MicroStrategy CEO Michael Saylor had the crypto community at hello. Now, after pouring $425 million of the company’s funds into bitcoin, he is cementing his reputation among crypto investors as a pioneer in corporate America.
Saylor in an interview with Bloomberg discussed the final straw that caused MicroStrategy to change up its treasury gameplan, saying the dovish Fed’s latest inflation policy sent him barreling into bitcoin. In recent days, MicroStrategy bolstered its bitcoin allocation after revealing a $250 million allocation in August.
Now Saylor has come out swinging against bitcoin’s rival store-of-value asset, gold, telling Bloomberg that bitcoin is a safer investment than the precious metal:
“We feel pretty confident that bitcoin is less risky than holding cash, less risky than holding gold.”
— Bloomberg Crypto (@crypto) September 22, 2020
Bitcoin vs. Gold
While investors tend to turn to both bitcoin and gold as hedges against inflation, the digital currency has disrupted the precious metal. Saylor pointed to bitcoin’s finite nature, given that only 21 million coins will ever be mined. Gold, meanwhile, has been being mined for thousands of years and is still being mined today. According to Gemini Co-Founder Cameron Winklevoss, a key difference between the two assets is that while bitcoin’s supply is fixed, gold’s is “elastic.”
#Bitcoin is the first commodity in the universe where supply does not follow demand. Demand for bitcoin does not, and cannot, expand its supply.
Contrast this to gold. The supply of above-ground gold expands with demand. Its supply is elastic and there’s no end in sight… pic.twitter.com/PtxwCC4jDC
— Cameron Winklevoss (@cameron) September 21, 2020
MicroStrategy flocked to bitcoin for the returns, which have surpassed most other asset classes year-to-date.
#Bitcoin returns YTD still beating everything in sight.
— Vortex (@theonevortex) September 20, 2020
The company’s treasury strategy before bitcoin involved government bonds, but that wasn’t working out well for them, especially on the heels of the pandemic. Saylor told Bloomberg,
“Once the real yield on our treasury got to more than negative 10%, we realized that everything we are doing on P&L is irrelevant. We really felt we were on a $500 million melting ice cube.”
Saylor holds nearly three-quarters of MicroStrategy’s voting shares and nearly 25% of its equity, so he has a lot of sway when it comes to the direction of the company. Most of the 10 biggest shareholders are “very supportive and complimentary” of bitcoin, he added. Saylor expects that other public and private companies will jump on the bitcoin bandwagon in the coming months.
And even though crypto market volatility doesn’t spook him, Saylor is not afraid to liquidate his bitcoin holdings for higher bond yields. Given the rock-bottom interest rates, chances are he’s not holding his breath for that to happen.