Bitcoin (BTC-USD) prices have reached new highs in 2024, thanks in part to the launch of spot Bitcoin ETFs. It's no surprise for MicroStrategy CEO Michael Saylor, a long-time Bitcoin bull, to call the cryptocurrency “the best investment asset.”
MicroStrategy (MSTR) recently increased its Bitcoin holdings by 12,000, which Saylor says the company will continue to do. When asked whether MicroStrategy will use some of its Bitcoin holdings to return money to shareholders or make an acquisition, Saylor was clear: “We believe that the highest and best use of capital is to buy Bitcoin and the Bitcoins He added: “Bitcoin is the winner” compared to other assets.
Overall, Saylor says Bitcoin’s use case is “capital preservation.” Saylor compares investing in Bitcoin to buying a house in a city everyone wants to move to, saying Bitcoin is “humanity’s most valuable possession.”
Watch the video above to hear Saylor tell Yahoo Finance's Julie Hyman about investing in MicroStrategy versus investing in a spot Bitcoin ETF.
For more expert insights and the latest market activity, click here to watch this full episode of Yahoo Finance Live.
Editor's Note: This article was written by Stephanie Mikulich.
Key video moments:
00:00:57 Why Bitcoin is “the best investment asset”.
00:01:18 Saylor explains why buying Bitcoin is like buying real estate
00:05:16 Will MicroStrategy ever sell its Bitcoins?
00:06:20 Investing in MicroStrategy versus a spot Bitcoin ETF
Video transcript
JULIE HYMAN: Well, despite Bitcoin's declines today, shares of MicroStrategy. Well, they are higher. TD Cowen and raised its price target on the stock to 1,560. That's $1,560 after MicroStrategy added another 12,000 Bitcoin to its Bitcoin holdings. The total inventory is currently around 205,000.
Joining me now: Michael Saylor, Executive Chairman of MicroStrategy. Michael, nice to see you. It has been a while.
MICHAEL SAYLOR: Thanks for having me, Julie.
JULIE HYMAN: So I want to start. I know you are bullish on Bitcoin. I think everyone knows by now that Bitcoin is seen as a long-term store of value.
The story goes on
And you said that you consider it a digital property and not a digital currency. So if you could help me understand what the end game is for these holdings on MicroStrategy's balance sheet as you add more to the company's balance sheet?
MICHAEL SAYLOR: Yes, well, we believe that Bitcoin is the highest form of real estate, the top property in the world. And it is the best investment asset. So the end game is to acquire more Bitcoin.
Whoever gets the most Bitcoin wins. There is no other endgame.
JULIE HYMAN: But Michael, I think what I'm trying to understand is this: when I think of it as digital property and think of analogies, I think of a real estate company that buys real estate and holds other types of property. They may not be the top, but whatever type of property. I'm thinking of an asset manager who buys all sorts of assets. Finally, they sell these assets to make profits.
But I don't think that's your end goal, right? At no time do you plan to sell the Bitcoin. So what is the purpose of this over time?
MICHAEL SAYLOR: Well, let's keep the basic principle in mind. What is the use case of Bitcoin? His capital preservation.
So if you have a billion dollars and you live in South America, Asia or Africa and you want that capital to last for hundreds of years, you're not going to want to buy a $1 billion company or a $1 billion building or a country worth $1 billion anywhere in Africa. You need to find another form of property that you can hold for a longer period of time.
Let's take New York City. The developers of New York City in 1776 had no end goal. They have been raising so much capital to invest in real estate in New York City for 300 years.
If you were to talk to them today and say what your goal is, they would say, “We're going to continue to invest in New York City.” If you've ever talked to a person who owned an apartment in New York City, strive no one wanted to keep the apartment for a few years, sell it and move out of New York City.
They wrote it down in their will. They give it to their children. And if you ask her why? They say there is no better place in the world to live than New York. There is no more room from up there.
So New York City is the final destination for people who want to live in the greatest city in North America. Bitcoin is the end game for anyone who wants to own the largest piece of real estate in the 21st century.
JULIE HYMAN: Well, I think that is the case. But is there a price at which you would consider selling some of the withdrawn Bitcoins? I mean, because you can relate to New York City.
You can live in New York City. You can start a business in New York City. You know, what do you do with Bitcoin other than just make it increase in value?
MICHAEL SAYLOR: Well, the real estate developers in New York City aren't buying the property because they want to live in it. They buy the property because they expect…
JULIE HYMAN: Well, because they want to sell it at some point, Michael. I mean, let's be honest, most people who do it – yes, some certainly pass it on to their children. But like most people who buy assets, they eventually want to sell those assets for a profit.
MICHAEL SAYLOR: Let me put it another way. There is a name for people who use fiat currency as a store of value. We call them poor. OK.
Everyone who is rich in the world owns property. They own – they own large tracts of land. The royal family of England did not sell all of their holdings in central London to buy cash or paper money.
Neither did the Japanese royal family. Neither did the royal family in the Middle East. In fact, they want to own the property forever.
I want you to imagine that Bitcoin is a city in cyberspace that is 276 blocks wide, 276 blocks high, and 276 blocks deep. About 21 million blocks. Now imagine if all 8 billion people in the world want to live there one day. They want to invest their capital there.
There is $900 trillion in wealth in the world. As people migrate from every other form of ownership and bring assets into cyberspace, you will see the Bitcoin network grow from a $1 trillion network to 10x to 100x. And there's really no other place to go. It is the top quality of humanity.
JULIE HYMAN: So if at some point the value of Bitcoin on MicroStrategy's balance sheet increases because it's growing in absolute terms, and because you might add more to it, at some point you'll see that you can take advantage of it? Do business, invest in the company, pay a special dividend to investors, buy other companies?
MICHAEL SAYLOR: We believe the best use of capital is to buy Bitcoin and hold the Bitcoin. Bitcoin will increase in value faster than the S&P index. The value will increase faster than commercial real estate.
So it makes no sense to sell the winner to buy the losers. And Bitcoin is the winner. Therefore, we will continue to acquire Bitcoin using our cash flows, equity or capital raisings. Any other enhancement method that comes to mind.
JULIE HYMAN: Something else that I've noticed is that as I've spoken to various investors and various analysts, MicroStrategy is actually trading at a pretty high premium to Bitcoin itself, according to one analysis, which I see today at a 90% to 100% premium. saw Bitcoin. Is that justified? And why do you think it is justified?
MICHAEL SAYLOR: Currently, an institutional investor who wants to buy Bitcoin has the choice of investing in the ETFs, of which BlackRock and Fidelity are very well known, or investing in another company that follows a Bitcoin strategy such as MicroStrategy. You could imagine ETFs like ocean-going container ships. They can transport huge amounts of capital.
You can invest $1 billion in the BlackRock ETF every day. So you could raise hundreds of billions of dollars in capital. You will not trade at a premium.
But what they lack is power and leverage. MicroStrategy is different. Since our capital is not available, you cannot return our shares. As a result, our shares may trade at a premium.
We are an operating company. And that means if our shares are trading at a premium, we can raise capital either through convertible notes or through equity. When we do that, we do so at a premium to the underlying assets.
This means growth for our shareholders. Following a debt deal in which we exchange the debt for Bitcoin, our common stockholders will have more Bitcoin per share than before the deal. In other words, if you pay 25 basis points and want leverage of 1 to 1, you would buy the ETF.
However, if you actually want to see growth or return without paying the fee and have leverage, you would buy a stock like MicroStrategy. You could think of us as a type of air freight, we are Federal Express. We can get you faster, but we will never carry the same amount of capital in our payload as a supertanker or a container ship.
So there is room for both strategies. And they actually complement each other very well. I think the ETFs benefit from the existence of companies like MicroStrategy. And MicroStrategy benefits from the existence of ETFs.
JULIE HYMAN: Yes, certainly we have seen an increase in adoption with the introduction of these ETFs. You mentioned the change offer. I'm curious because it's not the only offer you've made.
Of course, you have also taken other measures to invest in more Bitcoin. What happens if the price drops again? So what happens to MicroStrategy's capital structure?
MICHAEL SAYLOR: If you take a look at our history, you can see that during the crypto winter there were periods where Bitcoin fell from 66,000 to 16,000. In this case we simply keep the Bitcoin. Instead of being 20% in debt, we become 40% or 60% in debt.
And the way we raise the capital is through the use of convertible bonds. The convertible bond is therefore an unsecured instrument. It is not intended for the market. It matures four, five or six years from the time we issued it. And it is not hedged against any other type of capital.
So we don't actually have to do anything. We're just waiting for the market to recover. And we did that in '22. And in 2023, we recovered and our shareholders benefited from deleveraging as Bitcoin rose in the other direction.
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