‘We don’t panic. We have a strategy. We’re not traders. If your time horizon is less than four years, you’re sort of a trader. If it’s in the months, you’re definitely a trader. I’m not an expert trader. I don’t have a crystal ball. I don’t know where the market’s going to go week by week, month by month. If your time horizon is more than four years, you’re an investor. And when your time horizon is 10 years, you’re kind of a saver.’ – Michael Saylor.
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Bitcoin is showing its volatility. The flagship cryptocurrency dipped to the $17,800 range before quickly bouncing back to the $18,500 range, which is where it stands. Bitcoin is currently down 34.5% in the last seven days at the time of writing. With analysts and pundits arguing that the charts show bitcoin reaching as low as $12,000 before any bullish action appears, bitcoin trends down.
Michael Saylor tends to trend up as many want to see his reaction and thoughts to the latest bearish action. In a brief interview with Bloomberg, Saylor admitted that the high volatility of bitcoin in the short term cannot be denied. In the long term, at least four years, bitcoin is a low risk asset. More importantly, rather than just stating that bitcoin is a low-risk asset, Saylor went into detail as to what’s currently wrong with bitcoin and believes these reasons are causing such high volatility and when these 10 things are fixed, bitcoin will be seen as a more mature asset, which will bring in institutional investors and create a more stable market.
Now let’s read Saylor’s speech:
‘I couldn’t have bought billions of dollars of single family homes, and so that’s not even practical. The bottom line is the bitcoin strategy is 10x better than any other alternative and so no, I don’t regret it. We’ve got 2.8 billion dollars worth of bitcoin on our balance sheet right now. We feel like we’re positioned well for when the markets turn around and our only other choice would be to give all the capital back to the shareholders, in which case we would have nothing. We would be struggling to get by without any assets. I mean, the money supply has expanded by 41% since January 1, 2020, when we went into this kind of COVID crisis and we know that scarce desirable assets are getting a bit up in price. I mean, everybody wants to buy Rolex watches. They’re buying luxury real estate. They’re buying everything. They get their hands on creating shortages.
So you know, we are an institution. We have to take a 10-year view and the only thing that’s for sure is if we hold cash over a decade, we’re going to have a negative real yield. The only question is how much we have to invest in something and we’ve chosen as a business strategy to focus on what we believe is the most exciting investment idea because it’s a digital commodity that’s absolutely scarce and only getting technically better every year.
The number that I look at to figure out uh sort of a surrogate for the book value of bitcoin is the four-year simple moving average because it trades billions of dollars a day, so after 1400 days of billions of dollars a day, that number is $21,700. Um, bitcoin touched that, uh, in the March 2020 crisis, it touched it around 2017. It’s touching it right now. Generally it trades above there.
You know, our strategy is, uh, we’re going to acquire bitcoin with our free cash flows from time to time, so we’re kind of dollar cost averaging into bitcoin and we’re going to hold the bitcoin for the long term, so it wouldn’t really matter whether the price was 10% more or 20% more or 50% more. We’re just going to progressively acquire more bitcoin, because that’s our strategy.
So you are in terms of the bank for sale.
Yeah, I mean, it’s not a bad price and we will keep buying more. We have a very long-term 10-year time horizon and our view is that over the next 10 years, uh, bitcoin’s going to be a good idea and it’s just going to keep accreting in value.
You know, I can’t tell you whether it’ll go down a bit here and there in the near term, Emily, it trades like a high beta risk asset. There’s no denying that over the long term, we believe it’s a low-risk store of value asset. There are about 10 things that have to happen over the next decade to make it a better asset. We kind of know what those 10 things are. We’re waiting and inviting our guests. We think that it’s going to improve as an asset class over time. We’re not in a hurry.
Let’s take the 10 sources of my pain. There are no wash trading rules. People can sell their bitcoin and buy it back, harvesting the tax gain. That’s not the same as with apples. If that gets fixed by the house ways and means committee, that’s a big plus for the asset. There are 520 unregistered crypto exchanges offering 20x leverage. That’s a negative for the asset class as they get regulated, which I expect they will, and as the 20x leverage disappears, that’ll be a positive for the asset class.
There are about 19 000 unregistered securities in the crypto industry cross-collateralized against bitcoin as those things have to get eliminated or they have to be converted into publicly traded instruments. That’s going to decrease the volatility of a big shakeout. The wildcat banks like the Terra’s and Luna’s and Celsius actually create massive volatility, and as they get regulated, they disappear, and they grow up and become institutionalized banks, the asset costs will mature.
There’s a lot of ignorance and fear. People think crypto is the same as bitcoin. If they think that means they don’t understand either of those two things, we don’t have a stable coin, Emily, like UST, isn’t a stable coin. Tether is an opaque security that no one understands if we ever have an FDIC issued stable coin or something from a public entity. The FASB accounting is harmful and is supported by the Sec. That’s going to be very bullish for the industry. There’s no spot ETF. I think it’s only a matter of time before there is one approved that’ll be very bullish for the industry. The FASB accounting is detrimental. The lack of FDIC guidance makes it difficult, if not impossible, for banks to hold this stuff. We’re waiting for clear sec CFTC guidance and those 10 things that are going to get cured over the next decade. They’re just not going to get cured over the next 10 weeks.
We’re crossing the chasm. There’s about a trillion dollars in the asset class. $400 billion is bitcoin. The other 400 billion is 19000 unregistered securities. We’re moving from the era of the offshore entrepreneur to the onshore public institution. It’s pretty clear from chair Gensler’s comments that he made in the last few days that they want to see all the crypto exchanges regulated. They want to clean up this industry. The stable coin is going to have to be cleaned up as well. The winners are going to be the public investors in public banks and public companies, and the losers are going to be the wildcatters, you know, and the entrepreneurs with the guts to get started who are flying by the seat of their pants.
I think it’s essential for us to move from a one-trillion-dollar industry to a ten-trillion-dollar industry, so I welcome it. I think bitcoin’s been held back by its association with the anything goes crypto industry, and as that gets regulated, then that’s going to actually create a green light for public institutions and public companies to get much more heavily involved in bitcoin and is going to catalyze the next leg of the bull run.’
[This article is a transcription of a video made by Only The SAVVY]
Original video: https://youtu.be/rf_JN96bIRE ]
