Community Trust ScoreLikely Real
Michael Saylor Says: Legitimate risk is a black swan where the unknown are knowns. Otherwise, Bitcoin is the best engineered asset to serve as a digital property in the 21st century. And, we have got 12 years of history. Has it been hacked? No, it hasn’t been hacked.
Is it going to be banned? No, it’s not going to be banned.
Can it be copied? We copied it 10,000 times, every copy failed.
So, I suppose unknown are knowns, but if you look at the tangible risk of if you own a Turkish LIRA right now? If you are in Turkey right now? What is the African currency? You want to have a hotel in the middle of Africa. Every other form of property and asset has a higher risk right now and there is an incredible need for a non-sovereign store of value that will move at the speed of light on technology networks.
Bitcoin happens to be the strongest best, dominant, best engineered asset to meet that requirement in the world today.
Does that make the case that prices of Bitcoin are likely to go up forever?
Michael Saylor: Yeah, Bitcoin is going up for ever. It is my belief. I have said it before Brian, bitcoin is going up forever. It is simple, but let me be more articulate. The price of Bitcoin is going to be driven by adoption, and as more and more the world adopts Bitcoin that is going to create demand for it.
It is going to be driven by technology as it gets built into Facebook, Google and Apple. It is built into Square and PayPal. And, so as you build in technical utility that is going to drive more adoption.
It is going to be driven by inflation, and the monetary inflation rate in the US is 15 to 20% over the next 4 to 8 years. But the inflation rate in Turkey and Argentina is 40 to 50%.
So, monetary expansion in a Fiat frame of reference is also going to drive up demand for a scarce desirable global asset. And, all three of those drivers are going to be with us for the next decade so there will be volatility. It is not going to go up uniformly in a perfect exponential curve but I don’t think we are going to see a world where technology slows down and I don’t think we are going to see a world where currencies don’t keep inflating.
What does buying Bitcoin mean for the strategy of the Company? In an environment where the money supply is expanding at 20% a year, you have to take any value stock and you have to discount the future cash flow with a 20% discount rate. So, I think you don’t need to be a rocket scientist to figure out that unless you are a digital monopoly and you can grow your cash flows more than 20% a year it is hopeless to hold value in your equity.
So, any kind of operating company that isn’t a digital monopoly will see a super high growth rate can’t survive. It is not going to long persist unless you have a property strategy or a balance sheet strategy. And, the balance sheet strategy is you invest assets in to a property that is going to appreciate faster that the rate of monetary inflation. So, the Microstrategy strategy: 2000 people selling an enterprise software we are growing 5 to 10% some growth rate, but we are not growing north 20% and on the balance sheet we have just swept our treasury in to bitcoin and in the first month or 2 months it took a lot of communication, now I think our investors understand that we are long bitcoin that we are leveraged long Bitcoin. So, we are going to acquire and hold bitcoin for the long term and we do it with our cash flows, we do it with equity issuance, we do it with convertible debt, we do it with senior secured debt and in essence we are short the dollar with a long Bitcoin and Bitcoin continues to appreciate. It appreciates a 160% a year for the last decade. So, you could figure out that you are kind of borrowing money with 1% interest and we are loaning it out to the Bitcoin Network at a 160% interest, and we are scraping the arbitrage, and that is what puts value in the MSTR stock that becomes a derivative of Bitcoin and we become the first digital property company that we have seen in the world and we think that is a really good strategy in a world where digital property is universally desirable.
