- Bitcoin has been stuck in the $ 40,000 range amid a myriad of bearish macroeconomic factors.
- MicroStrategy CEO Michael Saylor attributes bitcoin’s struggle to a ‘tug of war’ between macro traders, tech investors, and bitcoin maximalists.
- He explains why he remains highly convicted in the asset and why he views it as digital property.
US inflation surged to a fresh four-decade high of 8.5% in March from a year ago, but bitcoin (BTC) – often touted by proponents as a better hedge against soaring prices than gold – has been struggling.
After a relief rally that drove it to nearly $ 48,000 in late March, the largest cryptocurrency was hovering near $ 40,000 as of Monday April 18 in New York. Major tokens have tracked bitcoin’s decline, bringing the global crypto
down to $ 1.88 trillion, according to CoinMarketCap data.
Faced with the prospect of tighter monetary policy from the
some investors are predicting a “coming crypto carnage” in which bitcoin could plunge to as low as $ 30,000.
Michael Saylor, CEO of MicroStrategy and arguably the world’s largest bitcoin bull, remains undeterred.
“If you look at it over two years, when we started buying, it was in the range of $ 10,000 and now it’s in the range of $ 40,000, so it’s actually up by a factor of four since the middle of 2020,” Saylor told Insider in an interview. “If you compare its performance in that timeframe versus the Nasdaq, the S&P, bonds, or gold, it’s outperformed everything.”
Since August 2020, Saylor’s software intelligence firm has spent $ 3.97 billion acquiring 129,218 bitcoins at an average price of $ 30,700. The company’s holdings are currently worth about $ 6 billion.
‘A tug of war’
Saylor, who personally owns more than 17,000 bitcoins in addition to MicroStrategy’s holdings, counts himself in the camp of bitcoin maximalists, fundamentalists, and true believers.
“They think of it as a risk-off asset and they think it’s a long-term store of value. They are all fully invested,” he said of the group. “They are not trading it, they are buying as much as they can.”
The other camp of bitcoin holders are macro traders and tech investors, who have rushed to sell or short bitcoin alongside other risk assets since the Fed signaled a series of aggressive rate hikes to rein in inflation, he explained.
“They are definitely not HODLers, they are not religious,” he added. “They are very atheist and mercenary about it.”
As a result, the price of bitcoin has been mirroring the movement of high-growth tech stocks, which are often correct sharply in a rising rate environment. The 40-day correlation between bitcoin and the tech-heavy Nasdaq reached an all-time high of 0.70 on Wednesday. A reading of 1 means that two assets are moving perfectly in lockstep.
The “tug of war” between macro traders and tech investors on one side and bitcoin maximalists on the other side has stoked
as the price of the token continues to gyrate.
“When there’s a lot of sound and fury, the traders are winning because they have the capital to deploy,” Saylor said. “If you’re looking at bitcoin in the four-to-10-year timeframe, I think the fundamentalists win out. In a matter of weeks and months, I think the traders win out.”
Over time, he expects bitcoin to break its correlation with risk assets as more people get educated about the fundamentals of the asset. He points to Treasury Secretary Janet Yellen’s recent speech on digital assets at American University as a milestone and a step toward that direction. In a change from her highly critical stance, Yellen called for “tech neutral” regulation of digital assets while adding that appropriately risk-managed innovation “should be embraced.”
“As people get more educated, they will get more sophisticated,” he said. “As they get more sophisticated, they will evolve from being afraid of it or just thinking it’s another random asset to trade to actually understand the fundamentals of it.”
‘Bitcoin is property’
Having claimed to have spent more than 2,000 hours studying bitcoin, Saylor said his firm is laser-focused on the original cryptocurrency because “bitcoin is property” while most other cryptocurrencies are “security tokens.”
“The key thing for us is we want to acquire the property and hold it and then we want to use our management discretion to either lever it intelligently or we might occasionally borrow against it,” he said. “We will sweep our free cash flows into it. We reserve the option to generate yield on it or sell volatility against it.”
The “property rights” that come with being a bitcoin owner confer a higher form of right compared to being the owner of a security token or a spot bitcoin ETF, which has yet to be approved by the Securities and Exchange Commission. He likens owning a bitcoin versus other securities to owning a hotel property versus owning a share in the real estate investment trust that owned the property.
“If you own the hotel, you have property rights. You could re-develop it and make it twice as tall. You can put a lien on it and sell the air rights to your neighbor for $ 100 million. You could borrow billion against it. “You could double the rents,” he said. “If you own a share in the
that owned the hotel, you have no rights. “
The “real brilliance” of bitcoin is that it gives property rights to the working class. In contrast, the physical property market has historically been reserved for the affluent and wealthy, Saylor said.
“If you got $ 10 million, you can buy the hotel. But if you have a million dollars or $ 100,000 or $ 10,000, you can’t buy a hotel, you can buy a security. So if you look at the billions of people in the world, for the most part, they have a hard time buying property, “he said. “But you can buy $ 387 worth of bitcoin and you have the same equal rights as someone who bought a billion dollars worth of it. That’s incredibly egalitarian.”