 bitcoins at approximately $96,000 per coin, bringing their total Bitcoin (BTC-USD) holdings to over 400,000. Saylor laid out MicroStrategy’s unique approach to capital markets and cryptocurrency integration, emphasizing how their strategy has evolved since they began buying Bitcoin in August 2020.
MicroStrategy (MSTR) has positioned itself as a “Bitcoin Treasury company,” according to Saylor, where the firm not only holds Bitcoin but also leverages it to bridge traditional capital markets with the crypto economy. The company finances its Bitcoin acquisitions by issuing stock or convertible debt, essentially securitizing Bitcoin to provide high-performance equity or bonds to investors looking for exposure to Bitcoin’s growth without directly trading in the volatile cryptocurrency market.
Saylor addressed the broader understanding of Bitcoin among the public, acknowledging that many still view Bitcoin skeptically, likening it to air or dismissing its value due to its intangible nature. He countered these views by highlighting Bitcoin’s unique economic properties: it’s a legally recognized commodity with a finite supply, unlike any other commodity in history. Bitcoin “is the only commodity invented in the history of the human race that’s absolutely capped. And so that means you can expect it to keep going up,” he stated. Saylor also emphasized Bitcoin’s performance metrics, noting it has an annualized return rate (ARR) of 60% with matching volatility, significantly outperforming and out-volatile-ing traditional assets like the S&P 500 (^GSPC) or commodities like gold.
The discussion then turned to the inherent volatility of Bitcoin. Saylor suggested that this volatility is not just a characteristic but a feature of Bitcoin, allowing for significant gains in a way that’s available 24/7, unlike traditional markets. He expressed optimism about Bitcoin’s future, predicting dramatic surges followed by corrections but ultimately leading to substantial long-term growth.
A significant part of MicroStrategy’s strategy involves an intricate financial arbitrage. Saylor detailed how they could generate a “Bitcoin yield” through treasury operations. By selling stock backed by their Bitcoin holdings, they buy more Bitcoin at a profit, capturing gains through arbitrage. This method was exemplified by their recent operations where they sold $1.5 billion worth of stock, backed by $500 million in Bitcoin, to buy back more Bitcoin, capturing nearly a billion-dollar gain. Similarly, issuing zero-coupon convertible debt at a premium allows them to acquire Bitcoin at no immediate interest cost, betting on Bitcoin’s appreciation over time.
Saylor’s insights reveal MicroStrategy’s aggressive yet calculated approach to Bitcoin investment, leveraging the cryptocurrency’s volatility and scarcity for financial innovation. His comments on CNBC underscore a belief in Bitcoin’s enduring value and its potential to reshape traditional investment strategies, even as he acknowledges the challenges posed by its volatility.
Price Action: MSTR is currently trading 0.32% lower at $378.82, while Bitcoin has experienced a 1.09% decline, hovering around $95,263 at press time.
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