There's some real comedy in this line: “The Company remains focused on our two corporate strategies of growing our enterprise analytics software business and acquiring and holding bitcoin ...”. What even is the connection!
Yeah dual, totally disjoint “focus” is remarkable. I liked this a lot too:
> “We believe our bitcoin strategy, including our bitcoin holdings and related activities in support of the bitcoin network, is complementary to our software business, by enhancing awareness of our brand and providing opportunities to secure new customers.”
They're aligning with the army/mob of people who own Bitcoin, who are part of the MLM scheme - that's trying to replace the financial transactional layer with one that rewards you in the future for adopting it, assuming you're not the last adopters left holding the bag.
One might imagine there are more effective ways to run an advertising campaign. At any rate, it sure makes those superbowl advert campaigns look cheap.
The economy is currently in the middle of an enormous asset bubble. Them buying SP500 Index Funds or Real Estate would probably raise more eyebrows, but they're a tech company and Bitcoin is tech stuff so it's ok or something.
So when all companies have substantial amounts invested in Bitcoin and therefore a non-trivial percentage of their performance is tied to Bitcoin, what will the world do to prop up Bitcoin when there's another 100 year catastrophe?
It's sad how little faith some of these companies have in humanity - surely a billion dollars could result in better performance by investing in their own labor?
Bitcoin is useless to everyone that's oblivious of the current issue of Central Banks debasing the currency with unlimited money printing and the creation of bubbles in the financial market.
First of all, Bitcoin is not a currency and it doesn't need to be a currency, it wasn't designed to be one, it was engineered to be an scarce digital asset that could be electronically transfered between two parties without the need of a middleman. These transfers can't be censored by nobody. Probably you don't see value in any of that because your country economy is right on track to recovery from the pandemic, you have inflation rate of 0%, or you went to a the bank with your parents when you was a child and they opened an account for _you_ .
Well, that's not how it works in many other parts of the world, where you don't have access to banks, where you have staggering inflation rates that destroy your savings, where you don't have access to the financial markets where you can benefit from the inflation of stock prices caused by the money that the goverment gives Wall Street for almost free.
Bitcoin is optional, you don't have to be part of this network. Probably the second scenario is what most countries in the world are living right now and that's why Bitcoin will thrive there.
It would be insanely easy for the US Government to shut down bitcoin, if they wanted to. All they would have to do is make bitcoin illegal and have ISPs block bitcoin P2P traffic. They could also shut down the exchanges and prosecute people who were found to be attempting to buy or sell stuff with it.
Bitcoin's value would plummet to almost nothing, virtually overnight.
The ONLY reason bitcoin exists is because the government LETS it.
Before the Civil War, thousands of businesses, local governments, and private banks issued paper currency in the US. This enabled all sorts of scams (banks that didn't exist or wouldn't pay full value, etc.) The federal government was barely a player in the space, with sporadic and limited issues until 1861.
With the National Banking Act in the 1860s, the federal government slapped a 10% tax on privately issued notes. The industry collapsed virtually overnight, federal government notes take over the ecosystem, and we start to see a currency ecosystem which resembles the dollar we know today.
If crypto becomes a serious logistical problem for state actors, we'll see the equivalent trick. Spinning up a state-backed digital coin is a relatively modest technical task, because it doesn't have to solve the decentralized/trustless problem. Just take existing banking infrastructure and scale it horizontally. Any s such state-backed currency just has to be cheaper than (your favourite crypto) + (penalty taxes) to immediately win the mainstream market.
This model also puts a significant direct motive into deanonymizing privatecoins. The revenuers may not care you're using XMR to buy fentanyl, but once they can demand a 10% cut of it, they care about who owns them.
The goverment SHOULD tax Bitcoin as a property, then it would be an incentive for Goverments to keep its value high and everybody wins.
States can create their own digital currencies, but as long as they can create an unlimmited ammount of it, then your savings in that currency will loose purchasing power, and it would be no different to the system we currently have.
Bitcoin is a savings technology, you can also have other assets as real state, gold. I don't see the Goverment excessively taxing those other assets. Bitcoin should be and will be taxed similarly to those.
There is the constitution and I’m not sure everything you said is constitutionally legal. The government could pass a law saying I need to slap myself in the face every morning, doesn’t mean it’s constitutionally allowed.
Sure, they can prosecute everyone holding Bitcoin. It would be as effective as the war on drugs.
They can shut down the exchanges, block ISP traffic but only in their jurisdiction. They cant't stop Bitcoin mining in every other country. They can't stop people from Africa doing business with Bitcoin. Or people in Venezuela where you see an real use case for this technology.
The network will continue to grow without US if they choose that path.
Or US Goverment realizes that Bitcoin might be the tool they need to revitalise the economy, and to avoid loosing influence and allowing China to continue growing stronger.
A company that doesn't produce anything of value get infinite P/E ratio due to Bitcoin. Compared to companies like AAPL that consistently produce products and tools that changes the lives of millions of people with only P/E ratio of 3x (<-- this means 30 something, not 3x as in 3 times, what I really want to say is, 30 something times)something.
Here's how I view it, and I believe Saylor as well: cash loses double digit % purchasing power annually for the things you want to buy and hold.
You can hold on to your melting pile of cash, or you can deploy that capital elsewhere. Art, wine, stonks, negative/0 yielding bonds, real estate, crypto kitties, or an asset that has been appreciating at a clip of 200%/yr.
Question is not why btc, but why would you put yourself at a disadvantage by holding fiat reserves.
None of these are the real question as regards a publicly traded company in the business software space. The better questions are:
- Why is the Company holding so much cash? Most companies do not hold 60% of their market value in cash or other assets unrelated to their core lines of business. Why is MicroStrategy making this choice?
- Why will the Company not return the excess cash to shareholders instead of running an investment book on the side?
- Revenue is declining in a market that is experiencing growth. Why is management focused on the minutiae of treasury management instead of fixing the core business?
It's not fiat vs BTC, it's about why is the company holding so much cash in the first place?
It's even worse than that. This isn't cash MSTR has on hand; they're raising new cash by issuing convertible bonds.
As an investor, if I want to bet on BTC, I can just buy BTC. Why would I buy this weird hybrid of business intelligence software company and holding company?
It's essentially a public holding company for bitcoin now. So using P/E isn't a relevant metric, try P/B, or use P/E after subtracting the bitcoin value from market cap. Your valuation methodology is as broken as the world supposedly is.
A company that owns $100 of cash and does nothing, should be worth $100. It earns $0, but is still worth $100. Therefore, its P/E would be 100/0 = infinity.
MSTR is becoming sort of like that. It very well could still be overvalued, but people aren't buying it for its earnings, they are buying it for the assets it holds (bitcoin).
Can I create an infinite energy money machine by doing this: BTC is held by MSTR, MSTR is held by ABC, ABC is held by FGE, FGE is held by XYZ? Eventually all companies hold it, and SP500 will be BTCPrice * 500. Everyone is rich. It's just a matter of time before it goes to the whole market. Everyone is rich.
Nope can't do that. MSTR might trade at a premium to its BTC holdings but only because at the moment it allows people to buy BTC through more traditional investment accounts. Your hypothetical ABC wouldn't have any advantage over MSTR so it would trade at parity.
I'm really not trying to be pro or anti BTC/MSTR here, just explaining whats going on. It's valid to think it's stupid/overvalued, but I'm just pointing out that its P/E ratio isn't the reason. And comparing MSTR's P/E to Apple's doesn't really make sense at face value.
> MSTR might trade at a premium to its BTC holdings but only because at the moment it allows people to buy BTC through more traditional investment accounts
While I share the sentiment about microstrategy, I don't follow your point on Apple. It's trading at something like 29x earnings, a market cap of $2100 billion. It's not exactly cheap.
Has Apple changed lives for the better though? I’m not sure anymore. A perusal of the literature on mental health effects of technology (specifically phone) addiction would say no. There are too many studies to post as a reference and they all say the same thing.
In countries with totalitarian and/or corrupt governments, it did. Venezuela, Argentina, Russia, China, ...
Even the US is testing its people trust and confidence with its aggressive money printing. Doesn't feel like free markets when there is a buyer of a last resort with infinite money.
This would be a total nightmare. The vast majority of suppliers and customers use ‘fiat’ and they are obligated to report in ‘fiat’ so why would they internally convert it to BTC just to convert it back out?
This is a recipe for misreporting and accounting fraud too.
He goes into great detail his logic and reasoning for doing the purchase, why he thinking it’s a good investment, etc. Going to give you a much richer understanding than the spitballing you’ll find in these comments.
I haven't listened to it yet, I will - however the narrative has certainly been crafted, evolving, over the last 10 years to avoid mentioning or addressing the unavoidable pitfalls of Bitcoin; there isn't honest discussion among it, and pro-Bitcoin narratives are starting to earn the title of propaganda.
Edit to add: the suppression tactics of downvoting counter-narrative comments instead of engaging with them is most common as well, financially incentivized to suppress counter-narratives.
I agree. You can get rich, definitely (or lose a lot of money), but if we're talking about protecting against FIAT inflation or money, there are better vehicles for that, and even better cryptos.
But markets are about expectations above anything else, and this people knows that.
I agree we need to protect against inflation, and there will be a blockchain structure that allows willing nations - not influenced by greed but consensus through decision making, reasoning, and democratic processes - save regulatory capture.
Various theories advanced include that it's the company buying Bitcoins from the CEO's private stash, or that their actual software business has gone down the toilet so they're just YOLOing on Bitcoins. Or possibly both.
They seem to be trying to make it sound like airlines doing fuel hedging. That it's only with spare cash, and leveraging some expertise they might have around analytics/data to play the market.
Ah, yes...the exact quote first says "excess cash" then mentions, in a downplayed way, the debt.
"We will continue to pursue our strategy of acquiring bitcoin with excess cash and we may from time to time, subject to market conditions, issue debt or equity securities in capital raising transactions with the objective of using the proceeds to purchase additional bitcoin."
Your balance sheet is either cash, which can evaporate overnight due to rampant inflation which many economists are predicting, or you can convert some or all of that to BTC. As a company, you need to manage your cash. Companies invest their balance sheet in debt, money markets, etc. That doesn’t imply that you are somehow a fund. You have no choice but to manage your cash. I recommend just reading Michael Saylor’s posts or listen to this podcast which provides a good summary of their thinking: https://open.spotify.com/episode/1VwUjvMNeoOeyiQwP3im6G?si=z...
Bitcoin has had a 50% drop two times in the last three years. No matter how bullish you are on its long-term prospects, it can't possibly be seen as a stable store of value in the short term.
At this point they are effectively staked their entire success to BTC. They aren’t just putting cash into BTC they are taking on additional debt to buy BTC.
If you had a strong core business anyway you wouldn’t do this, it’s just a sign that their core business is failing and that pivoting to a Bitcoin investment company is a Hail Mary.
The question is why a company doing < $500mm in annual revenue is holding $4B in cash. That's really the only question. It doesn't matter whether it's crypto or real estate or USD. The question is why it's holding so many excess assets at all.
Those 3 trillion dollars that the Fed injected into the financial industrial complex in April [1] (by way of increasing asset purchases) really rescued this economy! It's fractal bubbles, everywhere.
Who's gonna be left holding the bag? The people at the bottom who have (meager) savings in cash. Their assets will get inflated away by endless QE.
Until the people vote into power people without selfish interests, eliminating regulatory capture, and then implement policy that will strengthen society and democracy - then yes, it will be a problem. It doesn't magically happen via aligning people through a financial incentive like Bitcoin though - the same problem exists of people being left holding the bag.
I do think blockchain plays a role, just not like this - not like this.
"With Bitcoin, a private key, picked at random, is run through these algorithms to generate a public key. And the Bitcoin protocol uses the hash value of this to create a public Bitcoin address.
A quantum computer could reverse this process and derive the private key from a public one. And voila! Bitcoin’s claim of inviolability and unhackability is gone, and you have access to any Bitcoin wallet you want."
This is both right and completely wrong at the same time. It does mention that addresses are hashes of the public key, but then goes on to the unjustified leap that quantum computers would let you access "any Bitcoin wallet you want." That's absolutely false: addresses which have received Bitcoins but never sent them have not revealed their corresponding public key. There's no technique I'm aware of that would let a quantum computer efficiently invert the hash to find the public key. Most Bitcoin wallets are configured such that each time you send bitcoins to someone, the "change" of the transaction goes to a different address.
The risk comes from when a single address is re-used multiple times for multiple transactions, and has sent those proceeds to other addresses. Such multi-use addresses have revealed their public keys, and thus would be susceptible to a quantum computing attack. This is way, though, the advice since the inception of Bitcoin has been never to re-use addresses in this way, but instead always to generate new ones as needed.
Not just Bitcoin. Traditional banking, SSL, everything.
Also the crypto used in the above will be upgraded to quantum proof algorithms before then. The math is already known.
