Recently, Michael J. Saylor, Co-Founder, Chairman, and CEO of Nasdaq-listed business intelligence company MicroStrategy Inc. (NASDAQ: MSTR), explained why every corporate treasury should be using Bitcoin as the main reserve asset.
Saylor’s comments came during a fireside chat last Tuesday (December 8) with Binance Co-Founder and CEO Changpeng Zhao (“CZ”) that was moderated by moderated by Josh Goodbody, Regional Director at Binance.
Saylor first gave the reasons for being bullish on Bitcoin:
“I didn’t pay much attention to the crypto industry until March of this year, and in March of this year we had a K shape recovery. So, I think that the major macroeconomic event is the expansion of the M2 money supply. We had a money supply expanded by about 5.5% a year for a decade and starting this year it leaped forward by about 24% and looking forward looks like it’s going to expand by 15% every year for the next five years.
“So, another way to say that is the cost of capital just tripled and if you’re not beating the expansion of the money supply with your returns and investment, you can’t preserve wealth. You can’t store value. So when the cost of capital tripled, what that meant was a bond that’s not yielding more than 15% is losing value, and it meant a stock that’s not growing its EPS faster than 15% annually is losing value and it meant that real estate that can’t grow its rent by faster than 15% is losing value.
“So, the short of it is there’s $300 trillion dollars of money in these fiat investments. They’re all going to be cut in half over the next three to five years. Everyone’s going to lose half their wealth if they don’t find the solution to the problem. So why am I interested in bitcoin and the crypto industry in general is because there’s a mad scramble to find a store of value.
“We know that cash won’t work and we know that bonds, real estate, and stocks are fiat instruments, and they’re all going to be debased at the rate of expansion of the money supply. And so, what are you going to do? You search through gold, you consider silver, you consider commodities, you consider buying a portfolio of rare art, and eventually you settle upon the idea of perfectly engineered digital gold, something that is superior to gold in all respects, none of the liabilities of gold, all of the good attributes of gold, and that’s 21 million gold coins called Bitcoin sitting in cyberspace.
“Once you found that, you think ‘well, this is the ultimate safe haven asset and store of value for every investor on earth’ and, by the way, it’s the solution to 7.8 billion people’s problem because everybody on the planet has a currency that’s collapsing. The only difference is America or Europe is collapsing at 15% a year and everywhere else is collapsing faster. So how can you not get enthusiastic about that?”
Saylor also talked about how prior to March 2020, he would not have been able to convice the MicroStrategy Board to allow the firm to buy Bitcoin for use as the main treasury reserve asset:
“March of this year was the inflection point. If you had asked me what did I think about bitcoin and what our treasury invested in Bitcoin in February, I would have said what is Bitcoin or I think I read about it but I didn’t pay attention to it and if I’d walked into my boardroom and said ‘we should do it’, they would have thought I’d gone crazy…
“I think in March we kind of got hit in the head with a two-by-four. It was a wake-up call. And again, the rate of asset inflation tripled or quadrupled or quintupled, and so all the sudden the entire industry shifted, and every rational investor in the world today knows inflation is coming. They know there’s a problem. So starting in April, people had a problem. It was three times as intense as it was in February. All the media started covering it, and all the other solutions to the problem started to look like they’re not working…”
Goodbody also asked Saylor how he thinks the Bitcoin economy could one day be 100 times the size it is today.
Saylor replied:
“I think that it starts by rotating from one narrative, which is Bitcoin is a very interesting uncorrelated digital asset with high volatility, with high potential returns, and you can put one to two percent of your portfolio into it with or without leverage, but that was the speculative narrative predominant before March, but that’s not that’s going to appeal to 99% of the investors… they want something different. They want Bitcoin is the ultimate synthetic long-term treasury reserve asset…
“And if I go from one to the other, I’m not talking about getting 1% of the money from 1% of the investors. I’m talking about getting 50% of the money from 100% of the investors.”