‘We back tested our strategy against every other alternative, and if you roll the clock back to August 10th, 2020, when we embarked on this journey, bitcoins performed 10x better than anything else. Gold’s down 10%. The NASDAQ is flat. Since then, Bitcoin has increased by 86% across all time frames: two years, four years, or eight years. Bitcoin’s the best performing asset. I can’t come up with a better idea.’ – Michael Saylor said.
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At the time of writing, bitcoin is trading at $22,636, which is a slight rebound after it touched the twenty thousand dollar range, which is still at $22,600. Bitcoin is a far cry away from its all-time high. The question is, what’s the bottom as bitcoin trends down?
One of bitcoin’s most vocal advocates, Michael Saylor, tends to trend across social media as many are speculating his margin calls. Reports have stated that Microstrategy’s 129,218 BTC is being held at a net loss of 1.1 billion. Once again, rumors swirled over a potential default on a 205 million dollar loan used to purchase its holdings, suggesting that a BTC USD drop below $21,000 would trigger a margin call. The margin call would require Microstrategy to pony up extra capital or risk losing its position. Bitcoin fell below the $20,800 mark. The Microstrategy didn’t budge.
In fact, Sailor took to Twitter to clear the air on the rumors. Sailor tweeted out:
Despite the fud, Microstrategy stock closed up 9% in trading at $171. Michael Saylor also cleared the air on CNBC and suggested that now is the best time to buy and that bitcoin is on sale:
‘If you think about bitcoin, if your time horizon is one month, that looks like a volatile risk asset, but if your time horizon is 10 years, it looks like a risk-off store of value asset. The crossover point is four years. Nobody’s ever lost money investing in bitcoin for four years, and if you want to surrogate for the book value of the bitcoin network, it would be the four-year simple moving average. The simple moving average of bitcoin over four years is about $21,685. Uh, bitcoin’s only touched that uh, that point a couple of times in its history, and those are all great buying opportunities. This is the right bitcoin.
Bitcoins are backed by the most powerful and secure computer network in the world. You can’t replicate a hundred billion dollars, and it goes beyond a nation-state or corporate attack. Once you understand that and the fact that it’s a singularity, there’s nothing like it in the world, then yeah, this is an ideal entry point to get into this thing. We’re on a multi-billion dollar balance sheet. We’ve only got a 200 million dollar loan that we have to collateralize, and we’re 10x over collateralized on that right now. If the market traded down by a factor of 10, we’ve got cash and we generate cash flow, so this has all been the margin call thing. Much ado about nothing. It’s just made me twitter famous. I appreciate that and the Twitter trolls love to beat up on me because it gets me engagement.
As for the company’s balance sheet strategy in general, we borrowed 2.2 billion dollars at a blended interest rate of 1.8 percent before interest rates doubled junk bond indices from 426 basis points to 820 basis points. Mortgage rates have doubled. If you had a chance to grab two billion dollars at one and a half percent interest, it seems like a reasonable thing to do, and I’m glad we did it. Most of it is unsecured debt, and 1.7 billion of it is unsecured. The 500 million comes due in seven years after we borrowed the money, so we feel like we have a fortress balance sheet. We’re comfortable and, uh, and the margin loan is well managed.’
[This article is a transcription of a video made by Only The SAVVY]
Original video: https://youtu.be/voHQWYrKSoY ]